Kamala Harris’ Housing Plan: Realistic or Far-Fetched?

Housing advocates have tried for years to raise their issue to prominence. It took pandemic-fueled bidding wars followed by a surge in mortgage rates to do it.

The issue reached the national stage, literally, at the Democratic National Convention, when President Barack Obama said of Vice President Kamala Harris:

“She knows, for example, that if we want to make it easier for more young people to buy a home, we need to build more units, and clear away some of the outdated laws and regulations that made it harder to build homes for working people in this country. That is a priority, and she’s put out a bold new plan to do just that.”

Housing’s prominence in Harris’ platform and Obama’s speech was no accident. Democrats’ internal polling clearly shows the issue resonates with voters.

Obama would not have devoted 23 seconds to it on a whim. In modern campaigns, all messaging is data-driven.

Still, the audience’s reaction was telling. A crescendo of cheers built as Obama spoke, nearly drowning out his final sentence.

The talk of building more homes shows not only that Democratic leaders are taking the issue seriously, but that they understand its economics.

Other convention speakers made “corporate greed” a rallying cry, but on housing, Obama didn’t take the lazy and unproductive route of blaming landlords or corporations. He cited, instead, “outdated laws and regulations” that limit homebuilding.

The increased focus on supply in the housing affordability crisis is everywhere. The New York Times, for example, ran a story Thursday about Kalamazoo with this subhead: “A decade ago, the city — and all of Michigan — had too many houses. Now it has a shortage. The shift there explains today’s costly housing market in the rest of the country.”

Now the bad news: No president can simply sweep away laws and regulations.

The rules that limit homebuilding are largely on the state and local level. The federal government cannot order localities to increase housing density, allow accessory dwelling units and eliminate cumbersome approval processes. It cannot strike down exclusionary zoning.

Instead, it has tried to use carrots, sticks and the courts to get cities and towns to allow more housing. For instance, it has threatened to slash federal funding to counties that don’t cooperate, and offer grants to those that do. The Department of Justice has brought discrimination cases against localities.

Neither approach has worked especially well, as the housing crisis clearly shows.

Does Kamala Harris have a new strategy? Visit her website and you won’t find it. The links there do not connect to a single policy page. There are lots of links to donate money, though.

Fortunately, our intrepid reporter Kathryn Brenzel came across this link on the Committee for a Responsible Federal Budget’s website. It is Harris’ summary of her housing plan.

Here is a summary of the summary, and brief takes on whether it would work.

Create a tax incentive to build starter homes. This should help in places where land is too expensive to build a profitable starter home.
Expand the Low Income Housing Tax Credit. This would yield a predictable increase in affordable rental housing. Builders are familiar with the program, so an expansion avoids the friction and confusion of trying something new. Harris would still need Congress to fund an increase.
Launch a $40 billion fund to spur innovative housing construction. Harris says this would “empower local governments to fund local solutions to build housing,” “support innovative methods of construction financing,” and “empower developers and homebuilders to design and build rental and housing solutions that are affordable.” The first of those would be ineffective in the many localities that don’t want more housing. The second and third proposals are too vague yet to assess. But getting Congress to pony up $40 billion for this seems like a long shot.
Repurpose some federal land for affordable housing. Sounds plausible. Free or cheap land can allow low-cost housing to pencil out. But will this land be near job centers or out in the boonies?
“Cut red tape and needless bureaucracy” such as by “streamlining permitting processes and reviews” for transit-oriented development and conversions. These are local issues, so it’s not clear how Harris would do this. She claims the plan would build on existing efforts that have worked.
Provide $25,000 toward down payments for first-time homebuyers. Most renters lack savings for a down payment, so this would expand the pool of buyers. But that would also increase buyers’ bids, pushing up the price of homes. On the plus side, that could spur builders to create more starter homes. The $25,000 figure is an average, so some folks would get more and some less.

The vice president also wants Congress to pass a bill banning algorithms that landlords use to help set rents. This is a can of worms and too complicated an issue to address here, so stay tuned for future analysis.

The other is to “stop Wall Street investors from buying up and marking up homes in bulk.” That sounds like populist — if not socialist — nonsense. Housing commentator Jay Parsons, formerly of RealPage, thoroughly debunked the premise in response to the “End Hedge Fund Control of American Homes Act.” TRD’s podcast “Deconstruct” delved into it as well.

The bill that Harris cited, the Stop Predatory Investing Act, doesn’t actually single out “predatory” investing. Rather, it punishes all owners of 50 or more single-family properties. Those who own 49 or fewer could continue to prey on Americans, if that’s really what they’re doing by providing and maintaining houses for rent.

By deterring economies of scale, the bill could raise management costs and result in higher rents. And the 50-unit threshold could be difficult to enforce. If the bill gains traction, a thorough analysis will be warranted.

On the Republican side, Donald Trump’s platform page does not mention housing at all.

It does, however, link to the GOP’s agenda, which says, “Republicans will reduce mortgage rates by slashing inflation, open limited portions of federal lands to allow for new home construction, promote homeownership through tax incentives and support for first-time buyers, and cut unnecessary regulations that raise housing costs.”

It is a rather audacious promise, given that the Federal Reserve — which is not controlled by the president or Congress — raised interest rates to reduce inflation, after low rates contributed to skyrocketing home prices.

The rest of the GOP housing agenda sounds similar to Harris’ and would face the same challenges. Worth noting, however, is that Trump has supported suburbs’ efforts to prevent multifamily development, which he said would ruin their quality of life. Banning apartments is largely what keeps suburbs’ housing costs high.