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Although the midterm elections were held on November 8, it is still unclear who will control Congress. Republicans appear to hold the edge in the US House, The New York Times reported. The Senate remains up for grabs and may not be decided until next month, when the second round between Georgia senator Raphael Warnock and challenger Herschel Walker takes place.
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So far, the election results have been much closer than expected, even if the GOP ends up controlling one or both houses of Congress. If this happens, the US real estate market could be impacted in different ways, according to a new report from Cowen.
Cowen analyst Jaret Seiberg wrote that a Republican-led house likely means the end of the first-time buyer tax credit, MarketWatch reported. The credit was intended to give first-time home buyers up to $15,000 in refundable federal tax credits. Democrats tried to push it through last year through a reconciliation bill, but a new reconciliation bill is unlikely in a GOP-led house.
Another provision of the reconciliation bill, rehab housing, will likely also fail under a Republican Congress, Seiberg said. Under the rehabilitation housing program, billions of dollars would have been invested in the construction, renovation or purchase of affordable social housing.
“It’s hard to see how that goes beyond a GOP house,” Seiberg noted.
Affordable housing measures adopted in some cities
There is, however, good news for proponents of affordable housing. At the municipal level, voters in some cities approved more spending on affordable housing, NPR reported.
Kansas City voters approved $175 million in bonds for “very affordable” housing with rents as low as $550 to $750 a month. Voters in Austin, Texas approved the city’s largest housing bond measure, while in Palm Beach County, Florida, unofficial results showed voters approving $200 million in additional property taxes to encourage developers to build moderately priced homes.
Back at the federal level, Republican lawmakers are likely to keep Fannie Mae and Freddie Mac under government conservatorship, Seiberg noted. The Trump administration had wanted to remove Fannie and Freddie from government trusteeship, but that probably won’t happen even under a Republican Congress.
Finally, no matter who controls Congress, you can expect lower premiums for Federal Housing Administration (FHA) loans.
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“President Biden already has his FHA commissioner and [Housing and Urban Development] secretary in place. That’s why even a GOP sweep shouldn’t stop Team Biden from cutting FHA bonuses,” Seiberg wrote. “We still expect a 25 basis point reduction in initial fees and a 25 basis point reduction in annual fees.”
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