Back in November, all eyes were on Georgia as the public eagerly awaited the results of the 2020 presidential election. And now, we're once again looking to Georgia to determine who will control the Senate for the next two years.
Democrat Rev. Raphael Warnock has been declared victorious over Republican candidate Kelly Loeffler, making him the first Black senator from Georgia. Control of the Senate now boils down to the race between Republican David Perdue and Democrat Jon Ossoff. Ossoff was leading Perdue as of Wednesday morning, but a victor has yet to be declared as of this writing.
Warnock, meanwhile, is the first Georgia Democrat elected to the Senate in 20 years, and if Ossoff emerges a winner, Democrats will control the Senate and make it more feasible for Biden to push his agenda through. Throughout his campaign, Biden had pledged to aggressively work toward a full economic recovery and implement tax reform that includes higher taxes on corporations as well as wealthy Americans. The results of the Georgia runoff and subsequent Senate control will also determine whether a third coronavirus stimulus bill is passed into law and what provisions it entails.
But while these are probably the biggest issues on people's minds, a Democrat-controlled Senate could also help Biden bring some changes to the world of real estate. Here's what investors need to know.
Homeownership may become more attainable
It's long been said that homeownership lends to better financial security than renting, and Biden wants to help more people achieve that status. That's why he's proposing the First Down Payment Tax Credit, which would be worth up to $15,000 for qualified first-time buyers. Biden also intends to curb discriminatory lending practices to make mortgages accessible to all qualified applicants. If Democrats come to rule the Senate, there's a good chance this proposal will go through, especially since it's far less controversial than some of the other changes Biden is proposing.
A first-time buyer tax credit could result in an uptick in starter home demand. That's something investors may be able to capitalize on, especially in markets where inventory is particularly lacking.
The 1031 exchange could disappear
Real estate investors are privy to a number of tax breaks that allow them to protect and grow their wealth, and one notable one is the 1031 exchange. With a 1031 exchange, investors can sell one piece of real estate and buy a comparable property without having to pay capital gains in the process. It's a huge money saver, and one that Biden may seek to eliminate. That would result in higher taxes for real estate investors and fewer incentives to move properties around in their portfolios.
There's a lot riding on Georgia
Clearly, the results of the Georgia runoff will have huge implications as Democrats seek to regain control of the Senate. If that happens, and Biden's real estate plans move forward, it will certainly be a mixed bag for investors. However, the aforementioned changes may not happen right away, given that Biden has bigger problems to address in the near term -- namely, a raging pandemic and an economic recession that's destroyed businesses on a national level.