America is facing a housing affordability crisis, with high rent prices and the dream of homeownership feeling out of reach for many. The root of this crisis lies in the basic economic principles of supply and demand. The supply of homes on the market is low as sellers hold onto their properties due to fear of high mortgage rates, while demand surged during the pandemic and has remained high. While there are signs that the worst of the affordability nightmare may be over, the housing market is still tight, making it a top issue for voters in the 2024 presidential election.
Vice President Kamala Harris recently unveiled a plan to make homes more affordable, building upon President Joe Biden’s existing proposals. Her plan includes various measures such as up to $25,000 in down-payment support for first-time homebuyers, tax credits, incentives for builders constructing starter homes, and a focus on increasing affordable rental housing. However, some economists have expressed concerns that parts of Harris’s plan, particularly rent caps and down-payment support, may worsen market problems by stimulating demand and driving up housing costs.
While some economists see the substance of Harris’s plan, particularly the proposal to add 3 million housing units, as a critical step in addressing the supply shortage that has fueled high prices and worsened affordability, others are skeptical. Critics like Lanhee Chen argue that the rent caps and down-payment support could be ineffective or even counterproductive. Chen also raised concerns about the lack of accountability in the proposed innovation fund and its potential impact on the market.
There is bipartisan support for increasing the housing supply, with both Harris’s plan and previous proposals by Donald Trump focusing on repurposing federal lands for affordable housing and providing incentives for builders. These supply-side reforms are seen as long overdue to address the chronic shortage of housing units. However, economists caution that implementing these proposals will be challenging and that more action may be needed to bring housing supply back into equilibrium.
Overall, the response to Harris’s plan among economists is mixed. While many see the potential benefits of increasing the housing supply through various incentives, others warn about the unintended consequences of measures like rent caps and down-payment support. The debate highlights the complexity of addressing America’s housing affordability crisis, with no easy solutions in sight. Moving forward, policymakers will need to carefully consider the trade-offs and implications of different proposals to ensure that they effectively tackle the root causes of the crisis and create a more just and affordable housing market for all Americans.
