Democratic presidential candidate Vice President Kamala Harris speaks at a campaign rally in Las Vegas on August 10.
Justin Sullivan | Getty Images News | Getty Images
The offer is the “sweet spot” for housing policy.
“The focal point of bipartisan agreement on the housing affordability challenges we face today is increasing supply,” said Dennis Shea, executive director of the J. Ronald Terwilliger Center for Housing Policy at the Bipartisan Policy Center.
Since the mortgage crisis, a major period of foreclosures in the United States between 2007 and 2010, there have been far fewer single-family homes and multifamily apartment buildings under construction, says Janique Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute, a nonprofit think tank in Washington, D.C.
She said there is a “more acute shortage” when it comes to affordable housing, both for renters looking for high-quality rental units and first-time buyers looking for their first home.
To reach those 3 million new units, the Harris-Waltz administration would offer a “first-ever tax incentive” to homebuilders who build first-home homes sold to first-time homebuyers, according to proposals unveiled last week.
The initiative would complement the neighborhood home tax credit, according to the announcement. Shea said a bill pending in Congress called the Neighborhood Home Investment Act, which would promote the construction and rehabilitation of primary housing for sale in distressed communities, would create the tax credit.
“This would create this tax credit, which has strong bipartisan support,” he said.
My conclusion is that the (Harris) housing plan would be worse than doing nothing.
Edward Pinto
Senior Fellow and Co-Director of the American Enterprise Institute's Center on Housing
Former President Donald Trump also talked about ways to increase the housing supply as part of his presidential campaign proposals.
“We’re going to open up pathways on federal land to build housing,” Trump said at a news conference on August 15. “We desperately need housing for people who can’t afford what’s going on right now.”
But Edward Pinto, a senior fellow and co-director of the American Enterprise Institute's Center on Housing, said it's “much harder” for the government to pass “supply-side proposals” than efforts that generate demand by making it easier for consumers to buy homes.
“My conclusion is that (Harris's) housing plan would be worse than doing nothing,” he said.
“It's hard to define what a starter home is.”
James Tobin, CEO of the National Association of Home Builders, said it would be important for Harris to clarify what she means by a “starter home.”
“It's hard to define what a starter home is,” Tobin said, as the underlying costs make it difficult to keep construction expenses low.
“In most markets in the country, it is difficult to build a home for a first-time home buyer because of labor costs, land costs, borrowing costs to build, and then the cost of materials,” he said.
Determining the range of price points for a starter home will also be important, Tobin said, because it can vary widely across different markets.
“In California, a new home might cost $7,000 or $800,000, but in the South it might only cost $250,000 or $300,000,” he said.
$40 billion innovation fund looks 'too high'
Harris’s proposals also include a $40 billion innovation fund, which would enable local governments to fund local housing solutions and support local housing solutions.
However, some experts doubt the project's ability to achieve its desired goal.
“The federal government doesn’t have much power over what happens at the local level,” Fairweather said. “It’s up to local planning commissions whether they’ll allow more housing to be built in order to get the innovation fund money.”
“But time and time again, local residents, local governments and local homeowners ignore incentives because they are so resistant to building more housing,” Fairweather said.
Moreover, the $40 billion Housing Innovation Fund could be very expensive, making it unlikely to gain bipartisan support, Shea said: “I don’t know if the market can bear that price in Congress.”
Assistance for first-time homebuyers gets less support
Harris hopes to provide $25,000 in down payment assistance to first-time homebuyers who have paid rent on time for two years, with more generous support for qualifying first-generation homeowners.
The proposals stem from an idea introduced by the Biden-Harris administration earlier this year, which called on Congress to implement a $25,000 down payment assistance exclusively for 400,000 first-generation buyers (or first-time buyers whose parents were not homeowners) and a $10,000 tax credit for first-time buyers.
The Harris scheme is set to apply to all first-time buyers, extending access to more than 4 million eligible applicants over four years.
But Shea said, “There's not a lot of party support.”
During an August 16 appearance on Fox Business, Sen. Tim Scott said Harris's $25,000 down payment assistance “will just drive up demand while supply doesn't move, which means prices will go up, and fewer people will be able to afford it.”
“Frankly, unless financial literacy is built into any program, it just means there will be a higher level of default,” Scott said.
To help renters, Harris has taken up two pending pieces of legislation. The Democratic presidential candidate called on Congress to pass the Stop Predatory Investing Act, a bill that would eliminate major tax benefits for those who own 50 or more single-family properties. The initiative would limit the ability of large investors to buy large amounts of single-family homes for rent.
Meanwhile, the Anti-Algorithmic Rental Cartel Facilitation Act would crack down on companies that use tools to set rental prices in the market.
