Slow down, sweet talkin' woman...
Larry Ulsh
Helping Mortgage Brokers & MLOs Close More Deals—Non-QM Lending via Wholesale, Table-Funded, and Correspondent Channels (Non-Delegated & Delegated).
Kamala Harris recently released her housing proposals aiming to address housing affordability, increase housing supply, and provide support for first-time homebuyers and renters.
Harris went from joy and good vibes as her platform to a smorgasbord of new proposals for the housing industry. For industry participants like me, any attention to the issues of affordability and housing supply is welcome. However, the real test lies in how committed a candidate is to these goals and whether their proposals hold water.
Politicians from both sides often promise the moon during campaign season. Kamala Harris is hitting all the right notes, delivering her message with charm and a smile. But is she just sweet-talking us?
The list of the significant proposals are below;
1. Construction of 3 million new housing units: Harris aims to build 3 million new homes and rental units that are affordable for the middle class within her first four years in office.
2. Tax incentive for builders: Harris proposes a "first-ever tax incentive" for builders who construct starter homes aimed at first-time buyers.
3. $40 billion innovation fund: This fund is intended to empower local governments to implement housing solutions and find ways to increase housing supply.
4. Down payment assistance: Harris plans to provide up to $25,000 in down payment assistance to Americans who have paid their rent on time for two years, with additional support for first-generation homeowners.
5. Expansion of existing tax incentives: Harris proposes expanding current tax incentives for developers to build rental housing.
6. Legislation to prevent rent increases: Harris calls on Congress to pass the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act, which would prevent landlords from using price-fixing algorithms to increase rents.
7. Limiting tax breaks for large investors: Harris wants Congress to pass the Stop Predatory Investing Act, which would limit tax breaks for large investors and private equity firms that acquire single-family rental homes in bulk.
The response has been tepid:
1. Criticism of the $25,000 down payment assistance:
Kevin O'Leary, a prominent investor, strongly criticized this proposal, stating that it would trigger inflation in the housing market. He argued that providing $25,000 to buyers in a limited market would drive up prices, as sellers would capitalize on the increased demand in a market with low supply.
2. Concerns about demand-side subsidies:
The People's Policy Project pointed out that the down payment assistance is unfair to those who cannot afford a home even with the subsidy or those who prefer to rent. They also noted that as a demand subsidy without corresponding price controls, some of the money would likely be captured as higher home prices, negating the affordability goals.
3. Criticism of the tax credit for building starter homes:
The People's Policy Project argued that this proposal is misguided, stating there's no reason to believe that the barrier to building more housing is insufficient profitability. They called it a waste of money and pointed out that conditioning the tax credit on whether the buyer is a first-time homebuyer makes little sense, as builders typically don't know in advance who will buy their homes.
4. Skepticism about the 3 million new housing units goal:
O'Leary questioned the feasibility of this proposal, arguing that housing is primarily a state issue and expressing doubt about the federal government's ability to influence housing dynamics significantly. He challenged the idea that Harris could build 3 million houses, asking which states would grant her that authority.
5. Concerns about the overall cost and effectiveness:
The Hoover Institution estimated that Harris's housing plan could cost as much as $500 billion and argued that it would do less to facilitate home ownership than it could because it doesn't address the most important reason for expensive housing: high construction costs. They suggested that the plan significantly subsidizes housing demand, which will put upward pressure on housing costs.
6. Criticism of the "innovation fund":
The Hoover Institution expressed concerns about the proposed $40 billion "innovation fund" for local governments, citing past failures of government interventions in the housing market that have often backfired by driving up costs.
Is Government The Answer?
Government meddling in the housing market often leads to unintended consequences that exacerbate the very issues they aim to resolve. One glaring example is how well-intentioned interventions can end up driving up costs rather than improving affordability. In California, for instance, despite the passage of nearly 100 new housing laws between 2017 and 2022, homebuilding remains sluggish, with the cost of constructing "affordable" housing sometimes surpassing $1 million per unit. This highlights how even extensive legislative efforts can fail to address the root causes of the housing crisis.
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A key reason for these failures is the government's tendency to focus on boosting demand rather than addressing supply inefficiencies. Programs that subsidize buyers without easing construction barriers or enhancing building processes can actually inflate housing costs. Additionally, local and state regulations, such as restrictive zoning laws, significantly limit the ability to build new housing. While federal initiatives may aim to address housing issues, they often have limited impact on these entrenched local policies, further hampering efforts to increase housing supply.
Is Kamala The Answer?
Harris was involved in housing issues while a legislator from California. The Rent Relief Act: As a senator in 2018, Harris introduced the Rent Relief Act, which proposed tax credits for renters earning less than $100,000 who allocate over 30% of their income to rent and utilities.
However, the proposal faced significant criticism from experts. Many argued that it failed to tackle the root causes of high housing costs. The Tax Foundation pointed out that the bill would likely benefit landlords more than renters and could lead to market distortions. In supply-constrained states like California, critics predicted that landlords would simply raise rents, effectively absorbing the additional funds tenants would receive from the tax credits.
Ultimately, the Rent Relief Act did not pass and become law. As a result, it never provided the intended relief to California renters, leaving the underlying issues of affordability and supply unaddressed.
Kamala Harris’s track record on housing growth is spotty at best. The real question is whether she’ll empower builders and market players to address the crisis through competition and innovation by cutting through the red tape and easing costly regulations. Or will she stick to doubling down on restrictions and price controls while serving up more proposals that sound good but end up making things worse?
Citations:
[6] https://www.cnbc.com/2024/08/20/what-to-know-about-harris-affordable-housing-economic-proposals.html
Citations:
Owner at Way Ya Go LLC. a Real Estate Development Co.
7 个月And who would be paying for this? And I understand that Illegal Aliens would be eligible. It is the wise Surpent who is as humble as the Dove. If you fall for this you will fall for anything.