Indexbit Exchange:How do Harris and Trump propose to make housing affordable?

As affordable housing stays stubbornly out of reach for both renters and Indexbit Exchangebuyers, the candidates for president are making the issue part of their campaigns.

Democratic nominee Kamala Harris released a proposal in late August, while Republican Donald Trump has spoken publicly about some issues he considers key to the crisis.

They differ both in terms of heft and approach, but experts think neither plan hits the mark.

“Harris's plan is unrealistic, and I think that the Trump plan is really not serious,” said Cliff Rossi, professor of the practice at the University of Maryland’s Smith School of Business.

Still, the fact that housing is getting any attention in a presidential race points to just how critical the situation has become. It “suggests that for the first time in generations, housing is being taken seriously and it’s a subject we need to address,” said Yonah Freemark, a researcher at the Urban Institute’s Metropolitan Housing and Communities Policy Center.

New home construction

Analysts almost universally say that increasing the supply of housing is the most important component to alleviating the affordability crunch. Harris’ plan calls for the construction of 3 million new housing units over the next four years, a number Freemark calls “ambitious but probably unachievable.”

For context, he points to the years before the subprime bubble inflated and then burst, causing housing construction to stagnate. Builders completed about 1.6 million homes per year in the early 2000s, a level that was almost reached, for the first time in decades, in 2023.

However, jump-starting construction is key to getting the industry back to those healthier levels, experts say. What’s more, details in the construction proposal, such as tax incentives for builders, could also go a long way to tilting the market back toward affordability, said David Dworkin, president of the nonpartisan National Housing Conference.

“Affordable housing is significantly less profitable than building market-rate housing,” Dworkin told USA TODAY. “The costs are largely fixed and as costs go up, the profit margin declines.”

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The other component is “streamlining the permitting process,” possibly by offering incentives directly to communities, where permitting and most regulation-setting takes place, Dworkin said. A drastic step might be withholding federal highway funds from communities that make it difficult to build affordable housing, he said.

“If a community makes it difficult to build affordable housing - which is a problem in many communities, both red and blue - what we have is people who work in those neighborhoods have to drive further to their jobs,'' Dworkin said. "They spend more time on the highway, it wears down the roads faster. Why would the federal government enable this exclusionary policy by paying for road repairs that are self-inflicted?”

Down Payment Assistance

The Harris-Walz plan would offer $25,000 in down payment assistance to as many as 4 million first-time buyers who have paid their rent on time. It’s an amount that likely won’t go far enough to help most would-be buyers in more expensive areas of the country, experts say, but which could, in aggregate, nudge the price of homes higher by increasing demand.

Another drawback: by lowering the barrier to entry to a more expensive home, Rossi said, more Americans might wind up in homes they can’t afford over the long run.  “The whole purpose is to put people in homes they can stay in” he said.

Dworkin is more supportive of the down payment assistance plan, but would prefer funds be funneled through existing state programs and targeted by income to reach lower and moderate income Americans, he said.

Wall Street Landlords

Harris’ plan would “stop Wall Street investors from buying up and marking up homes in bulk,” a rare point of agreement between the Democratic candidate and Republican vice-presidential candidate J.D. Vance, who spoke out against big investors as far back as 2021, when he was running for Senate.

Across the country, big investing firms own only a fraction – roughly 3%, according to Rossi – of single-family homes, which they typically rent out. Still, experts like Dworkin note that in some metro areas, the share is much, higher – enough to make it impossible for a first-time buyer to crack the market.

Federal Land for Housing?

In an email to USA TODAY, Trump press secretary Karoline Leavitt wrote that the former president would “free up appropriate portions of federal land for housing."  That idea could help ease housing pressures in some select areas around the country, experts say.

Dworkin thinks some property that formerly belonged to the military might be a possible target, while Rossi points to some space owned by the Bureau of Land Management in the metro Las Vegas area.

Immigration

If elected, Trump would “stop the unsustainable invasion of illegal aliens which is driving up housing costs,” the campaign said in an email.

Freemark called that idea “the irony of ironies.”

“We have a construction labor market that is incredibly dependent on people from Latin American countries, in many cases undocumented people," he said. "If we kicked them out of the country, we would have a huge problem. The United States runs on immigration.”