When Housing Meets Immigration: Is the Swiss Referendum Capping Its Population Asking the Wrong Question?

Next week, Swiss voters are going to head to the ballot box to decide whether to cap the Swiss population at 10 million by 2050. Supporters of immigration caps can often be presented as Far Right, fearful, and parochial. I have felt this way in a U.S. context. But then I have to remind myself that the U.S. and Switzerland have two different contexts. Switzerland does not even have the integration issues that many of its European neighbors have. This is in part that Switzerland is able to integrate its immigrants better because they mainly come from countries like France, Italy, and Germany. Although the primer on the initiative lists Islamic culture as a reason, the main reasons for the Swiss ballot is a combination of housing and infrastructure strain.

In 2014, I expressed concerns about a similar Swiss referendum for a quota on immigration. Switzerland's immigration quota was a self-defeating policy because immigration is driven by labor demand and it is empirically shown to strengthen employment and economic performance. Less immigration means less economic output and less revenue. 

But I keep coming back to the housing component. In the United States, J.D. Vance wrongfully blamed housing affordability on immigrants. In the U.S. case, it is true that immigrants consume housing, but they also disproportionately build housing, so much so that stifling off the construction labor with strict immigration policy makes matters worse. I cannot help but think that something similar is going on here. It seems like Switzerland is trying to solve a housing problem with immigration policy. 

On the one hand, Zurich has made strides by boosting housing supply by 9 percent with upzoning. On the other hand, only land inside designated "building zones' can be developed, and done so over a 15-year demand rule (Swiss Spatial Planning Act [RPG], Article 15). The RPG also has agricultural zoning laws that further limit sprawl (Art. 16) to construct more housing. On top of that, each canton has their own zoning regulations and permitting rules that get in the way of housing construction. 

The Swiss case against immigration is not reactionary restrictionism. Switzerland faces housing and infrastructure strains. At the same time, Swiss housing scarcity is not occurring in a vacuum. The land use restrictions, zoning regulations, and permitting laws fundamentally limit Switzerland's housing supply. If this referendum passes, Switzerland will be treating a housing supply problem as a population problem, and will be doing so to its own detriment. 

How Institutional Investors Are Good for the Housing Market

Earlier this week, President Trump gave his first State of the Union address during his second term. I found plenty to disagree with, including immigration, how tariffs are necessary for economic growth, imposing price controls on prescription drugs, and how he wants to protect Social Security, Medicare, and Medicaid. There was one aspect that stood out: his take on housing costs. President Trump said that the problem with housing is not zoning, his tariffs, or construction costs: it's BlackRock. Trump touted his executive order to ban investment firms from buying up single-family homes. He also asked Congress to make the ban permanent. For reference, institutional investors are large financial organizations that pool money from many investors and buy assets at scale, such as large numbers of homes to operate as rental properties. 

It is not intriguing simply because it has historically been the Democrats arguing against corporations. It is ironic because Trump rose to prominence as a real estate developer by amassing large amounts of capital to buy and develop property. It seems poetic that he is now arguing that assembling capital to buy property is a threat to the American Dream. When examining further, it does not make sense how institutional investors are a threat. 

Institutional investors account for about one percent of single-family rentals (see below) and less than one percent of overall housing stock. Even if Trump were successful in banning all institutional investors from buying up housing stock, it would barely make a dent in housing supply. These firms operate on a scale that is tiny compared to the millions of homes bought and sold each year by individual buyers and families. Moreover, their purchases often target specific markets (e.g., the Sun Belt) or distressed properties. This means that typical first-time homebuyers are largely unaffected by institutional investor activity.  

Not only do institutional investors have a small market size, but they also improve the housing supply. A professor from City University of New York calculated that institutional investors expanded housing supply by 0.5 units for each unit purchased. In part, institutional investors purchase homes and convert them into rentals. Also, institutional buyers measurably have improved local housing markets by reducing vacancy rates and helping to stabilize neighborhoods (Federal Reserve Bank of Philadelphia). This is because investors buy vacant or distressed homes at a faster rate. Because they buy vacant homes quickly, neighborhoods avoid decay. 

This ripple effect even extends to local employment and home values. This investor activity is associated with statistically significant reductions in local unemployment and increases in employment, especially in construction-related industries (Federal Reserve Bank of Philadelphia). Another paper from the Federal Reserve Bank of Philadelphia that was released in 2023 shows permanent consumer welfare gains for homeowners. Homes within a quarter-mile of an institutionally purchased home sold at a value 1.4 percent higher than those that were not. That is not a rounding error, but real money is people's wallets. Who knew that Wall Street could be the good guy?

If Trump really wants homes for more people, banning institutional investors is a funny way of going about it. Institutional investors barely make a dent in the market. What's more, institutional investors actually help the housing market, whether through expanding supply, stabilizing neighborhoods, reducing vacancies, or boosting nearby home values. The real problem is not Wall Street. It is that local housing regulations make it harder to build a home than winning on The Apprentice. It turns out that banning institutional investors will not build a single house. On the other hand, cities with onerous land-use regulations, zoning laws, and permitting barriers do a fine job of stifling housing development. All the handwringing on the federal level cannot fix the housing shortage when the real bottlenecks are at City Hall. 

Trump’s 50-Year Mortgage Plan: Slow-Walking Americans Into Generational Debt

Housing costs in the United States continue to skyrocket, which makes homeownership an increasingly elusive endeavor. Especially since owning a home is one of the essential staples of the American Dream, politicians are even more gung-ho on finding new ideas to ease the burden of buying a house. One of the proposed ideas that has grabbed headlines is Trump's idea of extending the standard mortgage term from 30 years to 50 years. The Trump administration is pitching this idea as a way to lower monthly mortgage payments and to open the door to homeownership. Before passing such a policy, the Trump administration should ask what sort of economic or policy implications a 50-year mortgage would have for the housing industry. 

Trump's Illusion of Affordability

Lowering monthly mortgage payments sounds like a dream come true. The problem is that it is too good to be true and comes with a steep tradeoff. Although the principal is spread out over a longer period, so are the total interest payments. Because of that longer time horizon, interest payments will be much higher. One estimate from Realtor.com puts the total at approximately double of that of a 30-year mortgage. An estimate from the Associated Press calculates that the average home will cost an extra $389,000 in interest payments in comparison to a 30-year mortgage. Lower monthly payments today come at the cost of decades of additional debt. 

Another Hidden Cost: Slower Equity and Higher Interest

A longer time horizon creates another issue. Since the majority of a mortgage payment goes to interest instead of the principal, it can take decades to reduce the loan balance. This means that the home equity stays minimal while most of the debt remains outstanding. What Trump is selling as "affordability" becomes deferred wealth-building. The tradeoff is lower monthly payments today for higher interest payments over time and a weaker financial position in the future. This does little to build lasting financial security. For decades, the borrower's wealth is trapped under the weight of interest and debt. 

Similar experiments abroad show the limitations of ultra-long mortgages. In Japan, some regional banks have offered 50- to 60-year home loans, yet these loans have not meaningfully improved affordability. Homeowners simply remain in debt longer, often into retirement (Harimaya and Jinushi, 2025). In the United Kingdom, 35- to 40-year mortgages have grown in popularity, but they have not lowered the overall cost of housing. They have only extended the period during which borrowers are highly leveraged (Franklin et al., 2017). 

A study of 17 advanced economies over more than a century shows that expanding mortgage credit does not reliably increase housing construction. Instead, the financialization of housing markets can inflate prices without producing more homes (Kohl, 2020), a dynamic that a 50-year mortgage would most probably amplify. The lesson here is clear: stretching debt over decades does not address home affordability.

Source: Kohl, 2020, Socio-Economic Review

Additional Financial Risks of Ultra-Long Mortgages

There is another tradeoff aside from 21st-century serfdom and paying more in interest payments. The Federal Housing Finance Agency (FHFA) shows that longer terms increase exposure to interest-rate changes, housing market downturns, and default risk (Larson et al., 2019). In other words, there are additional financial harms due to the longer time horizon that Trump is not thinking about because regardless of his motives, the political appeal does not change its economic flaws. 

Freedom of Contract versus Government Distortion

On the one hand, adults should have freedom of contract and the ability to voluntarily enter a contract, no matter how stupid it might seem. More options could theoretically create a more competitive market. On the other hand, this proposal is not about independent private loans. It is about government-backed loans. The problem with government-backed loans is that the upside is privatized, whereas the downside is subsidized and underwritten by taxpayer dollars. This creates moral hazard while artificially creating demand for housing.

Conclusion: A Policy That Misses The Real Problem

Ultimately, a 50-year mortgage has the illusion of "helping" with a lower monthly payment, but does a fine job of hiding the costs and trade-offs. Like with many government policies, this 50-year mortgage idea treats the symptom instead of the disease. It does nothing to address the main culprit, which is a manufactured housing shortage caused by well-intentioned government meddling. This is a topic I have covered multiple times, whether it is in the context of land-use regulations, rent control, redlining, the mortgage interest deduction, or making single-room occupancy all but illegal. The policy might be different but the outcome is the same: Government steps in to "help" the housing market and somehow manages to make matters worse. Funny how that works. 

How the Government's War on Single-Room Occupancy Fueled the Housing Crisis

Along with food and clothing, a roof over one's head has been considered one of the three fundamental needs for human survival. This remains true even for those who have next to nothing. There was a time when housing existed for those who had very little: a room, a lockable door, and typically a shared bathroom. It was not glamorous, but it was a roof over one's head. These housing units, called single-room occupancies (or SROs), were a reliable and affordable source of housing for the United States' poorest residents, seniors, and those looking to climb out of poverty. Today, SROs are all but nonexistent in the United States. Rent is higher than ever, homeless shelters are jam-packed, and many are out of luck when it comes to housing. What happened to SROs? In two words: government intervention. 

Last week, a report from Pew Research that was released in July was brought to my attention. With the title "How States and Cities Decimated Americans' Lowest-Cost Housing Option," the researchers at Pew Research detail the various policies that state and local governments used to get rid of SROs. The reason why governments went after SROs was because even as early as the early 1900s, SROs were seen as run-down, neglected, dilapidated. They were stigmatized as a public nuisance and blamed for such outbreaks as pneumonia and tuberculosis. Between the 1950s to 1980s, there were numerous local-level, piecemeal government regulations that severely curtailed SRO usage:

• Los Angeles and San Francisco rewrote zoning codes to prohibit rooming houses and share-living arrangements. 
• Chicago adopted stricter building and housing codes (e.g., imposed requirements for private bathrooms, minimum square footage) that effectively outlawed traditional SRO designs. 
• San Diego used code enforcement and licensing crackdowns to close SROs for safety or sanitation violations. 
• Seattle used redevelopment campaigns in "blighted" areas to clear out residential units where SROs were concentrated in exchange for higher-value development. Other countries similarly subsidizer to demolish these areas courtesy of the Federal Urban Renewal programs, especially Title I of the 1949 Housing Act
• Denver provided housing subsidies for traditional apartment-style housing that effectively sidelined SROs.

There could be better health inspections, rehabilitation incentives, or proper building management to make SROs more habitable, but these regulations that de facto eliminated SROs were overkill. SROs were the lowest-cost housing for individuals in need without requiring government subsidies or intervention. Primarily as a result of this crackdown, the overall SRO housing supply was reduced by 2.5 million units. This especially puts a crunch on the housing supply for those in the lowest-cost tier. This has placed undue demand on government services, subsidized housing, and homeless shelters because they cannot meet the housing demand. Just as one example, about half of the men who entered homeless shelters in 1980 were previously living in SROs. Without SROs, low-income individuals have very few alternatives of places to live, thereby contributing to homelessness, as we will see shortly.

This pushes low-income renters into larger, more expensive units when all they needed was a single room. As the Pew Research pointed out, an SRO in 1924 only cost $230 in today's dollars, which is below the $391 per month that an individual at the federal poverty line can afford in rent. Contrast that to the $1,205 that a median one-bedroom apartment costs. This should not be a mystery. Regulations requiring larger units crowds out the smaller units from the market and forces low-income individuals into more expensive units than necessary. These zoning regulations put additional strain on housing supply.

I first raised the alarm on overregulation in the housing market in 2017, citing a range of studies on how land-use restrictions reduce supply and inflate housing costs. Eight years later, the data has only grown stronger and the consequences more visible. These SRO-related land-use regulations are tantamount to a production quota, which restricts housing supply while jacking up housing costs. In the case of SROs, it is especially problematic because it constricts housing supply for the poorest of Americans, thereby squarely and concretely affecting low-income Americans. 

The Manhattan Institute found that areas with greater housing regulations also had a greater homelessness population (see below). While a compelling pattern, it stops short of showing causation. However, a peer-reviewed study from the University of Maryland fills that gap. The author found that land use regulations are responsible for increasing homelessness by 9 to 12 percent (Dawkins, 2023). In other words, restrictive land-use regulations are not merely correlated with homelessness. They are shown to cause increased homelessness.

There is a way to provide a modern-day equivalent of an SRO that is well-designed, hygienic, clean, and up to code. To do so, the government needs to get out of the way. Modifying current zoning laws to include small, shared-unit formats is a necessary first step. Second, remove the stringent codes in order to allow for smaller units and shared bathrooms and kitchens. Relax permitting regulations to allow for conversion of older building into SROs, especially since it is 25-35 percent cheaper than new construction.

Millions already live in shared housing without stigma, whether it is college dormitories, senior co-housing (aka "Golden Girls" Homes), professional households in which young professionals rent individuals in shared homes to split rent, transitional housing, monasteries, boarding schools, and military barracks. States and cities need to remove regulatory barriers and provide incentives to create low-housing options so that we can reduce homelessness, help financially vulnerable Americans, and help keep America's streets safer and cleaner.

Build Less, Pay More: Another Study Shows The Price of Housing Regulations

There was a time when buying a home with a white-picket fence was a staple of the American Dream. The home was a symbol of stability, independence, and upward mobility. At least in the middle twentieth century, one could buy a modest home with a single income. That started changing in the 1970s when the coastal cities became less affordable and Americans started gravitating more towards such Sunbelt metropolitan areas as Phoenix, Atlanta, Dallas, and Miami. 

Unfortunately, affording homes in these Sunbelt metropolitan areas is becoming more elusive with skyrocketing housing costs and housing stock decreased (see above). A new National Bureau of Economic Research (NBER) working paper from leading economists at Harvard University and the University of Pennsylvania provides an answer (Glaeser and Gyourko, 2025). From the abstract of the paper:

If the U.S. housing stock had expanded at the same rate from 2000-2020 as it did from 1980-2000, there would be 15 million more housing units...New housing growth rates have decreased and converged across these and many other metros, and prices have risen most where new supply has fallen the most. A model illustrates that structural estimation of long-term supply elasticity is difficult because variables that make places more attractive are likely to change neighborhood composition, which itself is likely other influence permitting. Our framework also suggests that as barriers to building become more important and heterogeneous across place, the positive connection between building and home prices and the negative connection between building and density will both attenuate. 

It is not a lack of land because Sunbelt metropolitan areas have plenty of land. What these economists found is that the major culprits for increasing housing costs in the Sunbelt area are zoning laws and other land-use regulations. This is basic supply and demand. When demand for housing increases, whether because of population growth, job opportunities, or migration, and supply does not grow at the same rate, prices are bound to increase. 

To give you some examples of these regulations. Zoning laws restrict what can be built and where, which constricts supply. Height restrictions and density caps further constrain supply by limiting the number of people that can live on a given parcel of land. Lengthy permitting processes and environmental reviews create delays and uncertainty for builders, which also limit the number of houses built. When all these housing regulations are combined, they create an artificial scarcity of housing. 

This both plays out in economic theory and in practice. This new NBER study is hardly the first study to come to this conclusion. Back in 2017, I illustrated how deregulating the housing market and removing these regulations would boost housing supply. Here is some other research since 2017 illustrating this point:

• In April 2025, the Bush Center estimated in its counterfactual analysis that such pro-growth housing policies as lax zoning laws, reducing minimum lot sizes, and eliminating parking requirements for apartments implemented throughout the country would have lowered housing prices by $115,000 and monthly rent by $450 per month.
• Another NBER paper shows how municipalities with stricter land-use regulations have particularly small and unproductive construction firms (D'Amico et al., 2024).
• The American Enterprise Institute (AEI) wrote a paper about light-touch density (LTD), which is a zoning strategy that incrementally allows for more diverse housing types within existing single-family zones. AEI researchers calculated that LTD could create an average of 930,000 additional housing units per annum over the next 30 to 40 years (Pinto and Peter, 2023).
• The Institute for Transportation & Development Policy reports on how minimum parking requirements contribute to increased construction costs and limit housing availability. 
• A study from the Mercatus Center shows that build-to-rent housing bans further constricts housing supply (Furth, 2022).
• The Bipartisan Policy Center released this explainer in 2022 illustrating how housing regulations impact housing supply. 

Expensive housing in the United States is no longer an outlier on the east coast or in California. Housing has become less affordable because zoning laws and land-use regulations that have constricted housing supply, thereby increasing housing prices. The housing crisis in the United States is clearly a supply-side issue caused by government regulations. Whether local jurisdictions realize the damage of these regulations and reverse them remains to be seen. What we do know as long as they remain intact, Americans will continue to pay through the nose for housing.

Is J.D. Vance Correct in Blaming Immigrants on Rising Housing Prices?

Last week, two Vice Presidential candidates went head-to-head on the debate floor: Republican J.D. Vance and Democrat Tim Walz. As two Midwesterners, the debate has been the most civil during a U.S. election cycle in a while. One of the topics that they debated was immigration. More specifically, J.D. Vance claimed during the debate that "you have got housing that is totally unaffordable because we brought in millions illegal immigrants to compete with Americans for scarce homes." It makes for an interesting form of interdisciplinary politicking because Republican politicians tend to harp on immigration. Plus, housing costs rising relative to income (see Harvard data below) is a concern for those who are struggling to "live the American Dream," thereby making his assertion more palatable to voters. I have to wonder how true Vance's claim is. 

Intuitively, it sounds plausible. Housing supply has become more constrained in recent years. I pointed out that reality in 2017 when criticizing land use regulations. There has been an increase in unauthorized border crossings since the pandemic. There is a report from the U.S. House Judiciary Committee that points out that there have been 5.6 million crossings from January 2021 from August 2023. 

Conversely, as I pointed out last year when scrutinizing Trump's Title 42, the number of repeat crossings increased considerably under Title 42. Pew Research found that the number of unauthorized immigrants in the United States increased from 10.2 million in 2019 to 11.0 million in 2022. 

With an increase in population, it puts stress on an already constrained housing market that cannot expand quickly. After all, immigrants need a roof over their head like everyone else because they are human beings deserving of dignity, too. An increase in demand increases costs, which is a reality you can find in an Econ 101 textbook. 

As the Cato Institute points out, "Even immigrants who work in construction increase housing demand first before they can construct more housing. That increase in demand drivers up prices and incentivizes new supply through further construction, renovation, or increasing the supply of rental units through other means." Two questions that come to mind are "Does immigration drive up housing prices in the long term?" and "How much of an impact does immigration have on housing versus other factors?"

Similar to other markets, there are multiple factors that contribute to rising prices. To name a few that come to mind: high housing demand; low housing supply caused by such government obstruction as land use regulation, zoning laws, and permitting delays; inflation in the construction industry and economy generally; stagnant wage growth; the mortgage interest deduction; increased mortgage rates; and rent control in certain U.S. cities. Going back to the Cato Institute, "over 90 percent of housing prices comes from other economic factors and immigration has become less important since 2015."

While the undocumented immigrants increase the demand, they also contribute to the housing supply. According to the Bureau of Labor Statistics, 25.3 percent of construction laborers are foreign-born, which is higher than the 16.8 percent for the entire labor market. It is higher in other parts of the country. Per National Association of Home Builders data, that foreign-born percent is 40 percent in California and Texas; 37 percent in Florida, New Jersey, and New York; and 33 percent in Nevada. 

As such, it would not be surprising to find research from professors at the University of Wisconsin-Madison and University of Utah showing that deporting undocumented construction workers worsens the housing shortage (Howard et al., 2024). This finding of "immigration lowers housing prices in the long-run" is confirmed with research from the United Kingdom (Braakmann, 2013; Sá, 2011) and Italy (Accetturo et al., 2014). Economically speaking, that finding makes sense and it is another reality you can find in an Econ 101 textbook. When you reduce the number of available workers, the price of construction increases. The increased construction costs reduce residential housing output, thereby exacerbating the housing shortage.  

Postscript

To conclude, is Vance correct in saying that immigrants contribute to increasing housing prices? Yes, because an increase in demand increases costs. However, he is only correct to a point. Immigrants contribute both to the demand and the supply of housing. Immigrants help fill these labor shortage gaps, whether it is in construction, healthcare, agriculture, or other service-based industries. When you reduce the supply of labor, you end up increasing prices of the good or service in question. Plus, there are other factors that act as larger drivers of the increasing housing prices. 

On some level, Vance is technically correct, but not nearly as much as he or anti-immigration nativists think. As research organization New American Economy illustrates, immigrants have created $3.7 trillion in housing wealth, thereby stabilizing less desirable communities that would have otherwise declined. All this research reminds that whether it is in the housing market specifically or the economy more generally, immigrants creates more benefits than they produce costs.

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. 

Milei Eliminates Rent Control in Argentina, the Housing Market Booms: When Will the U.S. Political Left Learn?

Javier Milei has grabbed my attention not only because he is the President of Argentina, but more notably because he is the first libertarian head of state. In January, I was excited about his push to deregulate one of the most highly regulated countries in the world. In February, I got to write about how Milei's austerity created the first budget surplus in Argentina in over a decade. Today, I have the pleasure of featuring another one of Milei's victories, aside from having a 55.4 percent approval rating.

In 2020, Argentina introduced a form of tenant rent control. Aside from requiring tenancies to last a minimum of three years, rent was capped at a weighted average of inflation and wage growth. Deposits were capped and rent had to be paid in Argentinean pesos (ARS). Contract length regulations increased the risk of landlords acquiring troublesome tenants. Landlords forewent expensive maintenance while evictions soared. While the rent cap helped a small number of landlords sell property, the truth is that one in seven housing units laid empty. As a basic microeconomics course would teach, reducing the supply actually increased prices. Rent for a two bedroom in Argentina soared from 18,000 pesos a month in 2019 to 334,000 pesos in early 2024. 

To respond to this housing nightmare, one of the Milei's first acts as President of Argentina was to do away with rent control. How has that fared since he enacted that decree in December 29, 2023? The effect on the housing market was immediate. As the libertarian Mises Institute pointed out in April, housing began to rise as prices began to fall. According to an article from Newsweek published last week, the supply of rental housing in Buenos Aires boomed by 195.23 percent since December 2023. 

While encouraging, this news hardly came as a surprise. When I first lambasted rent control on this blog back in 2014, I laid out the economics of rent control and showed how rent control constricts housing supply. I brought up the topic again in 2022 when Pasadena passed rent control. This past June, I covered a meta-study on all the harms of rent control, including less mobility, lower quality of rental units because of disincentive to perform regular maintenance, bringing down property value and neighborhood quality, decrease in new construction, and higher rents in the overall market.

Yet Western politicians on the Left rave about it and are attracted to it as palatable, even though economists on all sides of the aisle can agree that it makes for foul economic policy. Last month, I illustrated how Biden's rent control proposal would have screwed over the U.S. housing market. Earlier this month, presidential candidate Kamala Harris embraced the harebrained idea of rent control. Politicians in Europe do not seem to know any better, including Sweden, Ireland, and Germany. As socialist economist Assar Lindbeck once stated, rent control is one of the most effective ways to destroy a building short of bombing it. Argentina serves a fine example of what happens when you remove rent control. What are the odds that other Western politicians will actually listen? 

Biden's Rent Control Proposal Would Screw Over Americans Looking for Affordable Housing

While political pundits are focused on President Biden dropping out of the race, I want to turn attention to a policy that Biden proposed last week: nationwide rent control. Biden is urging Congress to put a 5 percent cap on rental units for landlords with over 50 rental units with the threat of losing depreciation write-offs. The reason for this plan is because Biden wants to "make renting more affordable for millions of Americans." For Biden, affordable housing is part of the American Dream. With affordable rent being more out of reach for millions of Americans, Biden believes that rent control is the solution. While his proposed rental cap would only exist for two years and not apply to all landlords, it is still enough to do damage that would be counterproductive to the goal of making rental units more affordable. 

Forget for a moment that Biden nothing to tailor the policy to local marketing conditions and simply imposes a blanket cap. Rent control is a disaster policy that hurts those that it was meant to help. I first wrote about rent control in 2014 when I pointed out the macroeconomy theory of rent control and price ceilings, as well as how that has resulted in multiple unintended consequences. It was only last month that I analyzed a meta-study on rent control that illustrated the following costs of rent control:

• Reduces housing mobility
• Makes non-rent-controlled property more expensive
• Constricts housing supply because of disincentive to create new housing, which worsens affordability
• Disincentivizes rent controlled-property upkeep, which means more people living in property unsuited to their needs
• Decreases property value, which not only hurts the value of the rental unit, but also the neighborhood

Apparently, Trump is not the only president to descend into economic lunacy. Rent control has been discredited by economists on all sides of the political spectrum. The fact that Biden proposed this could suggest he was trying to buy votes just as easily as illustrating how much more political clout the extreme Left has in the Democratic Party. Exploiting economic ignorance is not a solution to rising housing costs. 

Thankfully, Biden needs Congressional approval to pass this nightmare (although it is possible to skirt the filibuster by making this proposal part of the tax code). Plus, Biden has bigger issues to deal with now than a housing proposal that is very unlikely to pass. If we care about increasing affordable housing, the focus should be on making it easier to expand housing supply, not policies that will further contract it. As the Cato Institute brought up in its recent analysis, allowing for homebuilders to construct more housing could easily reduce housing prices by 50 percent. Whether the next President realizes that reality of the housing market remains to be seen. 

New Meta-Analysis Confirms Rent Control Causes Way More Harm Than Good

Housing prices continue to spiral out of control in the United States. Last January, Harvard University's Joint Center for Housing Studies released a report showing, amongst other findings, that about half of renters in the U.S. pay 30 percent or more of their income to rent. This price spiral contributes to at least 60 percent of U.S. citizens living from paycheck to paycheck. One idea to deal with the rising costs is rent control. 

Rent control is a government-imposed price ceiling that imposes a limit as to how much a landlord can charge a tenant for rent. The states of Carolina and Oregon have rent control, whereas such states as New York and Maryland have some local jurisdictions with rent control. Rent control might sound like it has good intentions because it is supposed to, as proponents argue, "stop landlords from exploiting tenants." However, a recent meta-analysis in the Journal of Housing Economics shows a brutal picture of the economic realities of rent control (Kholodilin, 2024). After looking at 100 empirical reports and examining 26 potential effects, what did the author find? 

Analysis from the libertarian Cato Institute had the following to say on the study: 

The research near consistently finds that rent control leads to less mobility (not least, because people don't want to give up their rent-controlled properties), more people living in properties unsuited to their needs, and higher rents for uncontrolled units. The vast majority of studies examining each find that rent control leads to a lower supply of rental accommodation, less new rental housing construction, and a fall in the quality of rental housing too. 

These findings confirm mainstream microeconomic theory on the matter. I first analyzed the topic of rent control in 2014 and again in 2022. As the supply-demand graph shows below, rent control constricts housing supply while making non-rent control housing more expensive. It also disincentivizes property upkeep, which also lowers property value. Rent control makes quality of life more miserable for those living in rent control units, as well as bringing down the entire neighborhood. If cities with rent control want to get their housing prices under control, do not maintain rent control policy. If you are thinking about rent control, steer clear from a policy whose negative effects are both predictable and well-documented. Bringing housing prices down has a multi-faceted solution, but one of those facets needs to be that rent control is non-existent in the municipality.  

Looking at U.S. "Housing First" Initiatives: Why Fixing Homelessness Is Not As Easy As Buying the Homeless Houses

Homelessness is hardly a new issue. What is new is how the public encampments and street disorder caused by the homeless ramped up since the pandemic. It is one of those problems that is going to get worse before it gets better. One possible solution that has been thrown around is "Housing First." It sounds like a rallying cry for people who care genuinely care about the downtrodden. At its core, Housing First is simple. It is a policy that provides unconditional, permanent housing as quickly as possible. It is not uncommon to provide support services afterwards to ensure continuity and stability for those housed. 

The assumption made by Housing First proponents is that the root problem is not having a home. For these proponents, the substance abuse and mental health issues that the homeless have are a byproduct of not having a home. Once they have a home, they can find a job, tackle their underlying problems, and stabilize, or so goes the argument. 

I do agree that homelessness creates instability in one's life. Having shelter is one of the essential physiological needs under Maslow's Hierarchy of Needs. A roof over one's head is going to make life easier than living on the street. Providing housing also can offset other costs of the chronically homeless, e.g., arrests, emergency room use, shelter use. That being said, Housing First is an inadequate policy. As I pointed out back in 2014, housing policy is more complex than "give the homeless homes and that will solve everything."

A May 2023 briefing paper from the Cato Institute covers the Housing First policies in Salt Lake City, Utah; the state of California; and Houston, Texas. In Salt Lake City, much of the success was likely due to methodological reporting issues. As for California, the homeless population grew along with the funding for Housing First. Cato points out that Housing First worked in Houston, but its success was "partly attributable to the low cost of housing and elastic housing supply in that city." Better coordinated efforts over a smaller city, along with a nonprofit at the helm and "compassionate enforcement" policies, seemed to attribute to Houston's success. Given the adverse effects of land-use regulations and rent control, I cannot say that I am surprised. Removing such harmful policies would create greater housing supply, thereby decreasing the prevalence of homelessness. 

A 2020 report from the Manhattan Institute creates even more doubt of Housing First's legitimacy. To quote the report, "Claims made on behalf of the campaign to tend homelessness - that Housing First has ended veterans' homelessness, chronic homelessness, or homelessness at he community level - are not based in "evidence," as the term is normally understood." 

What is more from the Manhattan Institute report is that "there is no evidence-based proof of Housing First's ability to treat serious mental illness effectively, or drug or alcohol addiction." Reason Magazine provides intuition for that finding: "Placing mentally ill people and those with substance abuse problems unsupervised in housing units doesn't provide them with the help they need. As one homeless expert told me, it mainly results them dying alone in a room." As a 2020 Heritage Foundation report illustrating the flaws of Housing First shows, taking a "Treatment First" approach provides a preferred alternative. 

It is praiseworthy to want to help the homeless. However, what we are seeing play out in the United States is that cities most heavily relying on the Housing First thinking have some of the worst homelessness problems in the United States. This post is not meant to be a treatise to solve all homelessness. Even so, removing government regulations that constrict housing supply and making sure that there are services that target substance abuse and mental health issues among the homeless. As an additional note, intensive transitional housing is preferable to permanent housing for all except the most vulnerable. That way, we can help the homeless be more self-sufficient in the long-run. What is for certain is that using taxpayer dollars to pay for unconditional, permanent housing does not put an end to or mitigate chronic homelessness.

Redlining: Another Reminder Why Government Should Not Be Involved in Housing

While scrolling on my Facebook feed last week, a good friend of mine posted an exposé from ABC News in Chicago called Our America: Lowballed. Part of this coverage is showing how homes in Black-majority and Latino-majority neighborhoods are appraised lower amounts on average than in white-majority neighborhoods. My friend bemoaned this disparity as an example of "historic and current structural racism." My friend then pointed out that this racial disparity goes back to a practice called "redlining."

Redlining refers to the practice of refusing to provide a good or service to a given geographical area. In a U.S. context, the practice of redlining was most prominent in the housing industry. The practice took off during the 1930s with the Home Owners' Loan Corporation (HOLC). Under the leadership of former President Franklin D. Roosevelt (FDR), HOLC was created in 1933 to refinance homes that were currently in foreclosure. As the Federal Reserve Bank of St. Louis mentions in its brief on redlining, many mortgage holders could not pay their debts, which meant losing their homes. HOLC set the standards to appraise the value of residential properties. If mortgage lenders did not comply, they did not receive financial backing from the Federal Home Loan Bank Board (ibid.). While HOLC was created in attempts to stabilize the housing market during the Great Depression, it came with some negative unintended consequences. 

In its assessment of to whom to lend money, HOLC made color-coded maps of major urban areas in 1935. Green was a "desirable" area, yellow was an area in decline, and red was deemed "disastrous." The redlined areas had "a large minority population, poorer households, and older housing stock." By limiting loans to minorities in the early and mid 20th century, minorities were deprived of the ability to use housing to build assets. 

There is some debate as to whether the HOLC maps caused the discrimination or if they were reflective of already existing discrimination. A Federal Reserve Bank of Chicago concluded that the boundaries created with the HOLC maps caused redlining (Aaronson et al., 2020 [see below]), as did a paper from the American Sociological Review (Faber, 2020). A National Bureau of Economic Research paper argues that the Federal Housing Administration (FHA) used block-level information that was independent of the HOLC maps to implement its own redlining (Fishback et al., 2021).

As if there were not enough reasons to despise former President FDR, we can now add redlining to the list. Whether it was HOLC or FHA, it was an entity from the federal government during the New Deal era that brought about the practice of redlining in the U.S. housing industry. Lenders charged higher rates of interest in redlined areas than their higher-graded counterparts. Properties in redlined areas were appraised at minimal values. All of this made it more difficult to keep property in good condition, which made it more difficult for those living in redlined neighborhoods to accumulate wealth, especially through housing. The effects of government housing policy and denying access to capital from the 1930s to when the Community Reinvestment Act of 1977 de jure ended redlining for good still has its impacts to this day, especially when it comes to poverty concentration. 

Richard Rothstein, who is a housing policy fellow from the Left-leaning Economic Policy Institute, wrote a book entitled The Color of Law: A Forgotten History of How Our Government Segregated America. In an interview, Rothstein stated that the United States "was much, much more segregated as a result of these federal policies than it was before, or would be today without them." In addition to the redlining, Rothstein outlines how zoning discrimination, subsidies, and tax regulations contributed to the disparities in housing we still see today. As Rothstein brought up in another paper he wrote, the federal government placed public housing in high-poverty, racially isolated neighborhoods, which exacerbated racial disparities.

We cannot change the fact that redlining took place, but there should be something that we could do. That is not an easy conversation to have given the multifaceted nature of the problem. The main purpose of today's piece was to illustrate how government intervention vis-à-vis redlining was and still is a problem. Even so, I can still throw out some solutions that I can always elaborate on in the future: 

• One is that we should stop with the zoning laws and land-use regulations. Part of why housing is so expensive in the United States is that these laws constrain housing supply. When supply decreases, prices increase. This ends up pricing out many from owning a home, particularly those who have been affected by redlining.
• Another piece of the puzzle has to do with education policy. In spite of Brown v. Board of Education, many schools remain redlined. Why? As a study from the Right-leaning Heritage Foundation points out, it is due to attendance zone boundaries and school district lines. Dallas Independent School District is an example of offering a school choice option without attendance boundaries to help with school integration. By having access to better education, socioeconomically disadvantaged children can break the cycle of poverty instead of being trapped by their zip code. 
• There also needs to be a conversation around how individuals can improve their credit score, as well as improving their overall access to credit. Credit provides a lifeline to afford in the medium-term such things as an automobile, a college education, or housing. Again, this is beyond the scope of today's piece, but there needs to be finance policy reform to provide all Americans access to financial tools that would make home ownership more viable. 
• While struggling with an answer to this very question, Cato Institute scholar Neal McCluskey suggested a combination of educating the public and using civic society to pool funds for African Americans to purchase homes.
• This one comes from the Manhattan Institute: create a friendlier tax environment. Higher property tax values depress property values, diminish wealth, and make it difficult to properly invest (ibid.). Especially since the poor face property taxes at twice the rate than homes in the top decile (Berry, 2021), removing some of the property tax burden off of lower-income households could mitigate the effects of redlining.

It does not matter that redlining has been illegal for 50 years. The redlining that existed for decades made it much more difficult for those in redlined neighborhoods, African-Americans in particular, to accumulate wealth. When the government intervenes in such a fashion for more than a generation, it does not surprise me that the impacts of redlining are still felt to this day. Redlining is one of the main reasons why African-Americans have a fraction of the wealth that other Americans have. We should try to find solutions to make sure that all Americans have housing access. In the meantime, we should sincerely ask ourselves how much we want the government to intervene in solving this problem, especially since it was government policy that caused this mess in the first place. 

Pasadena Voted for the Economically Reckless Policy of Rent Control

Although the midterm elections were a month ago, I still reflect on the results, particularly those of ballot initiatives. This election cycle, I covered Massachusetts' millionaire tax and prison labor reform, as well as a hodgepodge of ballot initiatives covering multiple topics, including marijuana, minimum wage, and sports betting. Another ballot result caught my eye, this time from the City of Pasadena, California. One of the initiatives in Pasadena that was up for a vote was Measure H. Pasadena's Measure H included a mechanism to impose rent control, specifically that rent increases would be limited to 75 percent of inflation every year after tenancy is established. This Measure passed with 53.8 percent of the vote. 

According to proponents of Measure H, the purpose of such rent control is to prevent "massive year after year increases in rent for tenants who already are living in a home, while guaranteeing a fair return to landlords as required by state law." I can understand and emphasize with the fact that the increases in housing prices are real and painful. At the same time, rent control is a terrible way of trying to help out those struggling with housing prices. 

In 2014, I explained the economics of rent control. You can also read what the libertarian Cato Institute wrote about the economic of rent control in 2018 here. In economic terms, rent control is a form of a price ceiling. What happens in the housing market when such a price ceiling is imposed? 

For one, the demand for rent-controlled units will outstrip the supply. This puts pressure on the non-controlled units by decreasing supply, which not only decreases the number of overall units but also increases prices for non-controlled units. This is not merely economic theory. In San Francisco, rent control ended up decreasing rental housing supply by 15 percent, which caused a city-wide rental increase of 5.1 percent  (Diamond et al., 2019). Here are some other examples of where rent control backfired:

• Economists found that removing rent control in Cambridge, Massachusetts reduced crime by 16 percent, which brought an annual benefit of $10 million to the City (Autor et al., 2019). Removing rent control also accounted for a quarter of the property value appreciation between 1995 and 2005 (Autor et al., 2014). As the Left-leaning Brookings Institution points out, these findings suggest that one of the outcomes of rent control is that it reduces the neighborhood's desirability. 
• In Minneapolis, rent control did not fare better (Ahern and Giacoletti, 2022). For one, rent control caused property value to decline 6 to 7 percent. Two, the tenants that gained the most from Minneapolis' rent control was higher-income, economically advantaged households. The goal of this rent control was to help out lower-income households. Imagine that rent control had the opposite effect!
• Rent control is a cap on the amount of money that a landlord can make, which minimizes profit. This disincentives landlords to do upkeep on the property. Ultimately, this does not help the tenant because improper maintenance and poor repairs do nothing to improve the living conditions of the tenants under rent control. One study measured how deterioration of the rental units was a cost of rent control in Massachusetts (Sims, 2007; Pollakowski, 2003).
• In the long-term, poor rental quality has the potential to reduce supply further in part because landlords are then incentivized to invest elsewhere. Going back to San Francisco, rent control accelerated the conversion of rental units to condominiums (Diamond et al., 2019). A similar shift away from rental units occurred with the Massachusetts case study (Sims, 2007).
• When rent control was removed in Cambridge, building permits rose 20 percent and construction spending doubled over the proceeding decade (Autor et al., 2012). This serves an example of how rent control constricts housing supply and discourages new units to be brought to market.
• In the Los Angeles case, rent increased for noncontrolled units at two to three times the rate that controlled units (Murray et al., 1991). Similarly, New York City's 1968 rental market found that noncontrolled units were 22 to 25 percent higher than they would have been without rent control (Caudill, 1993).

There is substantial economic research to point out the multiple negative effects of rent control. It is no wonder that economists are near unanimous in their opposition to rent control. Even Montgomery County in the state of Maryland, which is quite Left-leaning, provided a scathing, unflattering prognosis in its Economic Assessment. Not only does rent control drive up the cost of housing in the long-term (something that Left-leaning economist Paul Krugman pointed out in 2000), but it erodes the quality of living for rent-controlled tenants and the surrounding neighborhood alike. 

In practice, rent control is self-defeating because it does the opposite of what it intends to do: help out renters struggling with housing. The economics behind rent control are so staggering that it makes me wonder how rent control remains popular. Rather than help out the citizens of Pasadena, all Measure H is going to do is add another example to the evidence base showing the folly of rent control.

Paying Rent During the COVID-19 Pandemic: My Concerns About Eviction Bans

We are coming up on the third month in which millions of U.S. citizens have to pay rent during pandemic-induced lockdowns. This becomes more challenging since over 38 million have filed for unemployment benefits since this all began. This does not get into how many struggle financially, whether they currently have work or not. Even for those who still work, 21 million renters pay 30 percent or more of their income in rent. To help alleviate the pressures of rent, the CARES Act temporarily prohibits evictions up to 120 days for those who live in federally-owned rental units, which account for about one in four rental units in the U.S. As for the other rental units, it depends on state laws.

Eviction is a serious matter. It can result in multiple issues, including higher rates of depression and other healthcare costs, loss of one's job and possessions, higher risk of homelessness and emergency room visits (Collinson and Reed, 2018), and it can negatively impact access to credit and durable consumption over the long-term (Humphries et al., 2019). As grave as the effects of eviction are, I also worry about what the effects of a policy instrument as blunt as a ban could have. What are some of the unintended consequences that could emerge as a result of an eviction ban?


1. An eviction ban has ripple effects in the local economy. This is a point that the centrist Brookings Institution mentions. If rent checks are not paid, this would affect multiple businesses. Rent checks go to pay property taxes, insurance, utilities, mortgage to the banks, maintenance, and capital funds for upgrades. This could adversely affect banking, local government services, as well as those providing maintenance services and utilities.

2. Eviction bans do not make the costs of rent disappear. If the tenant has to pay the rent once the moratorium expires, it is going to be difficult for that tenant to catch up, particularly if their finances were precarious coming into the pandemic. If one is to propose rent forgiveness instead of merely pausing rent payments, the cost of that rent still does not go away. It is simply shifted to the landlord. As discussed in Point #1, landlords have their own costs. Even if the rent forgiveness includes a mortgage forgiveness, it would still shift the cost to banks and credit unions. Whether the rent forgiveness has a mortgage component or not, that shift towards either landlords or banks would cause liquidity issues.

3. Eviction bans could limit housing availability. It might be politically expedient to depict landlords as money-grubbing and exploiting the working class. The truth is that many landlords are individual investors (i.e., mom-and-pop landlords) exist. According to the U.S. Department of Housing and Development (HUD), 22.7 million of 48.5 million rental units, or 46.8 percent of rental units, are managed by these smaller outfits. If a significant percent of individual investors were to go under, it would limit housing supply. As I have discussed in a past analysis on housing policy, limiting housing supply would increase the cost of renting.

4. This could spell trouble for future tenants, especially lower-income tenants. Going off the previous point, increasing the cost of rent vis-à-vis supply restriction make it more difficult for those who already struggle with paying rent. On top of that, there is a related concern with lending standards. As the St. Louis Federal Reserve points out, lending standards tightened during the Great Recession, which adversely affected the lending market and access to loans (Dvorkin and Shell, 2016). When the United Kingdom was looking to ban "no-fault evictions" last year, a survey showing from the Residential Landlords Association found that 84 percent of landlords would be more selective by picking tenants of higher income. If these eviction bans continue, they could result in longer-term issues with access to apartments and other rental units.

5. In many cases, an eviction might not be necessary. Yes, there are some landlords sleazy and profit-driven enough, i.e., slumlords, where they going to apply pressure on their tenants to pay rent. At the same time, the Brookings Institution brings up a valid point: landlords have a strong incentive to keep current tenants, especially if it is a reliable tenant who will likely be working again soon. There is an uncertainty in evicting a previously reliable tenant, such uncertainty where it is arguably preferable to negotiate a reduced rate on a temporary basis than to evict. This is probably why the National Apartment Association recommends waiving late fees and working with tenants on a payment plan. The American Apartment Owners Association also found that 80 percent of apartment owners would be willing to offer forbearance.

If a unit is vacant, that means it is not bringing in any rent. This will be even more true if eviction bans result in the tightening of rental standards (See Point #4), and if a mom-and-pop landlord is running the operation (See Point #3). There are costs to bringing in a new tenant and preparing an apartment for a new tenant, not to mention that social distancing guidelines will be yet another obstacle.

Conclusion: Eviction comes with serious long-term ramifications. At the same time, I worry that eviction bans come with their own serious long-term ramifications, ranging from reduced housing supply, increased rent, and adverse effects in multiple markets that could hamper economic recovery. That is why I would prefer something such as federal housing assistance over eviction bans or repealing such onerous policies as land-use regulation and rent control. Even better, how about ending the lockdowns so we could get people back to work so they can pay their rent?

As Reason Magazine brings up, market economies exist with the underpinning of supply and demand. A general adherence to that has brought us having as affluent of an economy as we have now. As unprecedented as this situation is, the last thing I would want to happen is to make a bad situation worse.

Why Cory Booker's Affordable Housing Plan Is Mostly Deficient, But Has Some Good in It

In recent months, I have noticed that various Democratic figures are shifting the Democratic Party to the Left. The Green New Deal, introduced by freshman Congresswoman Alexia Ocasio-Cortez (D-NY), has been a  topic of discussion long after it was voted down. Congresswoman Pramila Jayapal (D-WA) introduced a version of "Medicare for All" that was even more extreme than that of Bernie Sanders (I-VT), which says something. Presidential hopeful Elizabeth Warren (D-MA) has proposed student debt forgiveness. Now Senator Cory Booker (D-NJ) has joined the fun. Booker recently released his affordable housing plan. Before getting into the particulars of his plan, Booker tells the story of the challenges his parents faced in acquiring housing. He then has a five-point plan: renters' tax credit, Baby Bonds, zoning reform, combat housing discrimination, and eliminate homelessness. For time's sake, I am only going to cover the first three in detail here today.

Tax Credit for Renters
Booker has proposed a renters' tax credit that covers the difference between the 30 percent of a beneficiary's income and their rent [capped at the neighborhood fair market rent]. The median tax credit, if enacted, would be $4,800 annually. His reason for such a tax credit is that nearly half of renters pay more than 30 percent of their pre-tax income on rent. To mitigate the burden of rental costs and ultimately allow for better savings to eventually purchase a house, Booker finds this to be part of the solution.

There are some issues with this proposal, such as administrative costs, incidence, and whether the government can deliver the credit when the rent is supposed to be due [monthly], as opposed to one annual tax credit (Tax Policy Center). The main issue with Booker's plan is that his tax credit acts similar to a demand-side subsidy. I agree that a subsidy is technically not the same as a tax break. A tax break is allowing for a taxpayer to keep more of the paycheck that they earn, whereas a subsidy is a government expenditure to directly fund something. However, my caveat with this is that 47 percent of Americans do not pay federal income tax. When looking at federal taxes by income quintile, the lowest quintile pay a net federal tax rate of 1.5 percent. With the average household income for the lowest quintile being $12,457 (Census), the federal taxes that these households pay ($187) is less than the median amount of the tax break proposed by Booker, thereby making the tax credit de facto act as an indirect government subsidy.

That being said, mainstream economic theory states that such a subsidy would artificially push the demand curve upward. While an increase in demand would increase quantity consumed, it would also increase price. This is not mere economic theory. It plays out in practice. With regards to college, government subsidies towards college tuition have caused college tuition prices to skyrocket. Single-payer healthcare has pushed the demand curve well beyond market equilibrium, thereby making healthcare more expensive. Granted, the two main issues with these analogies is that a) they do not take place in the housing market, and b) these are direct government subsidies, whereas Booker's proposal is a tax credit.

If you want me to point out something more directly related, look no further than the mortgage interest deduction (MID), a tax break that de facto subsidizes the housing market. What happened when the government tried to use the tax code to incentivize housing and make it more affordable? Not what was expected, that's for sure. The MID does not make housing cheaper. It merely incentivized people to purchase more expensive homes, thereby increasing indebtedness. The MID did not end up increasing home ownership, which was its primary goal. It actually made it more difficult for lower-income households acquire a house. As such, it would be reasonable to assume that similar unintended consequences would result in the rental housing market, as is brought up in the Tax Foundation's analysis of Booker's renters' credit proposal.

Instead of fighting fire with fire, perhaps Booker could make the tax code more neutral by repealing the MID instead of causing more complexity to the tax code and the housing market.

Baby Bonds
Booker's second proposal, which is actually the one policy idea that currently distinguishes him in the presidential race, is to implement Baby Bonds. A "Baby Bond" is a government-funded savings account that, per his proposal, would grow in a federal trust and provide enough seed capital to fund a downpayment on a house. A study from Columbia University recently found that it would help close the wealth gap between black and white people (Zewde, 2018), a wealth disparity that exists regardless of income quintile (Duke University; St. Louis Federal Reserve). The other good news is that it would cost about $80 billion annually, which would be $800 billion over a decade. This is low compared to certain government budget line items or certain tax credits. It would also be less divisive than reparations. Even if you set up the Baby Bond in a way that the money would only be withdrawn for paying towards a house, we still run into some issues.

1. The tax break acts as a subsidy towards housing. As brought up in the previous section, the mortgage interest deduction (MID) has distorted the housing market with multiple unintended consequences. It would not be surprising to see similar distortions to the housing market as a result of Baby Bonds. 
2. We already have a clear example of how the government handles asset management: Social Security. Social Security provides lower rates of return relative to alternatives (see 2018 Heritage Foundation backgrounder; 2018 OECD report showing that private pensions fare better; 2016 Tax Foundation report; Ahmed et al., 2016; and my 2013 analysis). 
3. My general skepticism surrounding the government's asset management for Social Security is compounded with Booker's plan. When Booker initially proposed the Baby Bonds idea through his "American Opportunities Account Act" in October 2018, he proposed putting them in low-risk bonds at an estimated rate of return of 3 percent. While government bonds don't have the lowest rate of return, there are other higher-yielding options that could further create wealth.  
4. The government shows a lack of political willpower to deal with the fiscal insolvency component of Social Security. Can we expect the Baby Bonds program to realistically stay solvent?
5. More broadly, there is the question of how the U.S. government is going to pay for it. This country is still dealing with burgeoning debt growth. Under the Congressional Budget Office's baseline projections, the debt-to-GDP ratio is going to reach 93 percent by 2029 (CBO, p. 2). It is going to take eighteen years before the first recipients even cash out. In the meantime, the U.S. government has added $800 billion to the debt (plus applied interest payments). Too high of a government debt dampers economic growth, which impacts quality of life, especially for those who Booker is trying to help (see Peterson Foundation; Congressional Research Service; Mercatus Center; European Commission; Dallas Federal Reserve). The Baby Bonds program isn't going to break the bank, but it doesn't mean it wouldn't exacerbate the debt issues, either.
6. Booker plans on increasing the capital gains tax and estate tax. An increase in the capital gains tax and estate tax would slow down wealth growth, which would be ironic considering that wealth is what Booker is trying to grow. 
7. One criticism of the Baby Bonds is dealing with more imminent poverty issues, such as child poverty. University of Chicago law professor David Hemmel argues that the focus should be on child poverty because the effects of poverty on a child are lifelong. Hemmel posits that it would be preferable to address these current issues, in no small part because there are many developmental needs that need to be met before the individual would cash out on the Baby Bond at age 18. Zewde, the author of the Columbia University, presents the counterargument that providing children with hope about their future has its own intangible benefits. 
8. There is an issue of political feasibility. Even if the Democrats took both Congress and the White House, a recent Rasmussen poll shows that 48 percent of Americans disapprove of Booker's proposal.
9. Much like I expressed with the child tax credit, I have a philosophical qualm as to whether childless households should have to support another household's choice to support children. A philosophical qualm is more subjective than a policy outcome, but it's still worth considering.
10. Since this is part of a housing plan, let's assume that the Baby Bond could only be cashed for housing purposes. Booker's plan comes with the paternalistic assumption that lower-income households do not know how to best spend this accumulated wealth, which is why Booker proposes that the spending goes towards housing. Forgetting that owning a house is not for everyone, I have to ask this question: If lower-income households cannot be trusted with spending the accumulated wealth on something aside from housing, how can we trust them to make the right spending decision with regards to the house for which they make the downpayment? 
• Alternatively, let's assume that the eighteen-year old could gain access and use it for whatever they would like. In this alternative, the plan would implicitly assume that the young adult is going to spend that money wisely. This individual just became an adult. There is a chance that they are going to spend it on something stupid or frivolous, especially considering that the brain doesn't fully mature until around the age of 25. There is also a high likelihood that they are going to get their college tuition bill and spend it towards college. If the Baby Bond turns into a federal subsidy for college tuition, we already know that such a subsidy is going to cause college costs to skyrocket further.

Zoning Reform
Booker points out that restrictive land use regulations have constrained affordable housing by more than 50 percent from 1964 to 2009. I wrote a piece a couple of years ago on land use regulations (also see October 2017 policy report from the Cato Institute), and this is the one area in which Booker and I are in total agreement. Land use regulations have driven up housing prices by constraining housing supply, as well as create more volatile boom-and-bust cycles in the housing market.

Bottom Line: Baby Bonds and renters' tax credits are only going to add to the issues of affordable housing. If we want to make a difference, two sound policies would be abolishing the mortgage interest deduction (MID) to make housing more affordable and to remove land use regulations in order to increase affordable housing supply.