U-M real estate expert examines presidential candidates’ proposals to tackle housing crisis

EXPERT ANALYSIS

Housing policy is now front and center in the 2024 campaign.

For the first time in at least a generation, both major-party presidential candidates have released platforms addressing high housing costs.

[Link]Brian Connolly

Brian Connolly, assistant professor of business law at the University of Michigan's Ross School of Business, examines the candidates' platforms, which emphasize support for first-time homebuyers and construction of for-sale housing.

On one side, Connolly says, Vice President Kamala Harris has promised to build 3 million new housing units in her first term, provide tax incentives for builders to construct starter homes, provide $25,000 in down-payment support for first-time homebuyers and expand the low-income housing tax credit program that supports new affordable housing.

She also proposes creating a $40 billion fund to support local government innovations in the housing market, reduce red tape for housing builders, restricting corporate buy-ups of housing, and prohibit rent-setting algorithms.

Additionally, Harris has also supported building housing on federal lands and would continue the Biden administration's effort to restrict rent increases in large apartment buildings.

On the other side, Connolly notes, former President Donald Trump proposes reducing inflation, allowing housing development on federal lands, tax incentives for homeownership and first-time homebuyers, and cutting regulation.

Trump has also called for more presidential oversight over the Federal Reserve, implying that he would reduce interest rates. He's also proposed restricting immigration, which might affect the construction labor market.

As president, Trump reversed an Obama-era rule that required local governments that receive certain federal funds to take actions, like zoning land to allow more multifamily housing to reduce housing segregation. He also requested budget reductions for housing programs, such as the Community Development Block Grant program, which supports affordable housing construction.

Connolly offers the following observations:

The fact that both candidates have released housing platforms underscores the importance of housing affordability to voters.

This was highlighted in the April edition of the Financial Times/Michigan Ross poll. The candidates' platforms, which emphasize support for first-time homebuyers and construction of for-sale housing, underscore the challenges facing middle-income households-who are experiencing housing cost burden at greater rates than at any time in the past several decades.

Yet presidents have relatively little control over housing construction.

Housing is built by the private sector and is usually zoned, approved and permitted at the local government level. Federal interventions in housing construction typically come via grants or tax incentives and credits to encourage new housing development.

Both candidates acknowledge this problem by proposing tax incentives, but more will be needed to spur housing development, and states and local governments must continue to act to support new housing construction.

While they address many issues, neither candidate's platform fully addresses the root causes of housing undersupply.

Economists agree the root cause of the nation's housing crisis is a supply shortage, caused by things like restrictive zoning and building laws, high construction costs, construction-industry labor shortages, tight lending, and use of residential property for short-term rentals and second homes.

Some of the candidates' proposals, such as Harris' proposal to incentivize middle-income housing, loosely address these issues, but others do not. For instance, demand-side interventions such as Harris' proposals to offer first-time homebuyer support, restrict corporate activity in the housing market, and cap rents in large apartment buildings, or Trump's proposal to cut interest rates, could worsen the crisis by creating more demand for housing in an already tight market.

More details and more ideas are needed.

Both campaigns' proposals need additional detail to evaluate whether they will effectively address the housing crisis. For example, Harris' proposal to build 3 million new housing units in four years lacks detail-and given the pace of housing construction, it is a lofty one. Similarly, both candidates' proposals to cut local red tape lack important details, such as how the federal government will legally intervene in local matters.

At the same time, the candidates could offer more aggressive proposals to advance solutions to the crisis. They include: cutting federal funding to local governments that fail to approve new multifamily housing, creating federal programs to support the construction labor market and expanding the housing voucher program.

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