He’s known as a real estate mogul, but with proposals that could both boost or blast the housing market, Trump makes it far from clear what his presidency will do for housing, and even industry professionals don’t agree on what the future may hold.

If you ask Jim Jacobs, president of Jacobs Realty Group in Philadelphia, what he thinks the presidency of Donald J. Trump will do for residential real estate, he’s quick to say the market is going to grow. “The No. 1 thing the Trump presidency brings is restoring the confidence of the American worker,” said Jacobs. “Confidence is why people purchase.”

He adds, “They’re not afraid to take a mortgage out anymore. Working class people are getting more jobs because there are not illegal immigrants working at Home Depot for half the price.”

Meanwhile Billy Nash, who specializes in commercial and luxury real estate sales with The Keyes Company in Palm Beach, Fla., noted, “We are seeing a positive impact on Palm Beach County for both buyers and sellers of luxury real estate. Corporate tax cuts will have a huge impact on our real estate market.”

While many of those working in real estate are positive about the potential for a growing housing economy under the Trump administration, Jamie Gregory, chief lobbyist for the National Association of Realtors (NAR), is a bit more measured in his assessment of the new administration’s policies and proposals: “I think so far we haven’t seen anything that’s going to have a big impact [on the housing economy].”  He added, “A lot of it has to do with what’s happening on Capitol Hill. Is tax reform going to be comprehensive? We have serious concerns with how the blueprint will play out.”

HITS TO HUD

If one looks at the blueprint for Trump’s proposed budget, released in March, it’s definitely what Office of Management and Budget Director Mick Mulvaney calls “the America First budget” in its approach. Whether or not Congress will go along with the administration’s aims, however, remains to be seen. 

In order to meet his objective of increasing defense spending by 10% (or $54 billion), Trump is calling not for an increase in taxes but cuts in other areas of government, including a 13% ($6 billion) cut to the budget of the Department of Housing and Urban Development, now headed by Dr. Ben Carson. The White House proposes eliminating HUD’s Community Development Block Grant, the Home Investments Partnership Program, the Choice Neighborhoods Program, and the Self-Help Homeownership Opportunity Program, all of which help create and sustain affordable housing in this country.

Gregory believes the proposed HUD cuts would deeply impact housing, particularly for lower-income Americans and first-time homebuyers, but he’s not convinced all the cuts will be accepted by Congress. “I think Capitol Hill will create their own version of the budget,” he said. “We’ve tried not to overreact. We hope that cuts proposed for HUD are not implemented. That would be catastrophic. HUD couldn’t fill its function.”

Gregory said that NAR is stemming alarm for now. “The administration hasn’t staffed up yet,” he said. “At HUD, there’s nobody to talk to over there. We’re sort of in a holding pattern. We’re waiting for personnel to get in place.”

Gary Acosta, CEO of the National Association of Hispanic Real Estate Professionals (NAHREP), said he’s “cautiously optimistic,” adding that no one really has “a clear sense of the direction of the administration. It’s been a very slow start in that regard.”

And Acosta thinks it may be premature to worry. “Dr. Carson isn’t really a housing person,” he said, “so he’ll surround himself with experts in the housing field.”

IMPACTS OF TAX REFORM

There has also been plenty of debate about changing the popular mortgage interest deduction (MID), though Jacobs doesn’t think the Trump administration will follow through on that, at least not in terms of elimination. “I can’t see that happening,” he said. “Trump has learned quickly there are battles to fight and battles not to fight.”

And while Gregory doesn’t believe the MID will be eliminated either, he noted that the House Republicans’ blueprint for tax reform, while not killing the deduction, will make it less relevant because it will double the amount taxpayers can take for the standard deduction. That means fewer people would take the MID and, perhaps, would be less inclined to move from renting to buying.

The White House is also looking at eliminating the deduction for state and local taxes, which can be a pretty big tax cut in high-end communities and in states like New York and California. But Aaron Terrazas, senior economist at Zillow, doesn’t think those tax cuts make much difference to homeowners and buyers. “When people buy houses, they’re not factoring in these marginal things,” he said. “That’s not going to make or break a deal.”

“If you take away the state or local tax deduction and double the standard deduction, less than 5% of tax filers will itemize,” Gregory warned. “You’ve essentially made no difference between renters and owners. We’re taking it seriously.”

Gregory said if Congress takes away that incentive, he believes it would slow down the housing economy. “You’ll have fewer buyers, so home values will drop,” he points out. “As a result, you’ll have lots of people that will lose equity in their houses.” 

Terrazas doesn’t think proposed legislation on the MID will have much impact, however. “More money in people’s pockets gives them more ability to buy regardless of how [the money] gets there,” he said. “Most economists agree the MID doesn’t really incentivize people to go from renting to buying.” What it might impact, he said, is homeowners upgrading to more expensive residences.

When it comes to first-time buyers, the elimination of the student loan interest deduction would be the biggest damper on the market.

NAR is in the process of collecting numbers to produce a full analysis of the impacts of the House Republican blueprint for tax reform (which is substantially similar to that of the White House). Those figures were not available by press time but NAR Spokesperson Jon Boughtin shared early findings from PricewaterhouseCoopers’ study, noting that home-owning families with incomes between $50,000 and $200,000 would face average tax hikes of $815 the year after enactment while non-homeowners in the same income category would see tax cuts of $516.

“Home values could fall in the short run by more than 10%,” Boughtin added, if the House blueprint for tax reform is fully enacted, and that drop in values could be steeper in high-cost housing areas.

Gregory said he hopes Congress will extend mortgage debt forgiveness for homeowners that sell their houses at a loss. He also hopes to see the capital gains tax exemption of the Taxpayer Relief Act (1997) for home sellers extended, whereby couples who sell a primary residence don’t have to pay capital gains on the first $500,000 of profit. It’s $250,000 for single sellers.

Jacobs is more optimistic about proposed tax cuts and believes, if implemented, they will be good for the economy and will make it easier to build and grow businesses and, likewise, create jobs. “Money is a reward for the service you give or the product you sell,” he said. “Trump doesn’t want to penalize that but encourage it.”

Acosta said he’s long been a proponent of reducing the corporate tax rate. “I think that will stimulate jobs more than anything else,” he explained. “Jobs are issue No. 1 when it comes to housing and homeownership.”

He also hopes for tax relief for the middle class: “That could make the difference in being able to afford a home or not. We have a very complicated tax system, and anything that simplifies it is good. I see tax relief for the middle class and corporations as positives.”