With the midterm elections now less than four months away, conversations among investors have increasingly turned to how the outcome might reshape the commercial real estate landscape.

The headline: the elections themselves are unlikely to cause immediate disruption to property values or transaction volume. But the policy environment that emerges from the 120th Congress could meaningfully influence several forces that matter deeply to real estate investors, including tax policy, federal spending, interest rates and regulatory environments. Here’s how we’re thinking about it.

The Political Landscape Heading into November

Republicans currently hold slim majorities in both chambers of Congress –218 seats to 214 in the House (with three vacancies), and 53 seats to 47 in the Senate (assuming that Senator McConnell returns from the “Injured Reserve” list and the late Senator Lindsey Graham’s (R, SC) successor is from his party, as is nearly certain). Democrats need to gain just three House seats to reclaim the majority, and four Senate seats to flip control there.

Recent polling has Democrats with an edge in the generic congressional ballot, and President Trump's approval ratings are hovering in the mid-30’s. Redistricting battles in Texas, California and Virginia add further uncertainty to the final tally.

Three scenarios are plausible: continued full Republican control (long odds), a divided Congress (highest current likelihood, with Democrats reclaiming the House and the Republicans keeping the Senate), or a Democratic sweep of both chambers (also plausible). Each carries distinct implications for commercial real estate.

How Elections Impact Commercial Real Estate

CBRE’s research team has conducted statistical analysis across election cycles dating back to 2000, examining transaction volumes, impact on cap rates, and investment activity across property types and markets. Their conclusion: federal elections generally have little impact on commercial real estate investment activity or values in the months immediately before or after elections.

The pattern that does appear in the data is one of uncertainty – investors adopting a “wait and see” approach in the run-up to elections – followed by greater confidence and less uncertainty once outcomes become clear, regardless of which party wins.

What does matter is the policy environment that emerges over the full term of a given Congress. Government spending, tax structure, and regulatory frameworks are long-term drivers of commercial real estate values and activity.

Tax Policies

The most consequential near-term variable for real estate investors is a change in tax policy.

For example, the One Big Beautiful Bill Act (OBBBA) delivered several significant wins for real estate investors: 100% bonus depreciation was permanently restored for qualifying properties, the Opportunity Zone program was made permanent, and 1031 exchanges survived fully intact with no caps or limitations. These provisions represent a powerful set of tools that investors can deploy with long-term certainty, without the artificial urgency created by prior sunset deadlines.

A Republican-controlled Congress is generally expected to maintain the current framework. A divided Congress or Democratic-controlled House would not automatically reverse these provisions – undoing legislation requires affirmative action, not just inaction – but it could complicate any further enhancements and would increase uncertainty around future modifications, particularly if deficit concerns re-emerge as a legislative pressure point. Historically, 1031 exchanges have faced periodic threats from both parties as a potential revenue offset, and that dynamic could resurface. That said, we believe that most of the widely applicable tax advantages currently available to commercial real estate investors, including bonus depreciation and 1031 exchanges, are durable regardless of the outcome of the midterm elections.

Housing Policies

The most significant piece of real estate-related legislation in 2026 was just enacted: the 21st Century ROAD to Housing Act, which passed with overwhelming bipartisan support. The bill is primarily designed to increase housing supply by reducing federal regulatory barriers and providing incentives to states and localities to ease land-use regulations – developments seen as broadly positive for multifamily developers and value-add investors.

The more controversial element of the bill is a ban on large institutional investors – those owning 350 or more properties – from purchasing additional single-family homes. After negotiations following industry pushback, a provision requiring build-to-rent investors to sell properties within seven years was removed, meaningfully reducing the most damaging implications for institutional real estate capital. For our funds, which are focused on multifamily rather than single-family assets, the practical impact is limited – but it signals a broader political environment in which institutional real estate ownership of residential properties faces continued public and legislative scrutiny.

A change in House control would likely mean more aggressive housing regulation proposals – rent stabilization measures, tenant protection legislation, and potentially additional restrictions on institutional investor activity. Conversely, full Republican control could continue the current emphasis on deregulation rather than further operating restrictions.

Interest Rates and the Federal Reserve

No analysis of commercial real estate and elections would be complete without addressing the dominant force in the current market: interest rates and the cost of debt capital.

The Federal Reserve is an independent institution, and its rate decisions are driven by economic data – not election outcomes. The Fed has held rates steady this year as it has navigated competing pressures: moderating inflation, and economic uncertainty, including energy price shocks related to the conflict with Iran.

What elections can influence is the fiscal backdrop against which the Fed operates. High federal deficits and expanding spending – historically more likely under a Democratic-controlled Congress than a Republican one – can put upward pressure on long-term Treasury yields, which in turn affect commercial real estate cap rates and refinancing costs. Morgan Stanley has specifically flagged political pressures, high deficits, and energy price volatility as factors that could fuel bond volatility and keep long-term rates elevated.

For the distressed and value-add multifamily opportunities we are actively pursuing – particularly those involving properties with maturing loans – the path of interest rates over the next year or two is arguably more important than the election outcome. Assets facing refinancing stress in a ~6% rate environment may see a glimmer of hope if rates decline 100 basis points over the same period; conversely, the stress on legacy borrowers will rise if rates increase.

State and Local Elections: Often More Impactful

One dynamic that frequently gets lost in the focus on federal elections is the outsized influence of state and local policy on commercial real estate. Zoning laws, rent control ordinances, tax incentives and issuance of building permits are overwhelmingly determined at the state and municipal level – and November’s ballot includes hundreds of those races and ballot initiatives.

In Phoenix, for example, the Maricopa County policy environment – including permitting timelines, tax assessments, and multifamily regulations – is shaped by candidates who will be on the November ballot. In Colorado, state-level rent stabilization and eviction policy debates continue to occur at committees in the state house. These local outcomes often have a more direct and immediate impact on property-level cash flows than anything happening in Washington.

How Pathfinder Is Positioning

We seek to remain focused on property fundamentals and deal-specific economics, while staying informed about the policy backdrop. Specifically, we are:

• Actively deploying capital in distressed multifamily properties where asset-level economics – loan maturities, operating distress, motivated sellers – drive the thesis, independent of election outcomes;
• Taking advantage of the current tax framework, rather than waiting for election clarity that is unlikely to change the fundamental toolset available to us;
• Monitoring the interest rate environment closely as rate trajectories have a more direct impact on deal economics and exit valuations than the November results; and
• Watching state and local elections in our target markets for developments affecting the regulatory or tax environment and our properties.

Conclusion

A shift in congressional control could alter the pace and direction of future tax legislation, housing regulation, and fiscal spending. That said, elections themselves usually do not move commercial real estate values or transaction volumes in a material way.

What moves real estate values are fundamentals – the cost of capital, the supply-demand balance in specific submarkets and the operating performance of individual assets. Those forces will continue to be our primary focus.

It should be another interesting election.

Lorne Polger is Senior Managing Director of Pathfinder Partners.  Prior to co-founding Pathfinder in 2006, Lorne was a partner with a leading San Diego law firm, where he headed the Real Estate, Land Use and Environmental Law group. He can be reached at lpolger@pathfinderfunds.com.