Democratic Control in Washington Sparks Housing Policy Shift with Implications for U.S. Real Estate

As we move into 2026, the Democratic controlled House and Senate will shift the focus to federal housing policies with an eye to shoring up the national affordability crisis which has been described as needing 1.2 million more units by the NAHB.

While the Democratic majority plans to utilize a variety of programs to support affordable rental housing and spur workforce development, of greatest impact to house construction will be overcoming zoning restrictions, lengthy permitting processes, a lack of developable land, and growing material costs. While additional subsidies to construction will be utilized, their impact to increase housing production will be limited.

The Trump administration’s tariffs on imported construction materials and immigration policies have added complexity to an already complex situation. Seven percent of construction materials are imported, and the tariffs will increase the cost of those materials on average $10,900 per home, according to NAHB analysis. Labor, which makes up more than 25 percent of the cost of home construction, also will be affected by the administration’s immigration policies. The cost and availability of labor will impact construction schedules and costs.

Although a divided government can be challenging for real estate, progress has been made to implement housing policy through the 21st Century ROAD to Housing Act, passed with overwhelming bipartisan support in mid-2026. The new legislation will go to help remove regulatory barriers to increase the supply of housing to meet the needs of our growing population. Many other bills are currently under consideration that would address the permitting process for energy and minerals development with the goal of creating related housing-related infrastructure.

While opportunities in the affordable and multifamily sectors are emerging due to relaxed trade and labor restrictions, they also carry risk as the landscape continues to evolve. Investors will need to monitor the impact of high interest rates, including Freddie Mac reported 30-year fixed rates over 7%, as well as land and construction costs.

What This Means for Your Portfolio:

1. Funding for housing assistance will create opportunities for investors focused on creating impact to invest in newly created affordable housing projects.
2. Regulatory cost reduction – monitor how the new legislation, such as ROAD 2.0, can impact the margins of property developers.
3. Consider the impact of construction cost inflation brought about by tariffs and assess whether imported materials could result in lower margins or even delays for under construction properties.
4. Assess the impact of workforce constraints in local markets as severe shortages in skilled labor exist today and will impact project completion times.

The Final Takeaway:

This real experiment of divided government will seek to increase the amount of housing stock while trying to control the inflationary pressures and the required regulatory changes. The experiments will have much to teach the real estate community about the interplay of federal initiatives, cost of materials, labor, and credit.