A signature feature of Kamala Harris’s housing plan is providing first-time home buyers with $25,000 in down-payment support, at a total cost of $100 billion over four years. Absent a severe recession, this policy is all but certain to lead to higher home prices. That’s because the four million program recipients would become price setters for all buyers in their neighborhoods.
According to the American Enterprise Institute’s Housing Center, 77% of all home purchases would be subject to this home buyer “tax,” causing the price of these homes to increase by 3.6%. Over four years the increase in home prices would total $175 billion, more than the $100 billion cost of the program. The price increase would show up in higher revenue for sellers, thus acting as a wealth transfer to them.
The law of supply and demand dictates that an increase in demand without a commensurate increase in supply will result in higher prices. This effect on prices is because we’re currently in a strong sellers’ market, which exists when the number of months it would take to sell all the homes currently on the market is less than six. As of August, the overall supply of homes for sale was 3.7 months’ worth. For houses in lower price tiers, that number drops to 2.4 months. Sellers’ markets create upward price pressure on home prices, which grows more powerful when demand is further stimulated. Ms. Harris’s policy would do just that, boosting demand by giving buyers more spending money.
The plan’s defects don’t stop there. Ms. Harris’s proposed tax incentive for building starter homes is intended to increase housing supply substantially. This approach has led to significant market distortions on at least two occasions.
The Housing and Urban Development Act of 1968, with its easy credit terms and substantial subsidies, resulted in a surge of housing permits in 1971 and 1972. By 1975 the housing boom had reversed, leaving lasting scars on cities including Detroit, Chicago and Cleveland. Similarly, the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, which set affordable-housing goals, combined with Bill Clinton’s National Homeownership Strategy, led to credit liberalization in the runup to the 2008-09 financial crisis. Housing permits doubled, from 1.1 million in 1992 to 2.2 million in 2005, but then collapsed by 73% in 2009. In the aftermath, millions faced foreclosure, and the resulting housing-supply deficit still afflicts us today.
Without such dangerous credit easing, it is likely that Ms. Harris’s proposal would provide incentives largely for new homes that would have been built anyway, with any incremental construction being unevenly distributed across the nation. This would cause further imbalances between supply and demand.
Ms. Harris also proposes a $40 billion fund for local governments to explore “innovative” housing solutions. The Housing and Urban Development Department would likely channel this money into programs laden with self-defeating government-mandated affordability requirements, which markets abhor.
History offers a cautionary tale against such federal interference in the housing market: From the 1930s to 2008, at least 43 housing, urban-renewal and community-development programs were signed into law. Despite these laws’ lofty goals, these initiatives consistently failed to make housing more affordable.
There is indeed a housing affordability crisis. The root cause of this is a housing supply shortage of between three million and eight million housing units. Rather than pursuing Ms. Harris’s misguided plan, the federal government has several options to increase the housing supply at market rate:
• Implement a 10-year plan to auction surplus federal lands for home construction. Doing so could add 200,000 homes per year. By my estimate, these sales could generate $10 billion in annual receipts.
• Eliminate the tax deduction for interest on mortgages. This would increase supply and reduce demand by freeing up over the next decade 700,000 existing homes currently being used as secondary residences.
• Adopt a credible plan to reduce deficit spending. This could lower the 10-year Treasury rate (and mortgage rates along with it) by 0.75 to 1 percentage point.
• Subsidized housing projects often involve a cycle of subsidizing, rehabilitating, tearing down and rebuilding, all on the same parcel. Congress should require HUD to document, project by project, this revolving door of waste.
These measures, in combination with state and local efforts to deregulate land use and zoning, would mitigate the housing affordability crisis—all at no taxpayer cost and without unintended consequences.
Edward J. Pinto is co-director of the American Enterprise Institute’s Housing Center.
This article originally appeared in The Wall Street Journal.
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
Deportation will solve the housing shortage.
The question I have not seen or heard is where the $25,000 dollar down payments will come from? Is Kammula so wealthy and generous that she will selflessly be writing checks from her personal account to benefit those who really cannot benefit her? It is annoying at best the way politicians, especially the communist democrats (but RINOs as well), ruthlessly rape the taxpayers (US) and toss our earnings around like a dog’s play toy. This proposal from someone who can’t even spell the word “charity” let alone define it.
The Harris housing plan is essentially the same Democrat plan for a federal takeover of local and state zoning laws, as well as the overall mortgage marketplace that was first floated under the Obama administration. They just changed the angle of how they plan to do it to get it by the courts they don’t already control, and few phrases and some specific numbers to give the pitch an air of originality. Other than that, this is essentially the same plan the Obama administration tried to takeover Westchester, New York back in Obama’s second term before the courts shut it down.
As to the impact to the housing market, it will of course increase the prices of houses overnight by equal or more than the subsidy that the Democrats are proposing. That will in turn make housing less affordable for the middle class, which is the intention of all this. Once private home ownership becomes unaffordable for enough of the 18–40-year-old age demographic, which won’t take that long under what the Democrats want to do, the federal government will begin rezoning whole sections of towns as zoned for high-rise, multiply family housing and commercial development. Expect to see the Democrats also come out with a series of rail projects (the Democrats do love their high-priced train projects) get rid of private car ownership in this country. Except for the very wealthy of course. Property taxes will of courses be jacked up through the roof to make individual home ownership unaffordable to all but the very wealthy in the country in certain sections of the country were they already live. The rest of the country will find itself being crammed into large scale government housing projects, as the towns take on the look and feel of small to medium size urban centers.
There will be no Kamala plan. She is doomed to irrelevancy.
This plan will come with qualifying “conditions.” She floated this plan 5 yrs ago for “first generation” home buyers. Read her plan for what Warnock and Maxine Waters call “housing reparations.” They’re not telling everything, once again.
Harris like ole Joe governs by throwing money at everything. These spur of the moment plans are not thought out. Copy Trump without any substance. Just like Kameltoe herself. An empty vessel, no substance or ideas nor plans for the future of America. Eliminating Trump so they can govern forever. Now they are making Trump an object of Iran to assassinate him. Don’t vote for him Iran hates him. That is better than Kameltoe being in the pocket of the ayatollah’s in Iran. Iran has become rich under ole Joe. To repay him they are threatening Trump’s life. And ole Joe by his silence acquiesced. VOTE TRUMP/VANCE if we want to keep our freedom.
Her plan is basically building more housed projects that will eventually become Democrat controlled ghettos. That’s what the do best….build ghettos.
This communistic plan would increase home prices even MORE than what they are at present. Just like government interference in both education and medicine increased the cost of both, her “plan” would do the same thing to houses. Once someone knows the government will pay them, they jack up prices! College and hospital costs have skyrocketed far beyond the inflation rate.
I see only bad results with her plan. Just going to be taking more taxes from taxpayers as this would be the only way to get that amt of money to give away. What happens if these people are unable to keep up with payments along with all the utilities and property taxes and food for their families. Praying she does not get voted in but they have cheated before and got away with it and now there are immigrants being given the right to vote. Who ever heard of any other country going this far to get votes. That alone should make it illegal.
This article shows what I have already predicted and commented on.
Harris wants to bring back the old Lyndon Johnson urban-type housing projects that were the drug markets and prostitution hot-spots of every major city. The “Democrats” successfully “bought” the urban black vote with those “projects”, welfare, and food stamps.
The locations of the projects were very dangerous. I lived near one when in college. The police never patrolled near it. Nobody wanted to own real-estate anywhere near them. We regularly heard gunshots at night, and murders were commonplace.
Not many of the housing project residents seemed upwardly mobile. The smart ones escaped by joining the military when they turned 18.
Welcome to Communist harris (Stalin’s policy) for housing.
You guys have probably never heard of the latest thing in Long Beach,CA,another Democrat stronghold.They are going to give homeowners loans of $250,000 for 30 years at 0% interest to build ADU’s,which are like granny shacks on your lot.You need to rent them out to section 8(welfare people),who will be subsized by taxpayers for rent.If you really want to see what Democrats are aiming for the rest of the country,watch what happens in CA.
Hmmmm…so eliminating tax deductions for interest on mortgages won’t cost me anything? Maybe if I’m renting, or if the standard deduction exceeds the itemized deductions on my tax return, but otherwise this “solution” needs further explanation. Or, maybe I’m just misunderstanding this part of the article.
Deport the illegals.
So these irresponsible children that won’t act like adults and save money and do without some things like gourmet coffee, $1000.00 concert tickets, new vehicles and exotic vacations a few times a year. Oh hold it I got a good one! GET A JOB AND KEEP IT! Like most of us with houses have done in our lives to have houses and maybe pay them off? Well do we just suck on Lemons and like it??
I don’t think Koala cares if the program would work or not.Just,will it get votes.
She doesn’t care. The democrats want to ruin this country. That was Obama’s plan in the first place. He stated he wanted this country to be a third world country in his book talking of his father. He blamed this country’s polices in overseas control for his father’s poor living conditions.
The Democrats love spending US taxpayer money. Enough to Ukraine! Incidentally, the little beggar was just here in PA with the Democrats and I think got another 3billion. Flown in in US plane. Harris is a red, diaper , anchor baby, raised in a radical home. And that rearing stays with her!
Guess who pays for it!
I disagree with eliminating tax deduction of mortgage interest in totality. Eliminate it as a deduction IF it applies to a 2nd home, yes. But those of us who barely afford all the expenses involved in home ownership – especially with inflation, higher real estate taxes due to inflated home prices, higher utility costs, etc. – finally get a little break with that tax deduction reducing what we owe the government.
i doubt the average dumb as crap realizes that everything the dumb as crap party does is designed to destroy the USA. why? i don’t know but i would be all of them have been bought by America’s enemies with promises of high power positions in the socialist government they will bring. these are the good old days. the real good lod days
So once again ppl who can’t afford to buy are being subsidized instead. Hey, let’s get our Dodd-Frank on! It worked SO well in 2008…
Here’s a better plan. Everything should be free. Provided by your loving government. Oh wait! That sounds like communism. Hmmm. Oh well, just raise the tax payers taxes so high they won’t be able to keep their houses so more people (many illegals) can move in. But then, where do WE go? Anyway, she must have a plan. Right? Didn’t someone say: the problem with socialism is that we eventually run out of other peoples money? Hmmm.
As Harris and Biden have way, way, way overspent the approved budget. The Taxpayer is not responsible for more that what the elected representatives to congress approved, She says all manner of stupid things! We will not pay is the word on the street. Loud, clear, and with a depth of anger never heard before. Overspending, gigantic debt, “do not care” by the very people who took an oath not to do this, HAVE, then prosecution is in order, as it would be for every citizen.
The programs that HUD implements are unconstitutional. Therefore, HUD needs to be abolished and the laws that it administers and enforces need to be repealed.
When interviewed by MSNBC, Kamala stated that the corporate tax increase would pay for first-time home buyer incentives. But when asked what if Congress didn’t pass the corporate tax increase, where would the money come from? She replied, “Well, they just have to pass it!” Never mind that if the corporate tax rate is increased the corporations will just either raise their prices to cover it or move their operations to other countries. Either way, we’ll all end up paying the bill.
Sounds socialist to me. Where is she planning on getting this money?? Where is she going to put her illegal aliens??? What people NEED is not a handout to keep them beholding to the government….they need education and JOBS where they can earn money and not pay high taxes, like she plans! What people NEED is a clean sweep of this country to take 20 million illegal “citizens” OUT with a plan for them to return LEGALLY!!! What people NEED is to get the ILLEGALS who have KILLED, RAPED OUR CHILDREN, CITIZENS, ESPECIALLY the children! If they break our laws and have been arrested DO NOT RELEASE THEM TO THE STREETS AGAIN, STUPID DEMOCRAT JACKASSES, like has been done. Give them to ICE and let THEM take care of them; throw them in jail; stop with this dumb “SANCTUARY” CITY, COUNTIES, STATES!!! IT DOESN’T WORK NOR DOES IT HELP!!!
HER PLAN IS TO KEEP THE BORDERS OPEN..IN THE LAST FOUR YEARS OVER THIRTEEN MILLION ILLEGALS HAVE JUST WALTZED INTO THIS COUNTRY!! COMPLIMENTS of biden and harris!!
Communist harris and Dictator Beijing biden shut down Solvent Banks unconstitutionally that use Crypto banking keeping you from accessing your money.
If they stop counting then when they start counting in the morning, notice the election just got stolen
Eliminating the tax deduction for mortgage interest does not meet the criteria of “no taxpayer cost and unintended consequences”. Those who itemize rely on the real estate tax and mortgage interest deductions to get themselves over the standard deduction. When coupled with the rising cost of health care, also deductible over 7.5% of AGI, it does not take much in the way of charitable donations and sales tax to well exceed the standard deduction. People need to do the math. They might surprise themselves and the tax savings.