First-time homebuyers and working families could see up to $25,000 in assistance on down payments, according to a plan set to be unveiled by the Kamala Harris campaign on Friday. But some economists and housing experts expressed skepticism that the proposal would address the crux of the current housing crisis — namely, that there’s too much demand for not enough supply.
Ahead of a speech in North Carolina on Friday, the Harris-Walz campaign released its first economic policy agenda, focused on lowering costs for American families. Among the ideas floated in the proposal is giving $25,000 to more than a million first-time buyers who have a history of making their rent payments on time.
There would be “more generous support for first-generation homeowners” according to a preview of the remarks Harris is set to deliver Friday.
Combined with a new child-tax credit and other tax incentives set to be unveiled, along with the White House’s recent negotiation of Medicare prescription drug prices, the policies amount to a sweeping economic agenda meant to address the one issue that voters consistently say is top of mind: the cost of living.
But Harris’ housing policy, the details of which are still to be confirmed, would not fix the underlying supply and demand issue, as well as stubbornly high interest rates, that have made the prospect of buying a home so unaffordable for so many.
“Housing prices spiked during the pandemic, but housing prices have been an issue for a long time,” Scott Lincicome, the vice president of general economics at the libertarian Cato Institute told Newsweek.
A house in New York and a headshot of Vice President Kamala Harris. Harris and her running mate, Gov. Tim Walz, announced their plans for housing incentives.
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Homes are expensive not become of “corporate landlords or anything like that,” Lincicome said. “It’s land use regulations at the state and local level. It’s various policies that jack up construction costs, whether that’s tariffs on construction materials or building and permitting fees.”
The Harris plan is essentially an expanded version of a proposal set forth by President Biden, which would earmark $25,000 in down-payment assistance for 400,000 first-generation home buyers plus a $10,000 tax credit for first-time home buyers. The Harris campaign says its proposal would benefit four million first-time buyers over the next four years.
“As the price of housing has gone up, the size of downpayments have gone up as well,” Harris said in North Carolina Friday. “Even if aspiring homeowners save for years, it’s often not enough.”
She claimed in her economy-focused speech that former President Donald Trump‘s economic policies would “around $1,200 a year to the typical American mortgage.”
“He’s got it backward. We should be doing everything we can to make it more affordable to buy a home, not less,” Harris said.
The idea of a housing subsidy for buyers was immediately criticized by some conservative pundits.
“If the gov’t provides $25K for a down payment, the cost of the home will go up by $25K to capture the subsidy, plus the actual value,” said Erick Erickson, the talk-radio host.
The campaign also did not immediately lay out how it planned to pay for such a subsidy.
Another part of the policy would be the creation of a $40 billion fund dedicated to “innovative housing construction” meant to spur the building of affordable housing — the dearth of which economists agree is among the biggest problems facing the housing market. Harris will call for three million new housing units, and plans to offer tax incentives for builders who construct starter homes aimed at first-time buyers.
That part of the proposal has gained support, including from the National Association of Home Builders (NAHB).
“A tax credit to help builders construct more entry-level housing and expanding and strengthening the Low-Income Housing Tax Credit will help builders to construct badly needed new homes and apartments,” the association told Newsweek. “But any tax incentive to support the production of starter homes must be targeted to local market conditions and be widely available.”
The group said that while down-payment assistance and subsidies are “positive demand incentives,” the plan still must “weigh more heavily on boosting supply because the nation faces a shortfall of roughly 1.5 million housing units.”
NAHB has issued its own 10-point plan that aims to ease affordability challenges by focusing on removing regulations and other impediments for builders.
“Addressing these concerns would help the Vice President achieve her goal of building 3 million new housing units,” the association told Newsweek.
With “a lot of millennials” looking to buy their first homes, that puts “upward pressure on prices,” Lincicome, from Cato, agreed. This is especially true following the pandemic as many young families move from cities to the suburbs.
“You have interest rates,” he said. “That’s a Fed policy, not something that’s traceable by policy tweaks. We need to be humble about how much we can really do.”
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