Vice President Kamala Harris has unveiled a bold housing plan designed to tackle the persistent affordability crisis in the United States. The proposal aims to add 3 million new homes to the market, a significant step towards addressing the ongoing housing shortage. This plan, building upon President Biden’s previous housing initiatives, has sparked a lively debate among economists and industry experts.
Harris’s plan acknowledges the core issue: a lack of housing supply. “Everything else won’t work unless we have more supply,” Daryl Fairweather, chief economist at Redfin, told ABC News, describing the plan as “the boldest housing plan I have ever seen from a modern presidential candidate.”
To boost construction, the plan outlines several key measures, including tax incentives for builders to construct starter homes and a $40 billion fund to support housing development. It also proposes up to $25,000 in down-payment assistance for first-time homebuyers and a $10,000 tax credit.
While economists generally agree that increasing supply is essential, some elements of the plan have raised concerns, particularly the proposed rent control measures. Fairweather expressed reservations, stating, “When [Kamala Harris] starts talking about rent control, I just think that that’s not so effective.” Joe Brusuelas, chief economist at RSM U.S., echoed these concerns, telling CNN that while the emphasis on supply is commendable, the efficacy of rent caps is debatable, pointing out that market forces are already contributing to rental market disinflation.
The sheer scale of the plan underscores the severity of the housing crisis. Fairweather highlighted that the U.S. has been grappling with a housing shortage since the 2008 financial crisis, with construction lagging far behind demand. This shortage has been exacerbated by the pandemic and rising interest rates, making homeownership a distant dream for many Americans.
However, transforming these proposals into reality will be a significant challenge. Many of the measures require congressional approval, a daunting task in the current political climate. Local zoning laws and community resistance often act as barriers to new construction.
Jeffrey Zabel, a professor of economics at Tufts University, cautioned, “While this is a step in the right direction, let’s wait and see what they can actually implement. It is easy to make these proposals and another thing to actually implement them.”
Some experts also worry that certain aspects of the plan, like the $25,000 down-payment assistance, could inadvertently drive up home prices by increasing demand without a corresponding increase in supply.
Despite these concerns, the plan has received widespread support as a serious attempt to address the housing crisis. “The housing shortage has been getting worse and worse for the last decade… So I think it’s great that a leader is talking about the housing market in these terms,” Fairweather said.
The success of this ambitious plan will depend on its ability to navigate the complex political landscape and effectively overcome existing barriers to housing development. Whether it will ultimately deliver on its promise of easing the affordability crisis remains to be seen, but it represents a significant step towards addressing this critical issue.
