On the economic front, both candidates for president of the United States have promised to do something about the high cost of living. But which of their ideas are likely to work and which are just empty promises?
BourseWatch talked to a number of housing experts to find out what they thought of Kamala Harris’s and Donald Trump’s housing plans.
Home prices and mortgage rates aren’t directly affected by presidents, but some have had a big say in making policies that affect people who buy and sell homes.
As an example, think about Franklin D. Roosevelt. During the Great Depression, when the number of foreclosures rose sharply, he stepped in with the New Deal. This was the start of the era of fixed-rate mortgages. At first, this new type of home loan had terms of 15 years, but they were later pushed back to 30 years. It’s now the normal way for home buyers to borrow money.
It has been the job of other leaders to save the housing market from collapse. President Barack Obama led the country out of a deep recession that was partly caused by subprime mortgage lending. This caused the real estate market to crash and millions of people to lose their homes.
Come back to 2024. Many Americans can’t reach their goal of owning their own home because rents and house prices are so high.
Real estate company Redfin and Harvard’s Kennedy School both did polls that showed housing to be an important problem for younger voters in this election.
Kamala Harris, the Democrat, and Donald Trump, the Republican, have both come up with a number of ideas to lower the cost of housing. These ideas fall into two main categories: measures that lower the supply of homes and measures that lower the demand for them. For example, offering home buyers money up front to help them buy homes are examples of demand-side measures.
But how many of these ideas are likely to actually change the housing market?
There are many issues, such as NIMBYism and complicated building codes, that need to be fixed before builders can build more units, whether they are single-family houses or apartment buildings. This is what the housing crisis is all about.
What problems do people need to know about at the state and local level so they can help coordinate? That’s what Shamus Roller, executive head of the left-of-center National Housing Law Project, told BourseWatch.
“People need to understand what those challenges are at the local government level and state level, and help coordinate around them.”
Shamus Roller, executive director at the National Housing Law Project
“And we need leadership from the federal government to call those things out, to give them nudges,” he added.
Here are a few of Harris and Trump’s proposed policies with examples of how they’ve been implemented in the U.S. or in other parts of the world.
Kamala Harris wants to do the following to lower the cost of housing:
Giving people money to help them buy their first home
Harris’s idea is to help first-time home buyers with their down payments by up to $25,000 and give them a $10,000 tax credit. For now, her team said it hasn’t set any income limits.
Has someone done it before? Yes.
In November 2009, during the Great Recession, Congress agreed to a plan that would let people who bought their first home in 2008, 2009, or 2010 use a first-time homeowner credit. First-time home buyers who bought their homes before May 1, 2010, could get the $8,000 tax credit.
People who made more than $125,000 a year and people who filed jointly and made more than $225,000 a year were no longer eligible for the credit. At a time when home sales were at an all-time low and prices were falling, the White House later said that more than 2.5 million American families had used this credit to buy their first houses.
Bad effects that weren’t meant to happen: One issue with the program was that scammers used it, though only slightly. A report from the U.S. Treasury in June 2010 said that nearly 1,300 prisoners claimed the tax credit and got fraudulent returns totalling $9.1 million. At the time, the IRS said that the false claims made up less than 0.5 percent of all claims.
Still, as of April 2010, the government had given tax breaks worth $18.7 billion to more than 2.6 million people. An official from the Treasury told BourseWatch at the time that the program “played a critical role in stabilising the hard-hit housing market.”
Several experts who spoke to ABC said that giving home buyers subsidies could also boost demand, which would lead to higher home prices, especially when the housing market is still competitive. In some housing markets, homes that are for sale still get more than one offer, so $25,000 in grants could push up home prices, they said.
A German analyst who has looked into how government aid affects home prices agreed. Carla Krolage, an economist, wrote a study in 2022 that said when a new government subsidy program started in 2018 in the German state of Bavaria, prices of single-family homes went up by about 10,000 euros more than in nearby areas.
There was a small difference between the plan and Harris’s because the subsidies went to all home buyers, not just first-time buyers. Krolage told BourseWatch that she thought Harris’s plan would “also raise home prices and redistribute some of the benefits to sellers, but to a lesser extent than the Bavarian scheme.”
Home prices were also affected by the schemes that Obama ran. Dean Baker of the Centre for Economic and Policy Research, a left-of-center think tank in Washington, D.C., wrote in 2012 that the first-time home buyer credit “slowed the process of deflating the bubble” and “many homes were sold at higher prices than would have been the case otherwise.”
“It shouldn’t have been a surprise that the first-time homebuyer credit would cause millions of people to pay too much for a house,” Baker said. When asked for a comment on Harris’s idea, Baker did not reply.
A senior fellow at the conservative American Enterprise Institute named Ed Pinto told BourseWatch that he thought Harris’s plan to help people with their down payments would make the cost of living even higher. An extra $25,000 “will make the prices of the homes go up a lot, making the down payment help useless,” Pinto said. He thinks the plan to help people with their down payments by $25,000 “is wrong on every level.”
In the end, David Dworkin, president and CEO of the National Housing Conference, a left-leaning nonprofit advocacy group, told BourseWatch that Harris’s plan for affordable housing is a big thing.
“To be honest, I can’t think of a time in history when a campaign had such a comprehensive plan,” he said. “That makes it stand out on its own, and it shows how bad the crisis is.” Both Democrats and Republicans want to fix the problem of housing affordability.
“I can’t remember a time in history, frankly, when a campaign has had such a comprehensive plan, and that distinguishes it on its own, and it speaks to the scope of the crisis.”
David Dworkin, president and chief executive of the National Housing Conference, on Kamala Harris’ housing plan
Dworkin also pushed back on the argument that a subsidy or a grant would push up home prices. Many states already have programs that offer down-payment assistance, so “we don’t have to reinvent the wheel,” Dworkin added. “If down-payment assistance is targeted and then matched with investments in [housing] supply, then it is not going to be inflationary.”
Giving builders tax breaks to build more starter homes
Harris’s plan is to give builders a “first-ever” new tax incentive to build starter homes and to make a current tax incentive for builders to build affordable rental housing bigger.
Has someone done it before? In some ways.
The Harris campaign says that the tax break to urge builders to build starter homes would “complement” another idea in the Neighbourhood Homes Investment Act.
A group of senators from both parties, led by Democrat Ben Cardin from Maryland, introduced that piece of federal legislation. It also encourages investment in areas that aren’t growing or are in bad shape by giving a federal tax credit to private investment dollars that are used to build or fix up homes for people who live in them. The bill is currently moving through Congress and has backing from both parties. Congress is also running out of time quickly since it will only be meeting for a few more weeks before the end of the year.
“Areas where housing costs are actually too low, rather than too high,” Dworkin said, making the Neighbourhood Homes Investment Act one of a kind. This makes it financially appealing for people to buy homes that were worth so little that fixing them up and starting over would have cost more.
Dworkin said, “Those neighbourhoods get stuck in a kind of housing purgatory.” The tax credit would encourage more people to buy these homes and fix them up, which would eventually lead to more homes for first-time buyers.
There is also a Low Income Housing Tax Credit that the government has had since 1986. It gives billions of dollars to state and local governments so they can give tax credits to people who build or fix up rental homes for low-income families. The Harris team wants to make it bigger to help with the problem of high rent prices.
As a result of unintended consequences, Pinto of AEI said that government subsidies can get too complicated and wasteful. He said that a study by NPR in 2017 showed that the LIHTC program was no longer working well and generated fewer units at a cost to taxpayers greater than 20 years earlier.
Finally, most experts agreed that the fact that Harris wants to build more homes and offer tax breaks to encourage more building shows how important housing is to the U.S. economy.
That’s a big change for Democrats, who have been thought of as less excited about real estate growth than Republicans in the past.
MarketWatch talked to Glenn Kelman, CEO of real estate company Redfin. “It used to be that the Democrats were really on the wrong side of history trying to pick a fight with developers.” “The United States needs more homes.” Developers will help with that.
It used to be that the Democrats were really on the wrong side of history trying to pick a fight with developers. America needs more housing.
Glenn Kelman, CEO of Redfin
For building, get rid of the red tape.
Harris’s plan is to give local governments a $40 billion federal fund to help them find ways to build homes. Some of these options could be coming up with new ways to finance construction projects or designing and building rental homes that are more affordable.
It is also planned to “cut red tape” and “simplify permitting processes and reviews, including for transit-oriented and conversion development,” which will help builders get homes on the market faster and lower their costs.
Has someone done it before? Perhaps.
Ed Glaeser, a Harvard economics expert, wrote in the New York Times that Harris’s plan to encourage new ideas in housing is a lot like President Obama’s Race to the Top education program. The government can give money to the building or contractor if it likes a certain plan. The professor said that the way the school is set up is more promising than the results.
In an exclusive interview with MarketWatch, acting secretary of the U.S. Department of Housing and Urban Development said that the federal government has also pushed local and state governments to find new ways to build housing and cut red tape by giving them “carrots” and money.
Unwanted results: Many people who are against building denser housing are homeowners who want to keep their home’s worth high.
A tech billionaire, an NBA basketball player, and people who live in a rich suburb of Washington, D.C. are among those who believe in the “not in my backyard” (NIMBY) philosophy and are against building multi-family homes in their neighbourhoods.
There have been studies that show that adding apartments to an area doesn’t lower the value of single-family houses.
In short, both Democrats and Republicans want to change the rules that local and state governments set about what can be built. This is commonly known as “zoning reform.”
They have plans, but it’s not clear how far they can take them. “There’s no way we can increase the supply fast enough to significantly lower home prices,” Kelman of Redfin said. “A home is both a place to live and an asset class.” “And there are a lot of Americans who really want home prices to go up, which is bad news for those of us who want them to go down.”
“We hear a lot about NIMBYism, but the truth is that if you don’t want affordable housing in your backyard, hungry people will live in your front yard,” Dworkin said.
Roller of the National Housing Law Project said, “Decades since we had a national housing plan, and by that I mean a comprehensive federal approach to the housing issues that we face as a country.” This is Harris’s main housing proposal in one sentence. “This is the beginning.”
To lower the cost of homes, Donald Trump wants to…
Not letting illegal people in
Trump’s plan is to stop undocumented aliens from getting mortgages.
Has someone done it before? Not clear.
People who are living in the U.S. without papers can get home loans, according to the Wall Street Journal, but it doesn’t happen very often.
A study from the liberal-learning Urban Institute found that out of the 3.4 million home loans made in 2023, between 5,000 and 6,000 went to people with individual tax identification numbers. Most of these people were thought to be undocumented immigrants.
As Greg Siskind, an immigration lawyer, said on X, “in 34 years of practicing immigration law, I’ve never met a completely undocumented person who got a mortgage.”
Without meaning to, one of Trump’s immigration plans to deport a lot of illegal aliens could have an effect on the U.S. housing market.
One estimate from the University of Michigan says that about 20% of the people who work in the construction business in the U.S. are immigrants. That’s 1.6 million people. And in some states, as many as half or even more of the people working in this group are undocumented; they are called illegal immigrants.
Roller of the National Housing Law Project said, “We don’t have enough construction workers, and the fact that there isn’t any way for skilled tradespeople to come to the U.S. is a real problem that makes it hard to lower construction costs and make sure we have enough construction workers.”
The Associated Builders and Contractors says that the building industry will need to hire about 501,000 more workers than usual this year in order to meet the demand for workers.
Immigration reform could help fill the construction industry’s worker shortage and help speed the pace of home building, and so could adding more women to the construction workforce, the managing director of Harvard’s Joint Center for Housing Studies told Congress earlier this year.
In the end, there are two main problems with the home market: too much demand and not enough supply. Trump’s plan to crack down on illegal immigrants in the housing market might not have a big effect on most people who are buying homes.
Taking private This is Fannie Mae and Freddie Mac.
Trump’s plan: The Wall Street Journal reports that if Trump wins the election, people who support him plan to end the federal government’s power over Fannie Mae and Freddie Mac, two huge mortgage lenders. Trump’s team said that Trump hasn’t said anything about this idea.
The two businesses that the government backs have been run by the government since 2008, when the financial crisis hit. They buy mortgages, both residential and business, turn them into securities, and then sell them on the secondary market.
Has someone done it before? In a way, yes.
Before the government took over Fannie Mae and Freddie Mac when they were about to go bankrupt during the subprime mortgage crisis, they were companies that were sold on the stock market. There were stocks in Fannie Mae and Freddie Mac on the New York Stock Exchange. They do business over the counter now.
It was Trump’s plan to privatise these two housing funding agencies during his first term, but the pandemic stopped him.
Some conservative analysts and politicians want the mortgage market to be fully private. However, in September 2012, the Centre for American Progress, a liberal think tank in Washington, D.C., said, “it was the fully private segment of the market that caused millions of foreclosures and brought down the entire financial system.”
It also said that if the government stopped financing mortgages, middle-class buyers might not be able to get as much credit.
In the end, a former Trump staff member told HousingWire that Fannie and Freddie will not be going private any time soon, even if Trump wins. He said it is possible, but it won’t happen right away.
Zoning rules are being tightened up.
Trump’s plan: In an interview with Bloomberg in July, Trump said that complicated zoning rules and building permits are one reason why housing costs are so high.
Trump was asked what he planned to do to make housing more cheap. He said, “Fifty percent of the housing costs today and in some areas—like, you know, a lot of these crazy places—are environmental, are bookkeeping, are all of those restrictions.” Permits for building. “Terrible [limitation]”
Trump told Bloomberg, “Plus, they make you build houses that aren’t as good for a lot more money.” “They make you use things that aren’t as good as other things.” And the other things are, I mean, you want to cut your licenses in half. Your licenses and the way you get them. Your planning, if—and I had to deal with it for years. Zones are like… they kill. But we’re going to do that, and the price of homes will go down.
Has someone done it before? Yes.
There are rules in many states and cities that say builders can only build single-family homes in residential places. For example, in Minneapolis, these rules may become law. The city thought about getting rid of single-family zoning all over the city in 2018. That being said, the biggest problem has been local homeowners who don’t like the changes, as we already talked about.
President Trump will Make Housing Affordable Again by defeating historic inflation and reducing the mortgage rate back down to 3%.”
Taylor Rogers, a spokesperson for the Republican National Committee
Trump’s general plan for housing—in one sentence: “President Trump will Make Housing Affordable Again by defeating historic inflation and bringing the mortgage rate back down to 3%,” said Taylor Rogers, a spokesman for the Republican National Committee. In reality, U.S. law says that the president does not set interest rates. However, Trump has said that leaders should have more power over the Federal Reserve, which does set rate policy.
“President Trump will also secure the border, stop mortgages for illegal immigrants who drive up housing costs, and get rid of federal rules that do the same.” When Trump is back in office, he will cut in half the price of new homes, make parts of federal land available for large-scale housing building with very low taxes and rules, and end the housing affordability crisis that Kamala Harris started.
