Millions of Americans are unable to afford a home or rent a suitable apartment, making housing a key issue in the upcoming presidential election.
What’s the reason for this? The main reason homeownership is out of reach for many is the severe shortage of homes for sale. This imbalance between buyers and sellers has led to bidding wars, driving the median price of a previously owned home in the US to a record high of $426,900 in June. even as home sales have been in a deep slump for more than two years.
High mortgage rates have further discouraged prospective buyers. Notably, the average rate on a 30-year mortgage hit nearly 8% late last year, its highest in 23 years, and now stands at 6.44%.
The situation is not great for the renters either. While rental prices have eased over the past year due to increased apartment construction, they remain about 20% higher than pre-pandemic levels.
Kamala Harris’ campaign vs Donald Trump’s campaign
Against this backdrop, US Vice President Kamala Harris and former President Donald Trump have proposed housing policies that they say will make homeownership more attainable.
Harris’ plan focuses on expanding access to affordable housing, including offering first-time homebuyers up to $25,000 in down payment assistance, tax incentives for builders, and federal funding to speed up construction. She estimates her policies will add 3 million new homes over four years.
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Meanwhile, Trump’s approach includes tax incentives for homebuyers, reducing regulations on construction, and making some federal land available for housing development. However, his plan lacks detailed proposals. Trump also claims that by cutting inflation and curbing illegal immigration, housing costs will fall.
While the next president’s ability to implement these ideas depends on getting support from Congress, economists argue that, while the candidates offer some good suggestions, their plans may not provide complete solutions to the housing crisis.
Let’s take a look at the key ideas of these candidates:
Trump’s idea of immigration crackdown
Trump’s campaign often links the housing shortage to immigration, suggesting that deporting immigrants will reduce housing demand and make homes more affordable. His running mate, JD Vance, has even blamed Haitian immigrants in Ohio for contributing to the state’s housing issues.
However, experts disagree. Chris Herbert, managing director of Harvard Joint Center for Housing Studies, stated that rising interest rates and increased demand during the pandemic are to blame for soaring housing costs – not immigration.
“While immigrants do add to overall housing demand, they cannot be blamed for the recent surge in home prices and rents that took off in 2020 and 2021, as immigration reached its lowest levels in decades due to the pandemic,” he said.
Jim Tobin, CEO of the National Association of Home Builders, has warned that deportations could worsen the housing shortage, as one-third of the homebuilding workforce is foreign-born.
“Anything that potentially disrupts the inflow of foreign-born labour into our industry would be disruptive. No doubt about it,” he said.
Sarah Saadian, senior vice president of public policy at the National Low Income Housing Coalition, said that evicting undocumented immigrants would not free up housing units, as they tend to live in overcrowded conditions.
“The most pressing part is wages and incomes aren’t high enough to cover rental costs and that doesn’t really have anything to do with undocumented people,” Saadian said.
Harris’ $25,000 down-payment plan
Harris’ proposal to offer first-time homebuyers up to $25,000 in down payment assistance aims to help over 4 million people for $100 billion. This kind of help is not new – nearly three-quarters of single-family mortgages in 2019 included down payment aid from state housing finance agencies.
However, this buyer incentive could also drive up home prices in areas with limited housing supply, economists warn. The effect would vary depending on the market. “In Los Angeles, $25,000 down payment assistance is not enough, but it is enough in Detroit,” said Daryl Fairweather, chief economist at Redfin.
Nonetheless, if the number of homes on the market grows, the financial assistance makes more sense, because it can reassure homebuilders that “there will be buyers willing to buy” the homes they build, Fairweather added.
The federal government has offered homebuyer tax incentives before. In 2008, the Obama administration introduced a first-time homebuyer tax credit of up to $7,500 as the housing market collapsed during the Great Recession. While this pulled some sales forward, the market remained sluggish until 2012.
Trump’s campaign promises to make homeownership more affordable for everyone but provides few specifics. The plan mentions supporting first-time buyers and reducing mortgage rates by tackling inflation. However, experts argue that Trump’s broader economic agenda would likely increase inflation, which fell to its lowest in over three years last month.
Zoning and federal lands: Where the two candidates meet
Both candidates agree on the need to relax zoning laws and make some federal land available for housing construction. Trump’s plan lacks details, while Harris proposes a $40 billion fund to encourage local governments to streamline zoning regulations, provided they show they are building affordable housing.
Both have also suggested making portions of federal land available for housing. Harris points to an initiative in Las Vegas, where the Bureau of Land Management sold 20 acres at a reduced price for Clark County to build single-family homes for households earning up to $70,000 annually.
However, Don Simpson, the vice president of the Public Lands Foundation, said that similar arrangements could only be replicated on a limited basis in small areas near Barstow, California, and Boise, Idaho.
Nicholas Irwin, a professor at the University of Nevada Las Vegas, added that the 210 homes being built in Las Vegas would hardly impact the 75,000-unit shortfall in Southern Nevada. “We’re short by a lot. More federal land alone isn’t going to solve this,” Irwin said.
With inputs from AP
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