How the Upcoming Elections Could Influence California’s Real Estate Market

California’s real estate market is one of the most expensive and active in the country. As the upcoming elections approach, both homeowners and investors are keeping a close watch on potential changes that could impact the market. While factors like interest rates, demand, and economic growth play a role, political decisions often shape real estate trends in major ways. Here’s how the upcoming elections could influence the California real estate market.

1. Housing Affordability and Local Regulations

First and foremost, housing affordability is a hot topic in California, where prices have soared in cities like Los Angeles, San Francisco, and San Diego. Many voters and politicians agree that something needs to be done to make housing more affordable. However, the way candidates address this issue may differ.

Affordable Housing Programs: Depending on the election results, we could see more government efforts to support affordable housing. This might include incentives for developers to build low-cost homes or initiatives to fund affordable housing projects. These efforts could gradually help increase the supply of affordable homes in high-demand areas.
Rent Control: Another potential policy change that could come from the elections is the expansion of rent control. While rent control can help tenants by limiting how much landlords can raise rents, it might discourage investors from buying rental properties, as it can make them less profitable.
Zoning Reforms: Easing zoning regulations, particularly in suburban areas, could encourage the development of more housing. This could be a solution to increase supply in a state where demand has long outpaced the number of available homes. However, loosening zoning rules could face resistance from communities that prefer to keep their neighborhoods less dense.

2. Tax Reforms and Real Estate Investment

Taxes always play a significant role in the real estate market. How the upcoming elections shape tax policies will have direct effects on both homeowners and real estate investors.

Capital Gains Tax: One of the key issues for investors is the capital gains tax on the sale of properties. If the next government raises these taxes, it could make it less attractive to sell properties, leading to fewer homes on the market. On the flip side, lower capital gains taxes might encourage more transactions and boost inventory.
Property Taxes: California’s unique Proposition 13, which limits how much property taxes can increase, may come under discussion in the next election. Some policymakers have suggested changing the law, especially for commercial properties. If property taxes rise, it could make homeownership less affordable for many, while tax relief could attract more buyers.

3. Interest Rates and Mortgage Accessibility

Elections don’t directly control interest rates, but they can influence the economy and, by extension, mortgage rates. The Federal Reserve sets interest rates, but political shifts after the election may affect the broader economic outlook and, therefore, the cost of borrowing.

Interest Rates: If the election results lead to economic uncertainty or higher inflation, the Federal Reserve might raise interest rates. Higher rates make mortgages more expensive, which could push potential buyers out of the market. Conversely, if the economy remains stable and rates stay low, buying a home will remain more affordable, particularly in expensive markets like California.
Mortgage Lending Policies: Future political leaders might also influence mortgage accessibility through federal housing programs. Policies aimed at making loans more accessible to first-time buyers or low-income households could increase homeownership opportunities in California, where prices are high and down payments are often out of reach.

4. Infrastructure Development and Housing Growth

Infrastructure investment is another area where the election could have a big impact. California’s population continues to grow, and with it, the need for better roads, public transit, and utilities.

Transportation Projects: The outcome of the election could determine the level of investment in transportation, like expanding highways or improving public transit systems. This could make suburban areas more accessible to people who work in cities, driving up property values in these regions. For example, better connections between Los Angeles and its outer suburbs could make those areas more attractive to homebuyers.
Urban Renewal: Politicians may also propose new urban development projects in areas that have been neglected or are in need of investment. This could lead to increased property values in these areas, but it could also lead to gentrification, where long-term residents might be priced out of their neighborhoods.

5. Environmental and Climate Policies

California faces many environmental challenges, such as wildfires, droughts, and rising sea levels, so it’s no surprise that environmental policy is often a key election issue. What happens in the elections could determine how strictly the state regulates housing and land use in vulnerable areas.

Building Codes and Restrictions: Depending on the election results, we might see new laws that limit development in high-risk areas, such as wildfire zones or coastal areas at risk of flooding. These regulations could raise the cost of building homes, but they would also make homes safer from natural disasters, which is important for long-term investment.
Green Building Initiatives: The government could also introduce policies that promote green building practices. This could involve offering tax credits to homeowners who install solar panels or make energy-efficient upgrades. While these policies could raise the initial cost of building, they can also make homes more sustainable and attractive to environmentally conscious buyers.

Conclusion

The upcoming elections are poised to have a significant impact on California’s real estate market. From tax policy changes and infrastructure investments to new environmental regulations, the outcome will shape the market in different ways. For homeowners, investors, and prospective buyers, it’s crucial to stay informed about how these potential changes might influence the state’s housing landscape. The real estate market is always shifting, and in a state as large and diverse as California, elections often play a key role in determining which way it moves next.