Vice President Kamala Harris’s plan to boost the U.S. housing supply could represent the biggest push since the end of World War II, according to housing expert Jim Parrott and Mark Zandi, chief economist at Moody’s Analytics.
In a Washington Post op-ed posted over the summer, they attributed the housing affordability crisis to a lack of supply, estimating that the U.S. needs 3 million more homes, almost all in the bottom half of the market.
The Harris plan, released in August, aims to boost the inventory of affordable housing by encouraging more construction, while also offering $25,000 in down payment assistance for first-time buyers.
Parrott, who is the co-owner of housing advisory firm Parrott Ryan Advisors and a former White House economic advisor, and Zandi pointed to the expansion of a tax break for developers known as the Low-Income Housing Tax Credit, which would increase affordable rental supply.
To add more affordable homes for purchase, the Harris plan would also allow builders to get a tax break on profits from homes that are built and sold to first-time buyers.
Yet another part of the plan would create a new tax credit for renovating homes that couldn’t be sold at a price high enough to recoup repair costs. That would bring into the market additional supply that would otherwise sit unused.
To overcome infrastructure shortfalls and any local political resistance, the Harris plan would provide more money for states and communities.
“Each of these moves would be meaningful on its own, but together they would amount to the most aggressive supply-side push since the national investment in housing that followed World War II,” Parrott and Zandi wrote.
That’s when the federal government provided assistance to veterans via the GI Bill, which included, among other things, favorable terms for buying a home. That spurred more demand and construction.
Harris housing plan cost
To be sure, the plan comes with a big price tag: $125 billion. It would have to be paid for with tax revenue or offset with spending cuts elsewhere, they noted. Otherwise, it would add to the federal budget deficit and help lift mortgage rates, making homes less affordable.
But the upfront costs of boosting supply are far outweighed by the long-term costs of allowing the housing crisis to worsen, they warned.
“Our lack of affordable housing will continue to depress savings, opportunity, and growth in ways that will do long-term harm to the nation’s economy,” Parrott and Zandi said. “A thoughtful effort to address the problem now will ultimately lead to more growth and less cost.”
Trump housing plan
For his part, Donald Trump told Bloomberg that he would lower housing costs by easing environmental and permitting rules. But he also has suggested at campaign events that he would limit low-income housing developments in suburbs.
The Republican Party’s 2024 platform blames high housing costs on illegal immigrants, and vows to deport them, which some housing experts have said would reduce the availability of construction workers and add to costs. The platform also promises a mix of demand- and supply-side measures.
“To help new homebuyers, 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 says.
A version of this story originally published on Fortune.com on August 24, 2024.
