Kamala Harris' Housing Strategy: An Expert's Perspective

Motivation: As Americans head into the upcoming elections, the cost of living remains a dominant concern. With housing expenses soaring, there’s an urgent need for a comprehensive strategy to make homes more affordable.

Purpose and Strategy: Vice President Kamala Harris has outlined a plan to lower costs for American families across four critical areas: housing, groceries, medical expenses, and taxes. A central component of her strategy is the construction of 3 million new homes over the next four years, supported by federal funding and reforms in permit issuance.

Current Deficit: The U.S. faces a housing shortage of approximately 4 to 7 million homes. Harris’ plan aims to address this deficit through substantial investment and policy adjustments.

Construction Funding: The proposal includes $40 billion in housing-related tax credits allocated to local governments to finance the construction of affordable housing. Additionally, Harris has committed to targeting Wall Street investors who, she argues, are buying and inflating the prices of homes in bulk.

However, this approach may be based on a misconception. Institutional investors currently own less than 1% of America’s single-family homes. Instead of buying homes, these investors have primarily focused on constructing much-needed rental apartments. The real issue lies with individual investors who, fueled by cheap pandemic relief funds and historically low interest rates, have driven up home prices, sidelining first-time buyers.

A More Effective Approach: Rather than penalizing investors, a more productive strategy would be to incentivize their role in increasing the housing supply. Adjusting local tax regimes to encourage affordable housing development is crucial. Implementing a Land Value Tax (LVT) could play a pivotal role in this process.

Regulatory Reforms: To expedite the construction process, it is essential to reduce permitting times, eliminate set-aside ordinances, and adopt right-to-build processes. Additionally, rethinking local zoning categories and land-use regulations can foster higher density, promote off-site construction technology, enhance energy efficiency, and encourage economies of scale. By supporting local market-rate housing for rent, the laws of supply and demand can help keep rent affordable.

Promoting Investment in Affordable Housing: Instead of merely focusing on tax credits, the strategy should emphasize increasing the availability of construction-to-permanent loans. Developers of multifamily housing projects in low- and moderate-income (LMI) areas should be rewarded with tax credits. The Community Reinvestment Act (CRA), which mandates banks to meet the credit needs of all communities, including LMI areas, should be leveraged. By financing both the construction and purchase of for-sale housing at 20%, 40%, and 60% below the local market rate, banks can drive investment in underserved areas, fostering the development of affordable housing while addressing the needs of disadvantaged communities.