The voting is over in this year’s midterm congressional elections, and this time, many of the polls saying Republicans were on track to suffer heavy losses proved to be more accurate than they have been. Not all the counting is over, but it is clear that Democrats have regained the majority in both the House of Representatives and the Senate by comfortable margins. The results can only be seen as a rebuke of the Trump administration and congressional Republicans.
In truth, Democrats were widely expected to regain the majority in the House. After all, only twice in the past 80 years — since the end of World War II — has the president’s party actually gained seats in the House in a midterm election. Those two elections — 1998, when Republicans intent on impeaching President Bill Clinton misread the electorate, and 2002, when the country rallied behind President George W. Bush in the aftermath of the Sept. 11 terrorist attacks — were anomalies when it comes to midterm congressional elections. With a margin of only three seats, high gas prices, an unpopular war and a president with the lowest approval rating in decades, retaining their House majority would have been quite a political feat by the GOP.
But the magnitude of Democratic gains, particularly in the Senate and in what had been Republican congressional districts, was unexpected. A year ago, before the onset of the Iran war and the increase in gas prices, Republicans were expected to hold on narrowly to their Senate majority. Senate Democratic wins in traditionally Republican states like South Carolina, Kansas and Texas will make it difficult for Republicans to deny that the voters, including many of their own supporters, were voicing their unhappiness with President Trump and their leadership.
What will the election results mean for the commercial real estate industry and CREDA members? The impact at the state level will be profound, particularly on the issue of data center development. State and local election results and their impact will be the subject of future Market Share blogs. But purely at the federal level, the current members of the 119th Congress will reconvene next week for a lame-duck session and will deal with a number of issues important to commercial real estate. The newly elected 120th Congress, with Democratic majorities in both chambers, will be sworn in Jan. 3, 2027, and divided government will be the norm for the remainder of President Trump’s tenure.
The lame-duck session
- Permitting reform. Infrastructure permitting reform is one of CREDA’s top federal legislative priorities, particularly as it impacts development of energy generation and transmission projects. On the last day before the Senate recessed for the election, a bipartisan group of senators introduced a comprehensive permitting reform bill, the Bipartisan American Affordability and Jobs Act (S. 5653). Among other things, the bill would establish enforceable deadlines for agency environmental reviews and limit litigation-related delays, allowing projects to proceed while procedural errors are resolved. It would also facilitate data center development by ensuring that consumers do not pay for needed grid infrastructure upgrades or pay for the added costs of serving larger data centers. The bill’s sponsors have promised a Senate procedural vote when Congress reconvenes next week.
- Government funding. The stopgap spending bill that has kept the federal government operating expires Dec. 11, setting up a potential government shutdown scenario allowing Democrats, who will still be in the minority, to use the opportunity to leverage additional concessions from House Republicans on spending levels. One focus could be pressuring Republicans to renew expired clean-energy tax credits and health care subsidies in Obamacare.
- Transportation and infrastructure programs. The stopgap spending bill that has kept the government running also temporarily extended funding for surface transportation programs that otherwise would have expired Sept. 30. Reauthorization of infrastructure and transportation programs is a priority for commercial real estate. Congressional committees had reached bipartisan agreement on a five-year authorization bill but did not pass the bill before the election. Some Democrats may want to renegotiate the terms of surface transportation legislation in the next Congress.
Congress and the next two years
The reality of divided government is that President Trump retains the power to veto any House-passed legislation he opposes. But the magnitude of the Democratic wins will surely open the door for Democrats to pursue a more aggressive agenda. The question is whether the Democratic majority would be open to negotiating with President Trump and compromise to advance legislation that both can support, or instead focus on passing messaging bills designed to set a legislative agenda for Democrats going into the 2028 presidential race. In either case, you can expect Congress to pursue action in the following areas:
- Data centers. The populist sentiment against data centers that many politicians made centerpieces of their campaigns will demand action, if only through introduction of bills for which sponsors can take credit, but which in reality have little chance of enactment because of a sure Trump veto. Expect more committee hearings on data center development and the impact on consumers. On the tax side, Sen. Ron Wyden, D-Ore., currently the ranking member on the Senate Finance Committee, has floated a number of proposals that would adversely affect data center development, including disallowing 100% bonus depreciation, restricting Opportunity Zone investments and imposing a federal excise tax on the gross receipts of data centers.
- Agency oversight. Democrats will be aggressive in exercising their congressional committee prerogatives of oversight and investigation of federal agencies, including the conduct of the Iran war under Defense Secretary Pete Hegseth, Department of Homeland Security activities, and contracting by federal agencies, to name just a few areas. The Trump administration’s federal regulatory policies will be a target of congressional Democrats.
- Tax policy affecting CRE. While comprehensive tax legislation that overturns major provisions of the One Big Beautiful Bill Act is unlikely to be enacted because of a sure Trump veto, individual provisions harmful to commercial real estate could conceivably make their way into larger omnibus bills, such as funding measures, that could be enacted. For example, President Trump has agreed with Democrats on increasing taxes on real estate carried interests (also known as “promoted interests” or “promotes”) from the current capital gains rate to higher, ordinary income tax rates — a policy proposal we defeated in prior years. Additional provisions passed by Democratic Congresses that failed to make it into law, such as increasing capital gains tax rates or restricting 1031 like-kind exchanges, could also resurface and could be included in must-pass bills.
For CREDA and its members, now is the time when our advocacy meets the challenge. The next Congress will have a huge number of new members who will need to be educated on the issues affecting commercial real estate. The health of the industry affects the economic well-being of each elected official’s communities and constituents, and CREDA will make sure that this reality is understood when it comes to policies that affect our members and industry. After an election, when the partisan passions have begun to dissipate and elected officials necessarily turn to governance, is when the inside game of Washington really begins.
