Vice President Kamala Harris has announced a comprehensive set of housing policy proposals, giving voters their first look at what the housing market could look like under a Harris administration.
Harris unveiled the proposals as part of a populist economic plan that marked her first major policy announcement since replacing President Joe Biden at the top of the Democratic ticket in the 2024 presidential race against Republican Donald Trump.
Its signature housing policy seeks up to $25,000 in federal down payment assistance for first-time homebuyers who have paid their rent on time for at least two years. This dramatically expands on Biden’s previous proposal for a $10,000 tax credit for first-time buyers, which had limited additional down payment assistance to first-generation homebuyers.
Harris’ campaign says in a statement that the program will provide down payment assistance to up to 4 million first-time buyers over four years.
Other elements of the plan called for a new tax credit for builders that incentivizes the construction of starter homes, curbs on investor purchases of single-family homes and a ban on shared software platforms used by landlords to set rents that critics say it is a form. of fixing prices.
In total, Harris says he would encourage the construction of 3 million new housing units over a four-year term. It’s an achievable goal, with US Census Bureau data showing that 1.5 million new privately built housing units were completed in 2023 alone.
Its main proposals, including down payment aid, would require congressional approval. The nonprofit policy group the Committee for a Responsible Federal Budget estimates that the new housing policies Harris is proposing would cost $200 billion over four years and more if they were made permanent.
Harris’ campaign vows to pursue a massive increase in home values that has left existing homeowners sitting on a mountain of equity while freezing many potential first-time buyers out of the market. In May, national home prices rose 48% from four years ago, according to Case-Schiller.
“While the price of housing has increased, the size of advances has also increased. Even if aspiring homeowners save for years, it’s often not enough,” Harris said in a speech Friday in the swing state of North Carolina.
Harris’ down payment proposal was light on specific details — who exactly would qualify for down payment assistance and how would the funds be distributed? But the plan quickly sparked a heated debate, with some housing policy experts praising the proposal and others warning that it could spur unexpected spikes in house prices.
The Trump campaign was also quick to criticize the proposal, with Republican vice presidential candidate JD Vance claiming that “Kamala Harris wants to give $25,000 to illegal aliens to buy American homes.”
It’s unclear whether Harris’ plan would have a citizenship requirement, but immigrants present in the country illegally are not eligible to apply for traditional or “conforming” mortgages. Depending on how the program is administered, this may also make them ineligible for federal assistance with a down payment.
Experts react to Harris’ down payment assistance plan
Some economists who spoke to Realtor.com warned that Harris’ plan could backfire by fueling demand in an already hot housing market, pushing home prices even higher.
Ken Johnson, a finance professor and Walker Chair of Real Estate at the University of Mississippi, warns that offering broad down payment assistance would be like “throwing gasoline on an already red-hot housing market.”
“The real symptom of what’s going on is that we have a supply shortage. We are dangerously short of supply. We just can’t build houses fast enough,” says Johnson. “You can’t make it easier for people to buy homes and offer easier home loans when you have the housing market so overpriced.”
Johnson argues that to bring house prices back up, the government needs to do more to help small and independent housebuilders secure finance.
One way, he explains, would be to start a government-sponsored enterprise dedicated to buying construction loans, the way Fannie Mae and Freddie Mac buy mortgages.
Tai Christensen, president of private-sector down payment assistance provider Arrive Home, acknowledges that a federal subsidy for first-time buyers could fuel housing inflation if it wasn’t balanced by an increase in supply.
However, she argues that Harris’ proposed tax credits for homebuilders could offset the risk of inflation by spurring new construction, and that down payment assistance would be an important step to level the playing field and increase opportunities for home ownership.
“Anything that increases homeownership, especially in marginalized, low- to moderate-income communities, we’re in full support of,” says Christensen. “The ownership of the house is no. 1 wealth creation tool for the majority of Americans, and to be able to extend that benefit to more Americans, we are fully in support of whatever that looks like.”
The National Association of Home Builders praised Harris for making housing and homeownership a central part of her economic agenda.
“We are pleased that the foundation of her plan calls for the construction of 3 million new housing units, because the key way to address the nation’s housing affordability crisis is to increase the nation’s housing supply,” said NAHB Chairman Carl Harris in a statement.
He said new tax credits for builders would help spur construction, but warned that “any tax incentives to support the production of starter homes must be targeted at local market conditions and be widely available.”
Carl Harris, no relation to the vice president, also reiterated his group’s long-standing call to cut federal regulations and codes that he says are burdensome and costly to homebuilders.
“The devil is in the details”
If Kamala Harris gets congressional approval for a down payment assistance program, it wouldn’t be the first time the federal government has subsidized homebuyers.
In 2009, during the height of the global financial crisis, Congress passed a similar $8,000 loan for first-time buyers. But 2009 was a very different situation, when house prices were falling due to a huge pullback in demand and an influx of buyers was needed to stabilize the market.
Now, many economists believe we’re in the opposite kind of crisis: The supply of homes is insufficient to meet demand, pushing home prices out of reach for many families.
“The housing market is still a long way from where it needs to be,” says Professor Johnson. After the Great Recession, “We in the US and around the world didn’t build a housing product for a decade, almost none. So we’re way behind.”
From 1996 to 2006, the US completed an average of 1.6 million new housing units each year. Construction fell over the next five years, reaching just over half a million units in 2011. Since then, construction has slowly increased each year, but has yet to return to levels seen before the 2007 housing market crash.
As builders built fewer homes after the crash, they also began to focus on larger, more expensive homes, which have higher profit margins. In 2015, the average square footage of new single-family homes peaked at 2,473, up from an average of 2,088 in the decade to 2006.
New home sizes have slowly shrunk since then, but remain well above the pre-financial crisis average of last year, at 2,238 square metres.
Harris can hope that by offering tax credits to builders and subsidies to buyers, especially in the first-time buyer category, it will stimulate the market for starter homes and encourage more builders to turn to more affordable homes. suitable for first time buyers.
Arrive Home’s Christensen notes that today, the starter home category can often include units in multifamily properties, such as duplexes and townhouses, which are cheaper to build than detached homes, but still allow higher-income buyers low start building capital.
“When people think about starter homes, sometimes they have this kind of vision in their head of a white picket fence and a three-bedroom, two-bathroom cabin with a yard,” she says. “But planned urban developments are usually cheaper than your average suburban neighbourhood, and especially for first-time home buyers, that’s critical because they just need to get their foot on the property ladder.”
Matthew S. Roland, assistant dean for the real estate development program and clinical assistant professor at the University at Buffalo School of Architecture and Planning, notes that for an FHA mortgage with 3.5% down, a $25,000 loan can cover down payment on a home up to $715,000.
However, with 20% down, the loan would only cover the down payment on a home up to $125,000, a price range that is virtually non-existent except for a few condo units.
Roland says key questions about the program remained to be answered, including how homebuyers would qualify, whether they would have to put up some of their own money as well, and whether the funds would be distributed as tax credits or payments. direct to lenders
“Overall, I think it’s a program that has the potential to help,” says Roland. “That said, the devil is in the details.”
#Kamala #Harris #Plan #Give #FirstTime #Homeowners #25K #Fail
Image Source : nypost.com