The housing crisis is one of the most important policy issues facing the nation. Housing shortages increase living costs for large numbers of people, and also prevent millions from moving to places where they would have better job and educational opportunities, thereby slowing economic growth and innovation. Both Kamala Harris and Donald Trump have taken positions on housing issues. But their ideas are mostly ones that would cause more harm than good. Sadly, neither candidate proposes any meaningful steps to break down the biggest barrier to housing construction in most of the US: exclusionary zoning rules that make it difficult or impossible to build new housing in response to demand.
Harris is the one that has offered more in the way of detailed proposals. She proposes giving $25,000 tax credits to first-time homebuyers and tax incentives for developers selling homes to first-time buyers. She also advocates restricting the use of algorithms to set rental prices, and capping rent increases and cracking down on “corporate” landlords. The rent control idea may be a reference to the Biden Administration’s recent plan to cap rent increases at 5% per year, though it is not clear if Harris endorses it. Harris also promises to build 3 million new homes by 2029, but is extremely vague on how exactly she plans to do it.
These policy ideas range from mediocre to awful. A $25,000 subsidy for first-time homebuyers is unlikely to do much to ease housing shortages. The fundamental problem is one of regulatory restrictions on supply. In that environment, subsidizing demand will simply bid up prices. Moreover, the people who most suffer from housing shortages are mostly renters, not would-be homeowners. This subsidy plan does nothing for them. Much the same goes for the plan to provide tax incentives for developers. This won’t do much for supply so long as developers are barred from building much in the way of new housing in many places, especially multi-family housing.
If zoning and other regulatory restrictions do get lifted, Harris’s tax credit incentives would be unnecessary. And, indeed, there would be no good reason to have the tax code favor housing purchases over other types of consumption.
Rent control is a terrible idea that is actually likely to exacerbate shortages. This is an Economics 101 point broadly accepted by economists across the political spectrum. Don’t take my word for it. Take that of prominent progressive ecoonomists, such as Paul Krugman, and Jason Furman, former chair of Barack Obama’s Council of Economic Advisers, who points out that “[r]ent control has been about as disgraced as any economic policy in the tool kit.”
Finally, there is no good reason to think that corporate landlords are any worse than other types of landlords, or that algorithmic pricing is somehow making the housing crisis worse. To the contrary, corporate landlords are usually as good or better than their “mom and pop” counterparts. Take it from a longtime renter with experience living under both types of landlords; the corporate ones usually maintain their properties better, and have better customer service. And algorithms can help owners identify situations where they can increase profit by lowering prices, as well as increasing them.
Harris is right to want to build 3 million new homes. Indeed, it would be great to build more than that. But, so far, she hasn’t proposed much in the way of effective methods of doing it. Unless and until she does so, her aspiration for 3 million new homes is not much more viable than my desire to add 3 million unicorns to the nation’s stock of magical animals.
At times she has made noises about cutting back red tape. I assume, also, that she supports President Biden’s plan to make “underutilized” federal land available for housing construction. The latter is a good idea, but it’s far from clear exactly which land will be opened up and on what terms.
Trump’s housing agenda is less detailed than Harris’s, but could well be even worse. The housing chapter of the Heritage Foundation’s controversial Project 2025 emphasizes that “a conservative Administration should oppose any efforts to weaken single-family zoning.” Single-family zoning, of course, is the most restrictive type of exclusionary zoning blocking new housing construction in many parts of the country. Donald Trump has disavowed Project 2025, and claims he “knows nothing about it.” But the author of the housing chapter is Ben Carson, Trump’s former secretary of Housing and Urban Development. During the 2020 election, Carson and Trump coauthored a Wall Street Journal op ed attacking efforts to curb exclusionary single-family zoning. He recently reaffirmed that position, promising to block “low-income developments” in suburban areas. On housing, at least, Project 2025 seems to reflect Trump’s thinking, and that of the kinds of people likely to influence housing policy in a second Trump administration. The Trump worldview is one of NIMBYism (“not in my backyard”).
Trump’s immigration policies—a centerpiece of his agenda, if anything is—would also have negative effects on housing. Evidence shows that mass deportations of undocumented immigrants reduce the availability of housing and increase the cost, because undocumented immigrants are an important part of the construction work force (an effect that outweighs the potential price-increasing effect caused by immigration increasing the number of people who need housing). Trump and his allies also plan massive reductions in most types of legal immigration.
Cutting work visas is also expected to have a negative impact on housing construction, as well as harm the economy in various ways.
One potential silver lining in the housing policies proposed by Harris and Trump is that many of them would require new legislation to be implemented, which could prove challenging to pass through a closely divided Congress. This includes Harris’s rent control initiatives, plans to subsidize home purchases, and efforts to regulate “corporate” landlords. Similarly, any significant attempts by a Trump administration to protect single-family zoning would likely necessitate new legislation to counter state-level reform efforts.
However, Trump’s immigration policies present an exception to this rule. The executive branch could increase deportations and reduce legal immigration without the need for new legislation. In fact, during Trump’s previous term, legal immigration was significantly reduced without new laws. While state and local governments could resist deportation efforts, as seen during Trump’s first term, the administration could potentially use the military to enforce such actions. This could drive undocumented immigrants further underground, impacting their ability to work in construction where they are more exposed and easily detected.
In summary, both Harris and Trump are offering largely unfavorable housing policies, with the main advantage being the difficulty of implementation.
There are potential steps the federal government could take to alleviate housing shortages. While most housing restrictions are enacted at the state and local levels, Congress could pass laws requiring jurisdictions receiving federal economic development grants to implement “YIMBY” legislation that relaxes zoning rules. Additionally, the Justice Department could support litigation aimed at proving that exclusionary zoning violates the Takings Clause, potentially breaking down barriers to new housing construction. Finally, a shift towards more lenient legal migration policies could expand the construction workforce and expedite housing construction.
Unfortunately, neither major-party candidate is advocating for these proactive measures. Instead, they are promoting policies that are likely to exacerbate the housing crisis.
Source link
