Vice President Kamala Harris' plan to increase the U.S. housing supply could be the biggest boost since the end of World War II, according to housing expert Jim Parrott and Mark Zandi, chief economist at Moody's Analytics.
In an editorial on Wednesday, The Washington Post blamed the housing affordability crisis on a lack of supply and estimated that the U.S. needs 3 million more homes, most of them in the bottom half of the market.
The Harris plan, announced earlier this month, aims to increase affordable housing stock by encouraging more construction while also offering first-time homebuyers $25,000 in down payment assistance.
Parrott, a former White House economic adviser and co-owner of housing consulting firm Parrott Ryan Advisors, and Zandi pointed to the expansion of a tax credit for developers known as the Low-Income Housing Tax Credit, which they said would increase the supply of affordable rental housing.
To increase the amount of affordable housing available, Harris' plan would also give builders a tax break on the profits they make from building and selling homes to first-time homebuyers.
Another element of the plan is to create new tax credits for renovating homes that can't be sold for enough to recoup the costs of repairs, bringing unused, abandoned housing back onto the market.
To overcome infrastructure gaps and local political resistance, the Harris plan would provide more funding to states and communities.
“Each of these moves would be significant on its own, but together they would represent the most aggressive supply-side push since national investment in housing after World War II,” Parrott and Zandi wrote.
At the time, the federal government provided assistance to veterans through the GI Bill, including favorable terms for homebuying, which spurred further demand and construction.
Harris Housing Project Costs
Admittedly, the plan would be costly – $125 billion – and they point out that this cost would have to be paid for through taxes or offset by other spending cuts, otherwise it would increase the federal budget deficit, leading to higher mortgage rates and making housing less affordable.
But they warned that the initial costs of increasing supply would far outweigh the long-term costs of allowing the housing crisis to worsen.
“A lack of affordable housing will continue to stifle savings, opportunity, and growth, harming the nation's economy in the long term,” Parrott and Zandi said. “Thoughtful efforts to address this issue now will ultimately lead to more growth and lower costs.”
Trump's housing plan
Meanwhile, Donald Trump told Bloomberg he would lower housing prices by loosening environmental and permitting regulations, but on the campaign trail he has also suggested limiting development of low-income housing in suburban areas.
The Republican 2024 platform blames illegal immigrants for high home prices and vows to deport them, which some housing experts say would make it harder to find construction workers and increase costs. The platform also promises a combination of demand-side and supply-side measures.
“Republicans will help new homebuyers by combating inflation and lowering mortgage rates, opening up federal lands for new home construction, promoting homeownership through tax incentives and assistance for first-time buyers, and cutting unnecessary regulations that drive up housing costs,” the bill states.
