How will President Trump's "One Big Beautiful Bill" affect the Real Estate Market moving forward

As of July 15, 2025, President Trump's "One Big Beautiful Bill" (OBBB Act) has been signed into law, and its provisions are already beginning to ripple through the U.S. economy, with significant implications for the real estate market. While the bill covers a broad spectrum from national security to agriculture, its core tax and infrastructure components are the ones reshaping the landscape for homeowners, developers, and investors alike.

Let's dive into how this landmark legislation is impacting real estate:

1. Tax Policy: A Boost for Buyers and Businesses

The OBBB Act delivers several key tax changes that directly influence affordability and investment in real estate:

Permanent 20% Qualified Business Income (QBI) Deduction: For real estate professionals and other pass-through business owners, the permanent extension and slight enhancement of the 20% QBI deduction (Section 199A) is a major win. This prevents a significant tax hike that was otherwise scheduled for the end of 2025, offering more financial stability for many in the industry and potentially freeing up capital for real estate ventures.

Extension and Enhancement of Reduced Tax Rates and Standard Deduction: The continuation of lower individual tax rates, a higher standard deduction, and an increased child tax credit, all initially part of the 2017 Tax Cuts and Jobs Act (TCJA), means more disposable income for households. This can translate into greater buying power for prospective homeowners, helping to sustain demand in a market still grappling with affordability challenges.

Temporary Increase in SALT Deduction Cap: Perhaps one of the most talked-about provisions for homeowners, the OBBB Act temporarily multiplies the $10,000 State and Local Tax (SALT) deduction limit to $40,000 for tax years 2025 through 2029 (with some income-based adjustments). This is a significant relief for homeowners in high-tax states, potentially making homeownership more financially viable and supporting home values in these regions.

Reinstatement of 100% Bonus Depreciation: For "qualified property" acquired after January 19, 2025, the bill permanently restores 100% bonus depreciation. This is a powerful incentive for real estate developers and investors, allowing them to immediately write off the full cost of eligible tangible personal property and certain qualified improvement property. This is expected to spur new development, particularly in industrial and commercial sectors.

Expansion of Business Interest Deduction: The OBBB Act reinstates a more generous definition of "adjusted taxable income" for business interest deductions, making it easier for businesses to deduct their interest expenses. This can reduce the cost of borrowing for real estate projects, further incentivizing development and investment.

2. Infrastructure Overhaul: Connecting Communities, Creating Opportunity

While the "Big Beautiful Bill" isn't solely an infrastructure bill, it includes substantial investments and reforms that will indirectly shape the real estate landscape:

Targeted Infrastructure Investments: The bill directs significant funding towards transportation (FAA and Coast Guard modernization), energy, and water infrastructure. While some competitive grants and clean transportation programs have been rescinded, the focus on enhancing existing infrastructure and addressing critical needs can improve connectivity, reduce commute times, and make certain areas more attractive for residential and commercial development. We're already seeing announcements of new funding for roads, bridges, and port improvements.

Permitting Reform: Changes to environmental review processes and a renewed focus on streamlining permits could accelerate the pace of development, potentially leading to more housing and commercial projects coming to market faster.

Shift in Energy Policy: The bill notably phases out wind, solar, and EV tax credits (with some transitional periods) and imposes new fees on renewable energy projects on public lands. This shift in energy policy could influence demand for certain types of industrial real estate tied to the renewable energy sector and potentially lead to a greater focus on traditional energy infrastructure.

3. Affordable Housing Initiatives: Addressing a Critical Need

The OBBB Act makes perhaps its biggest direct impact on the housing market through its affordable housing provisions:

Expanded Low-Income Housing Tax Credit (LIHTC): The permanent reduction of the LIHTC bond test and a significant increase in the 9% allocation program are considered the biggest investment in the housing credit in 25 years. This is expected to lead to the development of tens of thousands of new affordable housing units, addressing a critical shortage in many areas and providing more housing options for lower-income individuals and families.

New Market Tax Credits: The permanent extension of new market tax credits will encourage investment and redevelopment in distressed communities, fostering revitalization and creating new real estate opportunities in underserved areas.

The Overall Impact: A Mixed but Generally Positive Outlook

As of mid-2025, the "Big Beautiful Bill" appears to be having a generally positive, albeit nuanced, impact on the real estate market:

Increased Development: The reinstatement of 100% bonus depreciation and expanded business interest deductions are strong incentives for developers, particularly in the commercial and industrial sectors. This could lead to an increase in construction activity and a more robust supply pipeline.

Affordability Support: While high interest rates continue to be a significant hurdle for many homebuyers, the extended tax cuts, increased standard deduction, and particularly the higher SALT deduction cap offer some financial relief, potentially offsetting some affordability pressures. The significant investment in affordable housing through LIHTC is also a major step toward addressing housing shortages for lower-income populations.

Geographic Variations: The impact of the SALT deduction changes will be most keenly felt in high-tax states, potentially boosting their housing markets. Infrastructure investments will also create localized opportunities for growth and development in areas targeted for upgrades.

Investor Confidence: The permanence of many of these tax policies, rather than their temporary nature, provides greater certainty for long-term real estate investments, which could attract more capital to the sector.

While the market still faces challenges such as elevated interest rates and some softening in the rental market, the "One Big Beautiful Bill" provides a notable stimulus. Its blend of pro-business tax reforms, targeted infrastructure spending, and a significant push for affordable housing suggests a real estate market that, while evolving, is being actively shaped by a new set of long-term economic drivers.