What the 2026 U.S. midterm elections could mean for construction and real estate

With the 2026 U.S. midterm elections approaching, RSM is looking at the economic stakes and the key issues for various industries. This article is one part of that series.

Introduction

The outcome of the 2026 U.S. midterm elections will help shape the policy landscape facing U.S. businesses through the remainder of the decade. Changes in congressional control, oversight priorities and state-level policymaking could influence everything from taxes and funding programs to regulation, workforce issues and investment decisions.

For construction and real estate companies, those shifts may affect current project pipelines and long-term growth opportunities. Here’s a look at the implications for the construction and real estate industry.

The top issue for construction and real estate

For the industry, federal funding stability is the policy issue most directly affected by the election. The 2021 infrastructure law provided roughly $156 billion in five-year advance appropriations for surface transportation programs through fiscal 2026. The September continuing resolution extended surface transportation authority only through Dec. 11 without renewing those advance appropriations, sharply reducing funding available for competitive grant programs that depended on them. Work already committed should continue to support activity in the near term, while the greater pressure falls on new awards and project lettings.

Housing faces a parallel debate. Congress enacted full-year funding for the Department of Housing and Urban Development (HUD) for fiscal 2026, but fiscal 2027 funding runs only through Dec. 11, and the administration’s fiscal 2027 budget proposes eliminating the Community Development Block Grant (CDBG) and HOME Investment Partnerships (HOME) programs. Heavy civil and transit contractors, engineering firms and affordable housing sponsors are most exposed. Middle market companies operating in these sectors may face greater challenges adapting to delays or funding volatility because they often have fewer resources to absorb prolonged project disruptions than larger national competitors. In the longer term, reauthorization and appropriations outcomes will influence project pipelines through the decade.

Implications for future legislation

Dec. 11 is the pivot point. Government funding, surface transportation authority and the National Flood Insurance Program all expire that day, and a flood insurance lapse could complicate or delay certain closings in flood zones where lenders require coverage.

The election will shape whether the outgoing Congress settles these issues now or defers them to the new Congress, which could ultimately complete the multiyear transportation bill. The House Transportation and Infrastructure Committee approved a roughly $580 billion reauthorization through fiscal 2031, but the Senate has not produced a companion bill. Unspent balances from the 2021 law could also figure in that debate, since highway funds are typically spent over several years after they are committed to projects.

Unified Republican control

Current congressional proposals provide a reference point for future negotiations. The bipartisan transportation bill shifts money toward formula programs, restructures some competitive grant programs and streamlines environmental reviews, while the House Appropriations Committee’s fiscal 2027 housing bill rejected eliminating CDBG and HOME but proposed cutting HOME by 60%. For developers and contractors, the resulting funding mix could influence which types of projects advance and how quickly.

Divided government

Reauthorization remains bipartisan and must-pass, but could slip into a series of short-term extensions. Housing program funding would continue to be negotiated through appropriations, while changes in committee control could also shift congressional oversight priorities. Businesses should be prepared for a slower policy environment and greater reliance on short-term funding extensions.

For business leaders, the key uncertainty is less whether federal dollars continue than how fast, through which channels and at what scale.

Other top issues for construction and real estate

Materials costs

The Supreme Court’s February 2026 ruling on tariffs imposed under the International Emergency Economic Powers Act did not affect section 232 tariffs on steel, aluminum, copper and certain wood products. An April 2026 change applies the metals tariffs to the full customs value of many derivative products, increasing the effective duty on fabricated and assembled items. Tariff increases on kitchen cabinets and vanities are scheduled for Jan. 1, 2027. The executive branch sets the tariffs; one of Congress’s main levers is oversight, including of the annual review of the United States-Mexico-Canada Agreement.

Labor supply

Associated Builders and Contractors estimates the industry must attract about 349,000 workers in 2026. But lower immigration is adding pressure to an already constrained construction labor market. Nearly three in 10 contractors report being affected by immigration enforcement, according to a 2026 survey by the Associated General Contractors of America and the National Center for Construction Education and Research. Enforcement priorities rest with the executive branch, and expanding legal pathways for trade workers would require bipartisan legislation. Companies may continue to face pressure on labor availability, wages and project schedules regardless of whether broader immigration reforms advance.

Affordable housing

The 2025 tax law permanently expanded low-income housing tax credit (LIHTC) allocations and reduced the bond-financing threshold for qualifying projects from 50% to 25%, improving deal economics. But many tax credit deals rely on CDBG and HOME for gap financing, so the appropriations fight matters as much as the tax changes.

Oversight

A divided Congress could increase oversight and scrutiny of the agencies responsible for trade, labor and housing policies affecting the industry.

Permitting

Bipartisan Senate negotiations over permitting reform are underway, but a vote is not expected before the election. If legislation is enacted, faster reviews could shorten project timelines and increase activity.

By the numbers

$156 billion—that is the total the 2021 infrastructure law provided in advance appropriations for surface transportation programs over five years through fiscal 2026. How Congress replaces or restructures that funding will shape public works backlogs into 2027.

What middle market businesses should consider now

• Map federal exposure. Identify which projects in your backlog and pipeline rely on federal grants or HUD funding, and model the impact on revenue and cash flow if that money arrives late or is reduced.
  
  
• Prepare for Dec. 11. Identify flood-zone closings and refinancings near the deadline, confirm lender requirements, evaluate private flood coverage options where acceptable and plan for delays in federal approvals if funding lapses.
  
  
• Perform stress tests on materials costs. Quantify section 232 exposure on derivative products, including cabinets and vanities, and review escalation clauses.
  
  
• Plan for labor constraints. Audit I-9 compliance, including that of subcontractors, and evaluate recruiting, retention and subcontracting strategies.
  
  
• Revisit affordable housing capital stacks. Confirm that pending 4% LIHTC projects satisfy the new 25% bond-financing threshold and applicable effective-date requirements, and flag which depend on CDBG or HOME gap funding. Timing delays may prove as consequential as final outcomes.