The 2020 Presidential Hopefuls: How Joe Biden’s and Donald Trump’s Plans Differ on Affordable Housing and Confronting the Ongoing Housing Crisis
Table of Contents
The High Cost of Housing: A Growing Concern
The high cost of housing has been a hot topic over the past two years. In a presidential election year, concerns about affordability have become talking points for both candidates.
Americans’ Financial Worries
In a recent Gallup poll, high housing costs were American families’ second-most important financial problem after inflation. A lack of inventory pushed home prices to new highs over the past four years, while rising mortgage rates significantly increased borrowing costs.
Both Sides of the Argument
Both Republican candidate Donald Trump and Democratic candidate Kamala Harris have spoken about the need for more housing and improved affordability. They even agree on some ways to help achieve it, although they differ significantly in their approaches.
What’s at Stake
With less than two weeks before Americans head to the polls, here’s where each candidate stands on housing.
Mortgage Rates
The president doesn’t have the power to directly influence mortgage rate movement, despite any promises to do so. Rate movements depend on the state of the U.S. economy, labor market, and how investors expect the economy to perform over time.
The Extent of Their Plans
The extent to which the candidates’ economic proposals might raise or lower inflation could have an indirect influence on mortgage rates, since Federal Reserve policymakers use interest rate hikes as a tool to tamp down high inflation. In a recent Wall Street Journal Survey of 50 economists, more than two-thirds said inflation would increase if Trump’s plan of imposing stiff tariffs on imports went into effect, while 12% predicted that inflation would rise under Harris (the remaining respondents said neither candidate would have much impact on inflation). Harris said she would reduce inflation by lowering drug costs and curtailing corporate price gouging.
The Housing Supply
The housing supply was already low before 2020 due to years of underbuilding. The buying frenzy created by record-low mortgage rates during the pandemic caused inventory to drop even more. Low borrowing costs made buying larger homes, second homes, and investment properties much more affordable, attracting more buyers to the market. With limited inventory to meet burgeoning buyer demand, home prices skyrocketed.
Help for Homebuyers
Coming up with a down payment is one of the obstacles many prospective buyers face, particularly first-time homebuyers. Harris proposes $25,000 in down payment assistance for would-be buyers who have paid their rent on time for two consecutive years. Her platform mentions more generous aid for first-generation buyers, although it is light on specifics.
Tax Incentives to Add Inventory
Harris’ platform includes a plan to increase housing inventory by building 3 million homes over the next four years, using existing and new tax incentives to make construction less expensive and easier for builders. These incentives include:
- Expand the Low Income Housing Tax Credit (LIHTC), a federal program that provides tax credits to developers who agree to reserve a fraction of their units as affordable housing.
- Expand the Neighborhood Homes Tax Credit (NHTC) for developers who build or rehabilitate owner-occupied homes for moderate- and middle-income families.
- Establish a new tax cut for builders to promote the construction or rehabilitation of affordable homes for first-time homebuyers in low-income areas.
- Establish a $40 billion innovation fund to encourage local and state governments to work with developers on finding new ways to create more affordable housing. This could include investing in more efficient building techniques and streamlining the permitting process.
Reducing Rents
Homeowners aren’t the only ones paying more for housing these days. Rents have risen significantly since the pandemic, as households priced out of the housing market have to rent instead.