A big problem for many Americans in the upcoming presidential election is the sky-high cost of housing. Vice President Kamala Harris’s new plan to bring them down may appeal to some key voting blocs.
Record-high housing prices make it impossible for many renters in the U.S. to ever become landlords.
“I know what it means to own a home.” A house is just one part of what’s going on. It’s more than money and more than that. Harris, the Democratic presidential candidate, said in a speech in Raleigh, N.C., on Friday, “Owning a home is a sign of the pride that comes with hard work; it’s a sign of financial security; it’s a sign of what you will be able to do for your children.”
“It’s also out of reach for far too many American families right now,” she said. “There are not enough homes in many places.” Prices are going up because it’s too hard to build.
Before Harris’s speech, her campaign released a plan to increase the number of homes available on Thursday. The plan includes a tax break for builders who build starter homes for first-time buyers, more tax breaks for builders who build rental homes, and a $40 billion federal fund to encourage innovative building of homes.
The campaign said that over the next four years, the work would build three million new homes.
Harris also talked about her plan to help first-time home buyers with down payments by giving them up to $25,000. Over the next four years, the campaign said it thought the strategy would help more than 4 million first-time buyers.
‘Buying a home feels impossible,’ especially for young people
Survey results show that housing is very important to younger voters and voters in key states in particular.
A February poll of 3,000 homeowners and renters by Redfin RDFN -1.84% found that 91% of Generation Z adults and 87% of millennials say housing is the most important problem for their generation.
“Housing affordability is a key issue in this year’s election,” Redfin Senior Economist Elijah de la Campa wrote in a blog post. “Many Americans feel like they can’t afford to buy a home, even though the economy is pretty strong, unemployment is low, and wages are rising.” This is especially true for young people, whose incomes have grown twice as fast as the cost of their first home.
According to a poll of 1,000 registered voters in Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin, most voters in battleground states also think that housing affordability is a problem in their own communities and on a national level. The poll was done for the Tenant Union Federation and HouseUS, two groups that support tenant organizing.
There are not enough homes for sale in the U.S., home prices are at all-time highs, and mortgage rates are also very high.
Zillow Z 0.51% ZG 0.47% says that housing costs have gone up by 110% in the last five years. During that time, rents have gone up by 35% and home prices have gone up by almost 50%. The company said that the average home in the U.S. was worth $362,156.
The Federal Reserve Bank of Atlanta says that the cost of housing has gone up, especially in the last two years. The Atlanta Fed found that a family in the U.S. with a typical income of $81,400 would have to spend almost 44% of their income on housing costs if they wanted to buy a home that costs $383,300 on average.
“Cost burdened” means that a family spends more than 30% of its income on living.
Who will gain the most from Harris’s plan for housing?
Economists told MarketWatch that Harris’s housing plan would help youth and people who build homes the most.
“How do you meet the needs of a lot of millennials who are now at the age when they want to buy a home?” MarketWatch talked to Jeffery Roach, who is the chief economist at LPL Financial. The National Association of Realtors says that millennials, who are now between the ages of 25 and 43, bought the most homes in 2023. Baby boomers came in second.
Existing homeowners can use their home wealth to buy a new home, but millennial renters can’t do that. This makes it harder for them to become first-time homeowners.
People who are just out of college or starting a new job are feeling a lot more than just the pain of high prices and high loan costs, Roach said.
There are also perks for housing developers in Harris’s plan, especially for them because they will be able to get tax breaks. She is suggesting the first-ever tax incentive for builders of starter homes, which are hard to find in the U.S. This would be in addition to other programs that already exist for developers.
Carl Harris, chairman of the National Association of Home Builders, an industry group, said in a statement, “We are pleased that the foundation of her plan calls for the construction of 3 million new housing units.” Harris said this because increasing the number of homes for sale is the best way to solve the problem of affordable housing in the country.
“But any tax incentive to encourage the building of starter homes must be tailored to the needs of the local market and open to many people,” he said.
There was also worry about Harris’s plan from at least one think tank on the right about how it would spend government money.
“To be in the subsidized housing business, you have to be a very specialized builder-developer,” said Ed Pinto, a senior fellow at the American Enterprise Institute. “The market-rate business is what most builder-developers do.” Not as hard, not as complicated, and not as expensive. So you get a well-trained group all over the country.
He also said, “Given the federal government’s track record of making these kinds of predictions, the chance of actually building three million more units over four years is literally slim and none.”
There is no doubt that home builders can’t build in some parts of the U.S. because of local zoning laws. In these cases, it is up to the local government, not the federal government, to decide if greater zoning, which would allow more homes, should be allowed.
David Tarter, who used to be mayor of Falls Church, Virginia, an affluent suburb of Washington, D.C., knows all too well how hard it is to deal with the housing problem.
Tarter, who now leads George Mason University’s Center for Real Estate Entrepreneurship, said that one common solution in some cities, like hers, has been to require that some new buildings built by developers have an affordable housing component or to offer programs to help home buyers with their down payments.
He remembered that in one part of Falls Church, the city let developers build more dense homes, which meant that the city had to rebuild an old school to make room for more students. He said, “It’s complicated, but as a local government official, you have to think about things like how my city will grow without growing too quickly.”
