Kamala Harris housing proposals would address shortage, experts happy

It fits right in with the YIMBY movement, which stands for “Yes, In My Back Yard,” and is a pro-development movement focused on increasing the supply of high-density, affordable housing by targeting barriers to new construction. (It’s a contrary to the NIMBY or “Not in My Backyard” movement.)

Harris said Friday that her administration plans to build 3 million units by working in partnership with labor and the private sector to overcome obstacles to new construction at both the state and local levels.

“There is a severe housing shortage,” Harris said Friday. “In many places, it’s too difficult to build and drives up prices. As chairman, I will work in partnership with industry to build the homes we need to both rent and buy.”

Housing policy experts say this is the most important aspect of her multi-pronged plan, because what the market needs right now is more supply.

Jung Hyun Choi, senior research associate at the Urban Institute’s Housing Finance Policy Center, said a lack of supply “is the root cause of the current problem” with the housing market, adding that Harris’ proposal to build more homes is “in -really the key. the solution to the real estate market problem”.

Business Insider’s four housing policy experts spoke with all who agreed.

“The strongest thing I see in this proposal is that it recognizes the key problems with housing at the moment and is very explicit about trying to improve the number of homes built – and not just the number of homes, but the number of homes at affordable prices. John Walsh, a research analyst at the Urban Institute’s Housing Finance Policy Center, told Business Insider.

Home ownership is one of the most reliable ways to create stability in the economic lives of Americans and should be a priority, according to Christopher Mayer, a real estate professor at Columbia Business School, who praised Harris’ emphasis on supply.

“I think most people should be homeowners,” Mayer said, noting the decline in youth ownership. “Owning a home is a proven way to build wealth. It creates stability for households”.

Addressing the housing shortage

However, with the low supply of starter homes, those transitioning from renting to owning often have to deal with both high prices and steep mortgage rates.

America is facing a significant housing shortage, with the country between 4 and 7 million homes short, NPR reported this spring. Builders cited supply chain issues among other reasons why the building stalled. Zoning also remains a big barrier to building homes.

COVID-19 only made the problem worse, Mayer said, as more people started working remotely. Through her proposal to build 3 million new starter homes, Harris aims to address this critical gap.

Harris’ housing proposals expand on policies that President Joe Biden has tried to implement since taking office, including loosening regulations that restrict construction. Former President Donald Trump also urged states and cities to pursue zoning reform while in office.

The vice president’s plan to build millions of new housing units depends on several new methods. She plans to offer the nation’s first tax incentive for builders who build starter homes and sell them to first-time buyers. Harris also plans to create a $40 billion federal fund to spur local housing construction, an expansion of the $20 billion fund proposed by Biden. In addition, she promised to expand existing tax incentives for businesses that build affordable rental housing.

“The answer is more supply, and the answer is also more supply at the sweet spot, which is first-time ownership,” said Susan Wachter, a professor of real estate and finance at the Wharton School at the University of Pennsylvania.

She believes Harris’ pledge to build 3 million homes is the strongest part of her plan because it will address what she called a “generational crisis” in rent and house prices. The increase in housing supply must be matched by an increase in available land, Wachter added.

Part of Harris’ proposed federal fund to encourage housing construction would make some federal land eligible to be repurposed for new, affordable development — something Trump recently promised to do as well.

Both Choi and Walsh were quick to caution that while Harris’ proposal is a great start to easing the housing burden and reducing wealth disparities, more details are needed to determine its ultimate effectiveness.

“The devil is really in the details of where these houses would actually be used,” Walsh said.

Targeting Advance Payments and Wall Street

Harris’ other flagship proposals — offering $25,000 in down payment assistance to new homeowners and barring Wall Street investors from buying starter homes — drew more mixed reactions from experts who spoke to Business Insider.

In Mayer’s view, the pay-in-advance policy is rooted in good intentions, but may not be particularly cost-effective. Many first-time homeowners traditionally rely on their families for help with a down payment, Mayer said, meaning lower-income buyers often don’t have access to generational wealth, and the $25,000 would could help significantly. However, he would rather find ways to reduce the advance across the board than hand out money as Harris proposes.

Wachter, meanwhile, said he supports the effort to help potential homeowners with the down payment, but he’s not sure the proposal will garner broad political support.

While Wachter declined to comment on Harris’ proposal to limit Wall Street’s ability to buy single-family homes, Mayer is less enthusiastic about it.

“The large number of single-family rentals are not owned by people on Wall Street, they are owned by people who own a small number of homes,” he said of the plan. “Institutional investors bring efficiencies to its management, and those efficiencies generally result in better opportunities for tenants.”

Despite lingering doubts about some aspects of Harris’ proposal, experts agreed that the basic premise of building more affordable homes, for the first time, is what the country needs.

“This would have a huge impact,” Wachter said. “Right now, what’s threatened is the ability to get on that scale to get housing security. And housing security where there are markets, where there are jobs, is the key issue for young Americans today.”