We Deserve Better Housing Reform Than Harris' Down Payment Assistance Scheme for First-Time Buyers

When Vice President Kamala Harris first took on the mantle of being the Democratic presidential candidate, it was a mystery as to what she advocated for on a policy level. Then she announced her economic plan on August 16. Needless to say, it has given me both plenty of fodder for my blog and plenty to make me worry. I already lambasted Harris' price controls on the grocery market as taking the cake for dumbest policy proposal this presidential campaign. 

The economic plan addressed housing in a few ways, including stopping investors from marking up and buying homes in bulk and using price-setting tools to increase rents. The policy idea I would like to cover today is the idea of giving a $25,000 down-payment support for first-time homebuyers that have paid their rent on time over the past two years. The Harris campaign believes this tax credit would help 4 million homebuyers over a four-year time period. The purpose of this tax credit is to provide relief for those who struggle with saving enough for a down payment on their first home. While it sounds noble, we have to dig into the details to find out why it is far from a good idea and even drew some ire from the Washington Post. 

There is the matter of the price tag. According to the bipartisan Committee for a Responsible Federal Budget (CRFB), the estimated cost for this tax credit is $100 billion. The CRFB believes that more than four million would receive this tax credit, thereby increasing the cost. Furthermore, this would cost more than four million if the government decided to make the tax credit permanent. 

Forget for a moment how Harris would pay for this tax credit, as well as the myriad of policy ideas she has proposed. This demand-side tax credit does not get at the crux of the issue in the housing market, mainly that there is not enough housing supply. Due to the fungible nature of money, the down-payment assistance will only provide additional purchasing power to bid up the price of homes that are already in short supply. It will be likely that the tax credit is capitalized, i.e., the seller will charge more if they know the buyer is receiving a tax credit. Rather than solve the problem, Harris' idea will perpetuate crippling housing prices. 

If you want to enact actual housing reform, look no further than this policy report that the Mercatus Center released shortly before Harris released her economic plan. The report addresses multiple aspects of housing, whether it is the regulatory overreach, ways to streamline procedures, improving legal frameworks, or updating construction standards. 

State and local jurisdictions could remove land use regulations and zoning laws, especially those that prevent multi-family housing. There could be a reduction in building and permitting fees, not to mention tariffs on construction materials that get in the way of producing good housing stock. Addressing housing supply will help Americans with the dream of owning a home. Without that supply component, throwing money at the problem in a supply-constrained housing market merely serves to perpetuate the problem by raising housing prices.