High housing costs have been a hot topic for the past two years. In a presidential election year, affordability concerns have become a talking point for both candidates.
According to a recent Gallup poll, high housing costs have become the second most important financial problem for American families after inflation. Lack of inventory has pushed home prices to new highs in the past four years, while rising mortgage rates have significantly increased borrowing costs.
Both Republican candidate Donald Trump and Democratic candidate Kamala Harris have spoken about the need for more housing and increased affordability. They even agree on some ways to achieve this goal, although their approaches differ significantly.
With less than two weeks before Americans head to the polls, here’s where each candidate stands on housing.
Mortgage rates
The President does not have the power to directly influence the dynamics of mortgage rates, despite any promises to do so. Rate movements depend on the state of the U.S. economy, the labor market and how investors expect the economy to perform over time.
The degree to which candidates’ economic proposals could raise or lower inflation could have a knock-on effect on mortgage rates as Federal Reserve policymakers use interest rate hikes as a tool to curb high inflation.
In a recent Wall Street Journal poll of 50 economists, more than two-thirds said inflation would rise if Trump’s plan to impose tough import tariffs took effect, while 12% predicted inflation would rise under Harris (the remaining respondents said neither one of the candidates did not declare that neither candidate would take effect). will greatly affect inflation). Harris said she would reduce inflation by lowering drug costs and curbing corporate price gouging.
Housing affordability
Housing supply was already low before 2020 due to years of under-building. A buying frenzy fueled by record low mortgage rates during the pandemic has caused inventory to fall even further. Low borrowing costs have made buying larger homes, second homes and investment properties much more affordable, attracting more buyers to the market. With limited inventory to meet rising buyer demand, home prices have skyrocketed.
High home prices weren’t that big of a problem while mortgage rates hovered near record lows, but once they started rising in 2022, the combination of elevated prices and rates created an “unprecedented affordability crisis,” according to researchers Harvard University.
Both candidates acknowledge that the key to increasing affordability is building more homes. Each has a plan to increase tax incentives and reduce regulation to encourage new construction, although they differ in specifics.
Help for Home Buyers
Making a down payment is one of the hurdles many potential buyers face, especially first-time homebuyers. Harris is offering $25,000 down payment assistance to potential buyers who have paid rent on time for two years in a row. Its platform mentions more generous assistance for first-generation buyers, although it doesn’t go into detail.
Trump said little on the campaign trail about his plans to help first-time home buyers. Its platform promises to support homebuyers through tax breaks, although no details have been provided. That support could come in the form of tax breaks or deductions for mortgage interest and insurance, according to the Bipartisan Policy Center.
Tax incentives for increasing inventories
Harris’ platform includes a plan to increase the housing stock by building 3 million homes over the next four years, using existing and new tax breaks to make construction less expensive and easier for builders. These incentives include:
- Expand the Low Income Housing Tax Credit (LIHTC), a federal program that provides tax breaks to developers who agree to reserve a portion of their units as affordable housing. These loans are typically sold to investors to raise capital for construction projects.
- Expand the Neighborhood Home Tax Credit (NHTC) to developers who build or remodel custom homes for moderate-to-moderate income families.
- Establish a new tax cut for builders to encourage the construction or rehabilitation of affordable homes for first-time homebuyers in low-income areas. (This will supplement the adjoining property tax credit.)
- Create a $40 billion innovation fund to encourage local and state governments to work with developers to find new ways to create more affordable housing. This could include investing in more efficient construction methods and streamlining the permitting process.
Trump’s platform also relies on using tax breaks and cutting environmental, zoning and other regulatory red tape, but does not provide many details. Both LIHTC and NHTC have bipartisan support, so these measures could also be passed by a Republican administration.
Both Harris and Trump also propose opening up limited space on federal land to affordable housing development. In a speech to the Economic Club of New York on Sept. 5, Spectrum News reported that Trump said these federal lands would be “ultra-low-tax, ultra-low-regulation” zones.
Rent reduction
Homeowners aren’t the only ones paying more for housing these days. Rents have risen significantly since the pandemic as households dropped out of the housing market are forced to rent instead.
Harris has expressed support for two bills currently before Congress that address rental costs. The first is the Stop Predatory Investment Act, which would limit the tax breaks available to large investors, making the rental business less profitable for speculators.
The second bill is the Algorithmic Collusion Prevention Act, which would prohibit “corporate landlords,” defined as owners of more than 50 rental properties, from using algorithmic software to set rental prices. Harris also expressed support for limiting rent increases to 5% over the next two years.
Trump hasn’t specifically focused on tenant availability, so he may be looking to add enough inventory to help keep prices down.
Whether any candidate can deliver on their promises depends on more than just the outcome of the presidential election. Either Trump or Harris will have an easier time implementing their proposals if their party also controls one or both houses of Congress. A divided government will mean that many of these proposals will not pass or will undergo a series of changes before becoming law.
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