Vice President Kamala Harris' plan to supercharge housing production has homebuilders, lenders and affordability advocates excited, even if they don't know how exactly it would work.
The Democratic presidential nominee
Harris' supply-driven approach is a breath of fresh air to housing market participants and observers who have grown frustrated with the federal government's long-running reliance on demand-side policies to spur the construction of new housing — though
"We don't have a lot of the details, and details matter," said Pete Mills, senior vice president of residential policy for the Mortgage Bankers Association. "But at a high level, the focus on supply is good. That's the primary root cause of the affordability issues, and the fact that they have looked for incentives to build and also looked for ways to clear regulatory barriers to building, those are all positive."
Some say the fact that Harris has
"The fact that we're talking about housing as a major campaign issue here — that's excellent. That means housing is finally top of mind to people," said James Tobin, CEO of the National Association of Home Builders. "It shows how important housing is. People are realizing that we are in a crisis and we've got to solve it."
But the expansive plan is missing key details that housing experts say are critical to determining how successful and viable the administration will be in generating new housing supply.
"We don't see how they make the jump from what they're proposing to 3 million units," said Nancy Vanden Houten, a senior economist with Oxford Economics. "Increasing housing supply is an admirable goal, and there are probably some policies and incentives that could be enacted to help with that. But given all of the obstacles — including regulations at the state and local level — it will be difficult to achieve that top number."
The Harris campaign has not broken down how much of the overall production would come from each of its various proposals. The campaign did not respond to multiple requests for comment this week.
The 3 million homes target itself is loosely defined. Lee Ohanian, an economics professor at the University of California, Los Angeles, said at first blush it is unclear whether that figure represents the total housing output over the next four years — which would actually represent a significant slowdown in production — or an additional sum on top of a given baseline.
"It strikes me as a hastily put-together idea," said Lee Ohanian "It didn't say 3 million on top of current production, it just said the goal is 3 million, which is way below where we are right now. And if the goal is adding 750,000 on top of where we are now, that is just patently unrealistic, given what the conditions are. I don't see anything in her plan that would get us close to that."
From the start of 2021 through the end of 2023, construction began on nearly 4.6 million housing units, according to data tracked by the Federal Reserve Bank of St. Louis. This is slightly above the long-running annual average of 1.4 million starts, but well above average the post-subprime mortgage pace of 1 million units per year. This year, the sector is on pace for roughly 1.25 million starts.
Mark Zandi, chief economist for Moody's Analytics, said the 3 million unit target represents the housing that would be stimulated directly by Harris' policy initiatives. Those include more funding for the Low Income Housing Tax Credit, or LIHTC — a tax break given to apartment developers who designate a share of their units as affordable, and the passage of the Neighborhood Homes Tax Credit, which would offset the cost of infill development and renovation projections, a new program that would pay developers to build smaller, entry level homes, and a $40 billion innovation fund to help finance creative housing solutions and incentivize local governments to bring down barriers to new home construction.
Zandi has calculated the total price tag for the plan to be about $125 billion. If successful, the approach would result in total housing production of more than 2 million units per year, which would go a long way toward addressing the nation's housing shortage.
The precise volume of homes needed to bring the market into an affordable equilibrium is difficult to pinpoint, but estimates
"If we can even get halfway down the path in three or four years and it takes another four years to get all the way there, I'd consider that a success," he said.
One of the most encouraging things industry participants saw in Harris' housing plan is something that was noticeably left out of it: the proposed 5% national
"This administration's dalliance with rent control is a concern for sure," Mills said. "But we have a candidate and we have a sitting vice president, and they may have different policies."
Still, other parts of the Harris housing plan are giving industry participants and policy analysts pause. On top of the high cost and political hurdles that would have to be cleared to implement such a sweeping plan, some say the policies themselves fall short in critical ways.
Tobin said he would have liked the campaign to match its proposal to incentivize state and municipal governments to cut red tape with a commitment to rolling back some of the federal government's burdensome requirements, including those related to environmental and energy efficiency standards. He added the subsidy programs such as LIHTC also come with heavy compliance obligations that he would like to see lightened.
"It's not that we're anti-regulation, but we want smart regulation that actually serves the purpose of health and human safety, rather than some of the bells and whistles that people want," Tobin said. "I would have liked to see the vice president talk a little bit about the federal government's responsibility in that regulatory burden."
Donald Trump, the Republican nominee for president, has built his housing strategy largely around deregulation and lowering interest rates. Tobin described the former president's approach as one aimed at stimulating broader economic activity to create a rising tide that lifts all boats.
The fundamental difference between the two candidates' housing visions are their views on the role of government. Harris' approach favors identifying the various pain points in the housing construction process and throwing government resources at each of them. Trump's mantra is to get the government out of the way entirely.
"The Trump plan has some good economics behind it," Ohanian said. "I worry that, with the Harris plan, we would spend a ton of money and not get a lot of bang for our buck."
But Zandi said the housing shortage is so great that market forces alone cannot address it.
"It's been almost a generation now that this crisis has been developing, and it's going to be very difficult for the private sector to do this on its own in any reasonable amount of time — and people don't have time," Zandi said. "A lot of people that are homeless, a lot of people that are doubling, tripling up — it's just not working fast enough."
