Midterm Elections 2026: What the Results Mean for Federal Real Estate

Democrats have gained control of both chambers of the U.S. Congress and are now poised to set the agenda for congressional oversight, federal appropriations and Congress' unique governing relationship with the District of Columbia. Beginning in January 2027, the incoming majority will set hearing calendars, sign subpoenas and write spending bills to fund the government. As a result of the shift, we expect to see a sharper investigative posture on Capitol Hill, a more assertive appropriations process, greater deference to the District's local self-governance and continued federal decision-making over real property in the District with direct impacts on the Washington real estate market.

Oversight and Investigations

Democratic committee staff have spent the past two years compiling questions, assembling records and identifying targets for potential congressional investigations. In the new term, we expect those efforts to be put into action in the form of subpoenas, interviews and public hearings. Existing information requests and document preservation letters from ranking members may evolve into new subpoenas, and stalled investigations may now be followed up with formal compulsory processes. Firms that secured federal contracts, exemptions, financing or favorable agency action should expect increased scrutiny and oversight. Even if companies are not themselves under investigation, committees often seek the same communications and records from companies on the other side of an exchange or relationship with agency actors.

For real estate owners, developers and federal landlords, the most consequential subcommittees are those with jurisdiction over federal real property:

• U.S. House of Representatives Committee on Transportation and Infrastructure – Subcommittee on Economic Development, Public Buildings, and Emergency Management. This subcommittee reviews federal real estate programs and the General Services Administration (GSA) Public Buildings Service, including the construction, acquisition, renovation and leasing of federal space. Rep. Greg Stanton (D-Ariz.) is the current ranking member in line to chair the subcommittee, while Rep Rick Larsen (D-Wash.) is the current ranking member of the full committee in line to chair.
• U.S. Senate Committee on Environment and Public Works – Subcommittee on Transportation and Infrastructure. This subcommittee reviews public buildings and GSA authorizations in the Senate. Sen. Angela Alsobrooks (D-Md.) is the current ranking member in line to chair the subcommittee. As for the full committee, leadership is not yet settled. As Sen. Sheldon Whitehouse (D-R.I.) is expected to move to the Senate Judiciary Committee, the position could go to either Sen. Jeff Merkley (D-Ore.) or Sen. Ed Markey (D-Mass.), depending on other leadership selections.

Expect these panels to revisit federal office space consolidation and disposals, agency relocations, lease terminations, the sale of federal buildings and GSA prospectus approvals. Particular transactions may draw scrutiny over valuation, competitive bidding, the selection of private counterparties and whether agency decisions were influenced by political considerations rather than the government's interests. Congressional inquiries can also proceed alongside litigation, agency reviews or enforcement proceedings, multiplying the legal and commercial consequences for the parties involved.

Appropriations

Rep. Rosa DeLauro (D-Conn.), the current ranking member, is positioned to chair the House Committee on Appropriations, and Sen. Patty Murray (D-Wash.), the current vice chair, is positioned to chair the Senate Committee on Appropriations. Both have been vocal about Congress' power of the purse and the position that the president cannot unilaterally withhold appropriated funds. This could bring about bill language that limits reprogramming and fences off funds for specific programs, potentially affecting contractors whose awards were paused or terminated. Congressional oversight of already-funded transactions is also a potential impact. Committees may probe how and why an agency reached its decision to make an award and request documents from private parties to investigate. Real estate owners and lessors doing business with the federal government may face this line of inquiry in the new year.

A potential government shutdown next month is also a risk, but it seems likely that negotiations between the parties will continue and Congress will extend funding into at least early 2027.

D.C. Government and Real Estate

Under the Constitution's District Clause, Congress holds exclusive legislative authority over the District. Though Congress delegated limited self-government to D.C.'s elected mayor and council through the 1973 Home Rule Act, text in Section 601 expressly "reserves the right, at any time, to exercise its constitutional authority as legislature for the District." Congress can exercise that authority in three principal ways: disapproving acts of the D.C. Council, enacting legislation directly for the District and attaching general provisions to appropriations bills.

A democratic majority is far less likely to use disapproval resolutions or riders to override the District on local matters such as tax policy, rent and tenant law, and zoning, and proposals to expand congressional review are unlikely to advance. That potentially reduces a layer of risk that investors and developers have recently had to price into their D.C. projects.

The District elected D.C. Councilmember Robert White as its new congressional Delegate, succeeding Eleanor Holmes Norton, who has held the seat since 1991. Though the Delegate cannot vote on final passage on the House floor, they may serve and vote in committee and offer legislation. In a Democratic majority, the Delegate's influence over issues such as federal property jurisdiction, agency headquarters relocations, disposition of federal office buildings and redevelopment of federal sites will grow substantially. Businesses with interests in the District should engage early with the incoming Delegate's office.

GSA's 2026 Prospectus prioritizes Repair, Alteration, and Modernization (RAM) projects at three major Washington, D.C., federal buildings: 1800 F Street NW, the Ronald Reagan Building and International Trade Center, and 1111 Constitution Avenue NW. These projects require Senate and/or committee resolutions for approval. A shift in committee chairmanships or appropriations priorities after the midterms could directly affect the funding and timeline for these projects – which in turn affects swing space demand, tenant relocations and leasing opportunities in the District during construction.

The USE IT Act

The 2025 Utilizing Space Efficiently and Improving Technologies (USE IT) Act is already driving real decisions. In March 2026, federal agencies reported office space utilization data to Congress for the first time, measured against a 60 percent utilization threshold. The results were striking: No federal agency achieved 60 percent utilization across its entire real property portfolio.

The enforcement mechanism is the part that should have every GSA landlord's attention. Under the statute, if an agency reports utilization below 60 percent for a second consecutive year, GSA must take steps to reduce that underutilized space. The first reporting cycle has already put agencies on notice; the 2027 reporting period is where the statute's teeth come in. We are already seeing agencies act preemptively – in a recent GAO report, the U.S. Department of Veterans Affairs (VA) cited USE IT Act data to justify cutting roughly 150,000 square feet of leased space, with projected annual savings of $9.7 million, and the U.S. Department of Homeland Security has identified 15 space-reduction projects it estimates will save $350 million over 20 years.

The same GAO report issued in October 2026 found that the March 2026 data understated the true vacancy picture because it excluded GSA-controlled vacant space from the utilization calculations – meaning the next reporting cycle could look considerably worse for agencies once that gap is closed. GSA has proposed refinements to the Office of Management and Budget (OMB) (excluding non-work areas and non-workdays from the denominator), but as of October 2026 it remained unclear whether OMB would adopt them.

Oversight of this data – and pressure to use it as a lease-termination trigger – is likely to intensify, not fade. Landlords with government tenants should be proactively gathering their own occupancy and utilization data now rather than waiting to be surprised by an agency's self-reported numbers.

The Judiciary

S. 5194, the Judicial Space and Facilities Management Effectiveness Act of 2026, proposes to restructure how space is allocated between the judicial branch and GSA, establishing a 10-year transition period and clear priority hierarchy (judiciary first, other federal agencies second on a reimbursable basis, private subleases last). This kind of interbranch and interagency competition for space is likely to become more common as the USE IT Act squeezes overall federal footprint, and it is a dynamic our clients competing for GSA-controlled space, or sitting on space GSA might want back, should track closely.

Key Takeaways

• USE IT Act: GSA and VA lessors should expect continued bipartisan pressure to shrink footprints. Consider building utilization data and flexibility (densification, co-location, subleasing options) into renewal conversations now. The exemption documentation burden under the USE IT Act is real. Agencies with mixed-use campuses (the VA's situation at Eagle Square is a good example) need to be precise about which spaces qualify for exemptions and why, and lessors can help their tenants with this burden.
• Congressional Investigations: Federal landlords, developers and other private counterparties should prepare for heightened scrutiny of federal real estate transactions, including agency relocations, property dispositions, lease terminations and significant leasing decisions. Companies should review relevant transaction records and communications, assess potential congressional exposure and develop a response strategy that accounts for the possibility of parallel litigation, agency reviews or enforcement proceedings.
• D.C. Impacts: A democratic majority is unlikely to override the District on tax, rent and tenant law, or zoning matters, thus reducing a layer of political risk for D.C. investors and developers. At the same time, GSA's currently prioritized RAM projects depend on committee approval and appropriations, so shifts in chairmanships or spending priorities could affect project timelines, swing-space demand and leasing opportunities. Owners and investors should monitor these projects and the incoming Delegate's priorities on federal property in the District.

For more information or questions, please contact the authors.