DOGE and Real Estate

Hey guys, Mo here.

It’s been a WHILE since I have posted. It’s been a hectic couple of months and the newsletter has been on the backburner.

I’ve got a 9-5 now (more like 7:30am-6pm with commuting) and have been working on the SaaS side of real estate.

Anyway, back to regularly scheduled programming - a LOT has happened since we have caught up.

• Trump got elected and in office

• Elon basically run a government branch

• DOGE (Department of Government Regulation) has cut a lot of government spending

This will obviously trickle down into real estate and change the entirety of how the government functions. These predictions are just mine so take them with a grain of salt.

A couple of obvious ways real estate is going to change:

• Government space requirements reduced

• Funding for housing from federal agencies understaffed (HUD/VA/Freddie/Fannie)

• Fair Housing laws are going to change

• Local Zoning may be easier to deal with

So let’s go into detail for what has happened recently.

With government departments being shut down left and right, it means that space requirements are going to be reduced significantly.

A few examples from CREDaily:

1. DOGE is ending nearly 100 federal leases and may sell two-thirds of vacant government buildings.

2. Washington, DC, faces the biggest impact, with 11 leases totaling 1.4M SF targeted in the first wave of cuts.

3. New York, Los Angeles, and Atlanta—could also see higher vacancies.

So the biggest culprit is that federal leases are going to be cut, which could significantly impact office landlords even more. Think of this affecting office landlords very similar as COVID affected office landlords in NYC/SF. Vacancy will plummet and it will be (imo) hard to fill those sites.

Second order effects of former federal workers will move out of DC and residential vacancy might experience an uptick. There is a lot of luxury rentals that were either under construction or brand new development still in the lease up phase. Those might face some resistance getting leased & the pro forma valuations might fall.

Per NPR, Housing and Urban Development (HUD) is set to lose 84% of staff. The downstream effects might be:

1. Lower section 8 rents

2. Slower turnarounds for funding sources & rental assistance

3. Freeze on grants & loans

4. Nonprofits can’t access funds

5. Changes in funding for homelessness.

Obviously, this is not good for renters, landlords, and home owners who rely on federal funding (HUD backed) organizations. The rental process is going to get slower, especially if you have section 8 tenants - from inspection to receiving rent payments. More rural areas might experience slowdowns in funding

Fair Housing laws are going to change per HousingWire. HUD Secretary, Scott Turner, said he would aim to rollback the AFFH or affirmatively furthering fair housing rule - created during the Obama administration. This is bad because this could mean more homeless people on the street and landlords can legally discriminate towards certain groups.

Local Zoning may be easier to deal with with effects from DOGE. This is GREAT in my eyes. A lot of the reason why it’s so expensive to build in certain counties is because of archaic zoning restrictions. If DOGE does its job and strips a lot of the fat of the zoning and permitting process, we can have higher density housing.

Higher density housing and fewer permitting & zoning restrictions allow us to build more units, which will drive up the supply of housing.

However, local zoning comes down to the city & county level. I am unsure if DOGE will extend to the local and county governments.

That is the current downstream effects of DOGE from what I could think of and what I’ve seen. We will see how Trump & Musk’s plan goes.

If you enjoyed this newsletter, please email me and we can chat 🙂