Equities.com hosted a webinar on Nov. 19 focused on investing challenges and opportunities in the midst of potential policy changes expected when President-elect Donald Trump takes office on Jan. 20.
The four-hour event, titled “Investment Strategies Under a Trump Administration,” included a panel moderated by Paula DeLaurentis, CEO of Equities.com, on real estate infrastructure, affordable housing and sustainability.
The panel included Sam Adams, CEO and Co-Founder, Vert Asset Management, and co-author of the book, Your Essential Guide to Sustainable Investing, and David Sand, Chief Impact Strategist, Community Capital Management. Their discussion centered on how infrastructure and sustainability initiatives are transforming real estate markets, with a focus on green building, energy efficiency and affordable housing.
Commercial real estate
The panel kicked off with Adams and Sand evaluating the current state of the commercial real estate market. Adams argued that the commercial real estate market is healthy because the economy is strong.
“Real estate does well when the economy is doing well,” he noted. “Of course, there is also the flip side. High interest rates give you some headwinds.”
Sand said that affordable housing and the cost of housing surfaced as a major issue in the 2024 presidential campaign.
“There’s going to be a lot more scrutiny on these issues than there used to be,” Sand said. “There used to be a handful of high-cost housing markets in certain states, but now it’s all over the country.”
There may be stimulus programs in the future to make housing more affordable, Sand noted, “including the Fed lowering interest rates even as the bond market worries about inflation and the impact of tariffs and a potential trade war.”
How regulations impact real estate
Adams and Sand also explored existing regulations that impact real estate. At the federal level, Sand said there could be regulatory changes.
“There are lots of regulations that affect housing construction, including OSHA [Occupational Safety and Health Administration] regulations, green building standards, financial regulation and consumer protection rules that affect the home mortgage market. Many of these are in play for revision with consequences none of us can predict. However, it would appear they’re going to lower certain aspects of the cost of new home construction,” Sand said.
Adams noted that when you sell a property, there is a range of real estate tax regulations and capital gains tax relief at the federal level. “As long as you buy another one in a certain amount of time. Then you don’t have to pay tax on it,” he added. At the corporate level, Adams said there are ways to reduce taxes by owning a REIT [Real Estate Investment Trust].
Green building standards
The panelists also addressed whether green building standards could take a hit under the new administration.
Sand said that “none of us have crystal balls but based on the campaign rhetoric, there appear to be plans to reduce HUD’s [Department of Housing and Urban Development] role in setting building standards.”
“Whatever the federal government does will not affect what happens in markets like California, New York, Massachusetts and Illinois where state regulations affect building standards. Also, the money for the Greenhouse Gas Reduction Fund and the Inflation Reduction Act has been approved and appropriated. The effect of these programs will have a ripple effect around greenhouse gas reduction in housing and affordable housing that is probably going to be unstoppable,” Sand added.
Trump made his millions as a real-estate mogul. Adams said that could be good for the industry overall.
“When you put a real estate guy in the White House, it should generally be good for real estate. Trump will make sure he takes care of his own business and his friends’ businesses. I think you’ll see some deregulation that will generally be positive for business and by extension real estate, including positive tax policies,” he added.
But on the flip side, Adams said, “tariffs are generally quite negative for everyone, including for the real estate business. It raises costs for everyone, which could be inflationary. It could keep interest rates higher for longer.”
Deportations, construction and city sustainability
If Trump increases the scale of deportations, it could affect the construction industry, which Sand said is “more reliant on immigrant labor than some other industries.”
“Potentially, you have two big things coming on the horizon: tariffs and deportation, which will make all forms of construction, including housing and affordable housing, more expensive,” he added.
Adams explained how many city sustainability programs that require buildings to decarbonize will not change with the new administration.
But Adams said it remains unclear what will happen to federal programs for individual homeowners, such as energy efficiency upgrades and tax rebates.
“There are a lot of things you can do to an existing building to make it more energy efficient and resilient,” Adams explained.
Sand agreed with Adams, adding that being in a green building is very attractive to residential and corporate tenants.
“Landlords compete to have the highest grade of green or LEED certification for their buildings. That’s not driven by regulation but by meeting tenant demand.”
Adams agreed: “The demand for green-certified and health-certified buildings is huge and will continue to exist and persist beyond any administrative policies.”
The mindset of sustainable investors
The panel also discussed the mindset of sustainable investors on the eve of a new presidential administration.
In 2016, when Trump was first elected, there was a surge in interest in ESG [Environmental, Social, and Governance].
“I think the ESG investor is a bit more sophisticated now, and they’re aware of ‘greenwashing,’” Adams said.
“They’re also aware of increased risks due to climate change, so they’re looking for investment options that can help them achieve their sustainability goals, but also their financial goals. The good news is they have more options than ever before,” he added.
Adams also said that investors want to make their buildings more resilient, especially in California, Colorado and Florida.
“They’ve seen the exit of insurance companies from those markets, and they’re starting to see that climate change is having a real financial impact,” he said.
On how climate change affects the real estate insurance market, Adams said if you’re a homeowner or thinking about buying a home, then insurance must be considered. And if you’re a financial planner, he added, insurance must be factored into a client’s plan.
“The cost to insure your home is going to go up all across the country. Insurers are going to walk away from insuring things like wildfires and floods. Housing is going to get more expensive, and so will insurance. There needs to be some deregulation, but that would just increase prices. It’s going to be a continual problem. Reinsurance rates have been going up dramatically over the last few years,” Adams said.
Closing thoughts
Sand said if you’re looking for a theme, it’s that people want to see lower costs for housing.
“Although we’ve been talking about real estate and housing, it’s going to be true for other aspects of the corporate sector. If corporate costs are going down, the consumer should reap the benefits of that, although history shows that it’s often corporate profits that prosper,” he said.
In terms of environmental regulations, Sand said, “you can expect that to be outsourced to all of us and onto the planet.”
“That may be terrible public policy, everybody is entitled to their opinion, but it creates an environment that is very, very strong for investing. The animal spirits of our industry love to see this,” he said.
Adams said that sustainability makes more sense from a business perspective. As an analogy, he explained how homeowners changed light bulbs from incandescent to fluorescent, and then to LED, which helped them save money on their utility bills.
“That’s why you’re going to see more and more movements to sustainability in the real estate space. It makes financial sense to make these investments upfront and then pay less going forward in terms of maintenance, energy costs, water costs, resiliency, and recovery costs. The sustainable investment movement is here to stay in the real estate space and in the Trump administration,” Adams added.
This is the second article in a three-part series on an Equities webinar focused on the second Trump administration. You can watch that webinar and learn more about the guest speakers here.
Read more in this series: Consider these investing challenges and opportunities under a second Trump administration
