Kamala Harris is going full YIMBY — and housing experts are optimistic

Addressing the housing shortage

However, with the low supply of starter homes, those making the jump from renting to owning often have to contend with both high prices and steep mortgage rates.

America is facing a significant housing shortage, with the country between 4 and 7 million homes short, NPR reported in the spring of this year. Builders have cited supply chain issues, among other reasons building has stalled. Zoning also remains a large barrier to homes being built.

COVID-19 only exacerbated the issue, Mayer said, as more people started working remotely. With her proposal to build 3 million new starter homes, Harris is aiming to address that critical gap.

Harris’ housing proposals expand on policies President Joe Biden has attempted to implement since taking office, including loosening regulations that restrict construction. Former President Donald Trump also urged states and cities to pursue some zoning reform while he was in office.

The vice president’s plan to build millions of new housing units depends on several novel methods. She intends to provide the nation’s first tax incentive for builders who construct starter homes and sell them to first-time buyers. Harris also intends to create a $40 billion federal fund to incentivize local housing construction, an expansion of Biden’s proposed $20 billion fund. To top it off, she vowed to expand existing tax incentives for businesses that construct affordable rental housing.

“The answer is more supply, and also the answer is more supply at the sweet spot, which is first-time ownership,” said Susan Wachter, a professor of real estate and finance at the Wharton School of the University of Pennsylvania.

She thinks Harris’ commitment to building 3 million homes is the strongest part of her plan, as it will address what she called a “generational crisis” of rent and housing prices. The increase in home supply needs to correspond with an increase in available land, Wachter added.

Part of Harris’ proposed federal fund to encourage housing construction would make some federal lands eligible to be repurposed for new, affordable developments — something Trump recently promised to do as well.

Both Choi and Walsh were quick to caution that while Harris’ proposal is a great start to alleviating housing burdens and reducing wealth disparity, more details are needed to determine its ultimate effectiveness.

“The devil is really in the detail of where these homes would actually be used,” Walsh said.

Targeting down payments and Wall Street

Harris’ other flagship proposals — offering $25,000 in down-payment assistance to new homeowners and preventing investors on Wall Street from buying up starter homes — drew more mixed reactions from the experts that spoke to Business Insider.

In Mayer’s view, the down-payment policy is rooted in good intentions but may not be particularly cost-effective. Many first-time homeowners traditionally rely on their families for help with a downpayment, Mayer said, meaning lower-income buyers often don’t have access to generational wealth, and the $25,000 could significantly help them. Yet, he would rather find ways to lower down payments across the board than distribute money as Harris is proposing.

Wachter, meanwhile, said she supports the effort to aid potential homeowners with their down payments but is not confident the proposal would garner broad political support.

While Wachter declined to comment on Harris’ proposal to limit Wall Street’s ability to buy single-family homes, Mayer is less enthusiastic about it.

“The vast amount of single-family rentals are not owned by people on Wall Street, they are owned by people who own small numbers of houses,” he said of the plan. “Institutional investors bring efficiencies to management of that, and those efficiencies generally result in better opportunities for renters.”

Despite lingering doubts about some aspects of Harris’ proposal, the experts agreed that the basic premise of building more affordable, first-time homes is what the country needs.

“This would be a huge impact,” Wachter said. “Right now, what’s threatened is the ability to get onto that ladder to achieve housing security. And housing security where there are markets, where there are jobs, is the key issue for young Americans today.”