On the campaign trail, President-elect Joe Biden promised a tax credit of up to $15,000 for first-time homebuyers. He also called for a more robust federal role in closing the racial gap in homeownership.

Housing policy never took center stage in the 2020 campaign, but real estate experts expect changes after Biden succeeds President Donald Trump in the Oval Office. The most dramatic difference is likely to come in the form of a renewed federal focus on racial equality and anti-discrimination regulation.

Trump largely downplayed the racial gap in a housing market where Black homeownership rates are far below White rates. Biden, on the other hand, makes social justice in housing the main thrust of his real estate platform.

“This is going to be a totally different approach,” says Ken Thomas, president of Community Development Fund Advisors in Miami and author of The CRA Handbook.

Jerry Howard, chief executive of the National Association of Home Builders, reaches a similar conclusion. “You’ve already seen indications that the era of deregulation is over,” he says. “That undoubtedly will increase housing costs.”

A tax credit for first-time homebuyers?

For consumers, the proposed tax break would be the most visible change. Biden has said he would revive a temporary tax credit for first-time buyers that was enacted during the Great Recession, then quickly disappeared.

That credit was part of the Housing and Economic Recovery Act signed by President George W. Bush in July 2008. The $7,500 credit was raised to $8,000 the following year in a bill signed by President Barack Obama. The tax break ended in 2010.

That incentive aimed to spur demand during a housing crash. There’s no crash now. Instead, soaring home prices have made affordability a challenge for many would-be buyers

The Bush and Obama programs awarded a tax credit of 10 percent of the purchase price of the home, although taxpayers didn’t receive the incentive until they filed their tax returns months after making the purchase. On his campaign website, Biden portrayed his tax credit as an immediate form of down payment assistance.

“This tax credit will be permanent and advanceable, meaning that homebuyers receive the tax credit when they make the purchase instead of waiting to receive the assistance when they file taxes the following year,” the Biden campaign wrote on its site.

Lawrence Yun, chief economist at the National Association of Realtors, lauded the tax credit, which he said could be made available to buyers at closing. However, he warned that runaway demand for entry-level homes is pushing prices higher, and an incentive for buyers might only further disrupt the imbalance between scarce supply and burgeoning demand.

“The homebuyer tax credit by itself is good news, but it’s only half the news,” Yun says. “The rest of the news is that we have a housing shortage. If we just add more fuel to the demand fire without increasing supply, we’ll have home prices rising even higher.”

The Home Builders’ Howard offers a similar caveat: New construction has not kept pace with supply, and home prices are rising sharply. “Right now, we’re in a very, very high-demand housing market,” he says. “If you’re going to do something about demand without doing anything about supply, you’re abandoning the whole issue of housing affordability.”

Biden will have to negotiate the details — such as how and when the money will be delivered, and who will be eligible — with Congress. While Democrats hold a majority in the House of Representatives, control of the Senate hinges on the results of two runoffs in Georgia in early January.

It’s possible that the proposal wouldn’t be stalled by partisan disagreements, says Mark Hamrick, senior economic analyst at Bankrate.com.

“A stable and robust housing market ought to be a bipartisan issue,” Hamrick says. “I don’t think that’s the kind of legislation Republicans would spend a lot of time resisting. Clearly, people who live in red and blue states want to own homes.”

The National Association of Home Builders supports the first-time buyer tax credit, but Howard offers this reality check: Such a measure almost certainly would be part of a broader tax reform. But if Republicans hold the Senate, any sweeping tax bill seems doomed to die there.

Biden also has called for an end to the so-called Section 1031 tax break for real estate investors. The provision lets owners sell property without paying capital gains taxes if they use the proceeds to buy other real estate. While such a change wouldn’t directly affect consumers, Yun warned that it could hamper the supply of housing by making landowners less willing to part with parcels that could be used to build housing.

A renewed focus on social justice

Biden also calls for a return to the Obama-era approach to enforcing anti-discrimination rules. In one example, the president-elect said he’ll bring back the Affirmatively Furthering Fair Housing rule that pushes local communities to address housing segregation.

Housing and Urban Development Secretary Ben Carson in July called the rule “unworkable and ultimately a waste of time.” Trump followed up on Twitter, where he declared, “I am happy to inform all of the people living their Suburban Lifestyle Dream that you will no longer be bothered or financially hurt by having low income housing built in your neighborhood.”

Biden also has called out discrimination in appraisals. To counteract low appraisals in minority neighborhoods, Biden says he’ll push for training to address racial bias among appraisers.

The appraisal industry’s standards-setting group accepts Biden’s assessment.

“While The Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice has specifically prohibited discrimination since the first writing in 1989, it is clear that we must do more,” wrote Dave Bunton, president of The Appraisal Foundation, in a pre-election column.

The National Association of Realtors is similarly amenable to a focus on racial inequality in housing. “It’s the right thing to do,” Yun says.

Biden’s platform calls for a return to aggressive enforcement of federal laws such as the Home Mortgage Disclosure Act and the Community Reinvestment Act.

“To the degree that the Trump administration sought to undermine that regulation and its enforcement, clearly a Biden administration is going to make that a priority,” Hamrick says. “It’s sort of a housing equivalent of Black Lives Matter.”

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