To most of the pundits’ surprise, Donald Trump won the presidential election and at least some of the policies and promises of his campaign will come to fruition. More importantly for California, the democrats have won a super majority in both the Assembly and Senate (along with holding the Governorship) and can pass any tax or ballot proposition without a single republican vote. What does this election mean for real estate and property management?
- Inflation – Trump has already signaled he wants to implement two actions very quickly: a 1 trillion dollar 10-year transportation stimulus package to create more jobs and make our infrastructure country wide. With our current 500 billion annual deficits, and a total outstanding debt over 20 trillion, this should create more inflation because the job market is already tight and we will have to finance more debt.
- Recession – Another promise Trump would like to keep is to cut the corporate tax rate and simplify all tax rates. Any tax cut may create jobs in the long term, but in the short term it may create higher deficits and bring on a recession sooner than later. As I have blogged before, even if Clinton were elected, we expect a recession after 7 years of economic growth, but these cuts, along with the stimulus bill, may make that happen in 2017 or 2018 and not later.
- Pro-Tenant Legislation – Typically, the democrats have been more concerned with tenant rights than property rights. With affordable housing nowhere to be found in the state, rising homelessness, and a critical shortage of below market rentals, there will be a push for rent control, additional tenant rights and more pressure on owners to meet state and local requirements.
- Pro-Tax Legislation – If we hit a recession and the state budget suffers again, there will be a push to increase taxes and possibly undermine proposition 13 rather than cut school funding and programs for the poor and elderly. That tax burden may fall on both taxpayers and property owners.
I believe property management companies will be more needed than ever as it becomes more difficult to manage by owner. We will be the boots on the ground for our owners as we abide by the laws of the land but make tenants abide by the terms of their lease contract.