The state elections across several states are also a big factor at play during the upcoming midterm, particularly in toss-up states like Arizona, Georgia, Nevada, Pennsylvania, and Wisconsin.
Following the elections, state governments are expected to remain largely Republican-controlled. Many state governments are focusing on increasing access to affordable housing. Politicians in Arizona have recently proposed laws that uncap the number of units allowed in affordable housing projects and mandate a large portion of unclaimed property revenue be put toward the Housing Trust Fund.
However, because laws favoring affordable housing creation and maintenance are traditionally Democrat-leaning, it is probable that housing supply will continue to fall short of demand as residential supply is likely to not find government support up to par with housing demand.
Apartment real estate investment trusts (REITs) and the rental housing industry stand to benefit from supply shortfalls in the residential market. Strong demand for apartment housing across the Sunbelt and Mid-America markets following steady growth in jobs and wages, along with positive new household formations and migration trends across markets, fuels a growing need for housing.
Some population redistribution ahead of the 2024 elections should be expected as a result of tax migration induced by a change of party leadership on the state level. In states with new Republican leadership, the legislatures might take the budget surplus as an opportunity to decrease taxes, convert to a flat income tax, or remove the income tax altogether. This would attract wealthy residents into the state as investors chase tax benefits.
States to hold Democratic leadership are likely to spend extra money on environmental protection efforts and green energy, providing an opportunity for environmental, social, and governance (ESG) investments. The extra money comes from the earlier injection of stimulus through the series of COVID-19 response bills and the distribution of funds from the Infrastructure Investment and Jobs Act which have boosted total balances to record highs.
Presently, the legislative outlook as it relates to the rental housing industry is still heavily speculative. Come Tuesday, November 8th, 2022, as Americans take to the polls to elect local and state representatives, a clearer picture will become apparent as to what the next two years might look like for the industry.