The Democrats’ gains in the 2026 midterms went well beyond what many expect. Democrats won control of both the House and Senate, ending two years of unified Republican control in Washington. The party flipped seven Senate seats, including races in Texas, Kansas, Iowa, Ohio, North Carolina, and South Carolina, while also making significant gains in the House. Democrats added to those gains at the state level, flipping governor’s offices in Texas, Georgia, Ohio, Iowa, and Nevada.¹

For the construction industry, the most noteworthy result is divided government. President Trump will remain in the White House for another two years, but starting in January, his administration will face a Democratic House and Senate. This will create a very different policy environment for the second half of his term.

Some of the implications are fairly straightforward. Major pieces of Trump’s legislative agenda will face a much higher hurdle in Congress. Democrats will gain considerably more influence over federal spending, tax policy, and congressional oversight. Other issues are harder to predict because the president retains substantial authority over tariffs, immigration enforcement, regulation, and other policies that have directly affected the construction industry.

That combination points toward two years in which sweeping legislation may be difficult, but the policies shaping construction could still move considerably.

Federal spending enters a different phase

One immediate question is what Democratic control means for federal infrastructure and construction funding. Democrats have historically supported higher levels of federal spending on transportation, transit, water infrastructure, housing, clean energy and other public investments. Control of Congress gives the party more leverage over annual appropriations and the federal budget.

However, there are limits to that power. President Trump can veto legislation, and Democrats do not have the two-thirds majorities needed to override a presidential veto. The result is that neither side can simply implement its preferred agenda.

For construction, that could make annual funding negotiations especially important. Transportation programs, federal facilities, water infrastructure, and other federally supported projects will continue to require congressional appropriations. Democrats may push for higher funding levels, while the White House will retain considerable leverage over the final outcome.

Existing programs also matter. Billions of dollars authorized through earlier infrastructure and industrial policies are still moving through the economy, and changing political control does not immediately stop projects that have already been funded or have entered into procurement. The likelier shift is at the margin: which programs receive additional funding, how aggressively existing programs are administered, and which new initiatives can attract enough bipartisan support to become law. Public infrastructure should therefore remain one of the more resilient construction sectors entering 2027, even as Washington becomes more politically divided.

Energy and permitting could become areas for compromise

Energy policy presents a more complicated picture. The rapid expansion of data centers, advanced manufacturing, and electrification has created enormous demand for power. Across many markets, the constraint on new development is increasingly the availability of generation, transmission, and utility connections. That reality is beginning to blur some traditional political lines.

Republicans have generally favored expanding oil and natural gas production and reducing regulatory barriers to energy development. Democrats have placed greater emphasis on renewable energy, transmission, energy efficiency and environmental protections. Both have reason to want more power infrastructure built. Permitting reform could become one of the more plausible areas for bipartisan legislation.

A divided Washington may struggle to agree on which types of generation should receive the most support, but there is considerably more overlap around the need to expand transmission capacity and shorten development timelines. That could matter particularly for data centers and advanced manufacturing, where power availability is becoming one of the biggest determinants of where future investment occurs.

Texas may be the bigger construction story

Some of the most consequential election results for construction happened outside Washington. Texas provides the clearest example.

Democrat Gina Hinojosa defeated three-term Republican Governor Greg Abbott, becoming the state’s first Democratic governor in more than three decades. Data centers emerged as one of the defining issues of the campaign. Hinojosa has called for a moratorium on new data center permits until the state adopts additional protections governing electricity, water, and impacts on local communities. She has also proposed ending tax breaks for large data centers.²

That has potentially significant implications for the industry’s largest growth market — Texas is one of the country’s largest data center markets and represents a substantial share of planned future capacity. The explosive growth of artificial intelligence has driven demand for campuses requiring hundreds of megawatts of power, billions of dollars of investment, and enormous construction workforces. At the same time, communities have become increasingly concerned about electricity demand, water consumption, utility costs, and the amount of public support being provided to data-center operators.

Those concerns became a political issue beyond Texas during the campaign. Voter opposition to data center development emerged in communities across the country, and Hinojosa successfully made the issue part of her campaign against incumbent Gov. Greg Abbott.³

The immediate implication is probably greater scrutiny rather than an end to the Texas data center boom. Even Gov. Abbott moved toward additional restrictions during the campaign, pausing new state permits while regulators reviewed the industry’s effects on electricity and water resources. Hinojosa has advocated going further, including a broader permitting moratorium while the Legislature develops permanent regulations.⁴

For developers, that raises the possibility of longer approval timelines, additional infrastructure requirements, and potentially higher project costs. It could also affect where projects land. Markets able to provide power and water while maintaining community support will become increasingly valuable.

There is an important constraint on how far Texas policy can move. Many of the changes the Governor-elect has proposed would require cooperation from the Legislature. That means the ultimate result may be a negotiated framework rather than a wholesale reversal of the state’s development strategy. Still, the governor’s race sends a broader message to the industry: data center development has become a political issue, and community acceptance can no longer be treated as a secondary consideration.⁵

Trade policy remains in the president’s hands

The Democratic victory also changes expectations around trade policy, although perhaps less than control of Congress would suggest. Tariffs have been one of the defining economic policies of Trump’s second term and an important source of construction-cost uncertainty. Steel, aluminum, copper, and other construction inputs have all been affected by higher trade barriers.

Congress has constitutional authority over trade, and Democratic control gives lawmakers greater ability to hold hearings, conduct oversight, and pursue legislation related to tariff policy. The administration, however, retains significant powers under existing trade statutes. As a result, contractors should probably expect tariff uncertainty to remain part of the cost environment in 2027 and 2028.

Labor remains another source of uncertainty

Immigration policy creates a similar dynamic. Democrats in Congress are likely to resist the administration’s aggressive immigration proposals and could use appropriations and oversight authority to challenge portions of the agenda. However, the executive branch retains significant enforcement power.

That matters for construction because the industry’s labor shortage remains structural. Slower population growth, retirements, and an aging skilled-trades workforce continue to limit labor availability in many markets.

A more divided Washington may reduce the likelihood of major new immigration legislation in either direction. It also leaves contractors operating with many of the same workforce constraints they faced before the election. For markets already absorbing data centers, manufacturing plants, infrastructure programs, and other megaprojects, labor availability could continue to be as important to project schedules and costs as federal policy.

What the election probably does not change

For all the attention paid to Washington this week, many of the strongest forces shaping construction existed before the first ballot was counted. Artificial intelligence continues to drive unprecedented demand for data centers and electricity. Manufacturing investment remains elevated as companies rethink supply chains and production footprints. Aging infrastructure still requires substantial investment. Housing shortages continue across many growing metropolitan areas, and skilled construction labor remains difficult to find.

Interest rates may ultimately matter more to many private projects than the composition of Congress. Analysis during JE Dunn’s National Economic Webinar emphasized how uneven the construction market has become. AI- and high-tech-related investment continues to support data centers, power infrastructure, and select manufacturing projects even as more rate-sensitive areas of private nonresidential construction remain under pressure. That basic picture is unlikely to change because of one election.

What the election changes is the policy environment surrounding those trends. Democratic control of Congress introduces more friction into the administration’s agenda, while giving Democrats greater influence over federal spending and oversight. Democratic gains at the state level could prove equally important as decisions about data centers, power infrastructure, incentives, and local development increasingly move into state capitols and communities.

Heading into 2027, Washington will be more divided. The construction market may be increasingly divided as well. Public infrastructure, power, manufacturing, and data centers continue to have strong underlying demand, while financing costs, labor constraints, tariffs and regulatory uncertainty remain meaningful challenges.