It is well-known among economists that the construction industry in the United States is one of the most important industries to the American economy. If construction is doing well, then that means the economy is doing well. In the 2008 presidential elections, construction and housing were two key issues in the wake of the Great Recession that hit in late 2007. When Barack Obama won the election, he put in place a series of laws designed to prevent that sort of collapse from happening ever again. While neither Hillary Clinton nor Donald Trump talked a lot about construction and housing, Donald Trump’s promise to undo much of what Barack Obama has done as president could mean that many of those regulations are going to go.
Many observers found it odd that Donald Trump the real estate developer had little to say about the construction and housing industries during the campaign. But when Trump did talk about those industries, he did indicate that he intends to make changes that will benefit both. The residential housing industry received almost no attention from either candidate, but the industry is still hopeful that Trump’s understanding of how important housing is to the economy, and Trump’s promise to make it easier for Americans to buy homes, will positively affect the industry.
When President-elect Trump did talk about construction, he spent a lot of time talking about his $1 trillion highway construction plan. His supporters like the idea because it will repair the country’s crumbling infrastructure, it will create thousands of long-term jobs, and it will do all of this without using taxpayer money. Trump plans on enticing private investors to invest in the program using tax incentives and revenue generated from toll roads, airports, and utilities, which is how he intends to pay for the entire program.
While Trump was on the campaign trail talking about his road building plan, there was a lot of skepticism that it would pass through Congress. Prior to election night, it was expected that the Congress would be one part Democrats and one part Republicans. But when the votes had been counted, the White House, Senate, and House of Representatives had all turned red with majority Republican wins. Industry experts and some incumbent/returning Republican congressional representatives still think a $1 trillion spending plan (even one funded by private money) is going to be an uphill battle, but having control of all of the necessary mechanisms to pass the law could make things much easier for Trump and his supporters.
While the residential construction industry seemed to get the least attention from both candidates during the campaign, it has suddenly become a hot item of discussion for the incoming president. Donald Trump is a lifelong real estate developer who understands how important it is to get the residential housing industry up and going again. Since Trump feels that most of the issues facing the residential construction industry were created by the Obama administration, Trump feels confident he can jumpstart the industry and get it back on track.
There are three areas Donald Trump plans to address when it comes to the residential housing industry; the bureaucracy of building a home, the bureaucracy of buying a home, and the ability of consumers to afford homes. To help consumers afford homes, Trump has put several plans on the table to increase jobs and wages. But the other two issues are going to require some very specific reforms that Trump indicated he was prepared to make.
In the wake of the 2008 economic collapse, the Obama administration put several sets of regulations on mortgage lending that Trump claims are now hindering the industry’s ability to grow. Trump has said he is considering repealing the Dodd-Frank Wall Street Reform and Consumer Protection Act because it puts too many restrictions on funding new housing. This act was put in place to prevent the predatory lending that helped bring about the 2008 collapse, but Trump says that the act has served its initial purpose and now only acts as a barrier to the growth of residential housing.
Trump also plans to start eliminating many of the regulations the Obama administration put in place during the course of its time in office. While administrative and regulatory costs are still 25 percent of the cost of a home, home prices have increased approximately 30 percent to keep up with rising prices. Builders complain that new regulations slow down building times and price homes out of the range for first-time and low-income buyers. Trump has indicated that he intends to review those regulations and eliminate anything that he perceives to be a hindrance to the growth of the residential housing industry.
Immigration And Its Potential Effect On Housing
According to U.S. News and World Report, immigrant investors accounted for 40 percent of the growth of the United States housing industry from 2000 to 2010. That means that immigrants were buying up American residential housing even after the 2008 collapse. As a comparison, that number barely reached five percent at any time during the 1970s.
Donald Trump has made it very clear that he intends to make major changes to the way America conducts trade with other countries, and the procedures in place that allow immigrants to enter the United States. If Trump makes good on his promises, he may inadvertently stunt the amount of investment legal immigrants make into the American housing market. While Trump’s intentions for growing the American housing market from inside the country seem positive, his immigration reforms could still wind up creating problems for a struggling residential housing industry.
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