Back HomeThoughts on Kamala’s Plan to Fix Housing Affordability
August 17th, 2024 by keithandkinsey
CNN recently posted this article on Kamala’s thoughts of how to fix housing affordability. I thought I’d comment on the bullet points posted from my unbiased perspective as a Realtor and a landlord. To be clear I’m not advocating for or against Kamala. My political views fall in the middle and are not in direct alignment with either party, and if somebody can find similar bullet points on what Trump intends to do I’m happy to comment on those points as well. Here are Kamala’s bullet points and my comments.
- “Up to $25,000 in down-payment support for first-time homebuyers.” Our current problem is more demand than supply. While this is improving slightly, I’d expect an increase in demand as interest rates start to tick back down. Providing free money to first-time home buyers only adds to the demand and makes the problem worse.
- “To provide a $10,000 tax credit for first-time homebuyers.” Like the comments in item 1 above, credits to buyers will increase the demand and drive prices up further. Items one and 2 could be an option if the housing market starts to flip to be in the buyer’s favor, but we need to wait until that happens. Additionally, we did similar things in 2008-2009 to try to help stimulate the housing market. Typically, when the housing market needs stimulation, there is not an affordability issue.
- “Tax incentives for builders that build starter homes sold to first-time buyers.” This could be an option that helps the current market we’ve had a shortage of new construction in the starter home price range for years. Most builders are not interested in building starter homes because there is not enough profit margin with the current labor and material costs.
- “An expansion of a tax incentive for building affordable rental housing.” This potential could help. We’ve had a huge boom in apartment construction, but the bulk of it has been at the very high end of the rental market. The problem is most new construction is considered class A apartments and thus the higher dollar apartments. Maybe something to incentivize owners of older existing units to keep prices low would be more beneficial.
- “A new $40 billion innovation fund to spur innovative housing construction.” I’m all for innovation in construction and technology regarding housing. Designers and developers are pretty good at innovating on their own, but throwing money at them can certainly add to innovation. The bigger challenge is newer products that have come from innovation such as 3d printed homes, tiny houses, accessory dwelling units or new construction methods/products don’t meet building and zoning codes. While codes are meant to protect us and improve environmental impacts, they have also had a negative effect on affordability. I’m not saying we should go backwards, but if we are going to benefit from innovation, we need to allow some of those innovations to be built.
- “To repurpose some federal land for affordable housing.” I can’t speak intelligently to this one. I’m curious what federal lands they are proposing and how they would propose to do this. Anything to add to the affordable housing inventory would help. However, it’s got to be logical and in strategic locations.
- “A ban on algorithm-driven price-setting tools for landlords to set rents.” This one kind of baffles me. I don’t think algorithms are what is driving up prices. The economic environment driven by past government policy is what drives up prices. As landlords, we look at comparable unit prices, absorption rate, occupancy levels, and current expenses (including maintenance, taxes, etc.) to set prices. We’ll adjust prices algorithm or not.
- “To remove tax benefits for investors who buy large numbers of single-family rental homes.” Limiting institutional investors from buying up large numbers of single-family homes would have a positive affect on inventory levels, and thus could help the housing market balance slightly. However, in the Madison area I haven’t seen many of these large national investors, so I don’t think it would really have an impact on our local market.
While the government can certainly influence the housing market (and markets in general). They need to be very thoughtful and cautious in how they approach things. Covid over-stimulus and holding interest rates too low for too long is what got us to high inflation and high housing prices to begin with. Then the correction (that seemed like an oh sh!t reaction) was a double whammy on housing affordability with the fastest rise of interest rates in history. It needed to happen, but they waited too long to start raising interest rates and as a result were forced to do it quickly. Maybe less government influence in the first place would have kept us out of this situation. I think things will eventually balance out, but it’s going to take a few years. …and with the current demand I don’t think we can stimulate buyers.
