The worst parts of Vice President Kamala Harris’s economic plan are pretty bad. Like, so bad that her more credible defenders are reduced to arguing that silly proposals such as exempting tips from income tax at least poll well, and maybe when she says “first-ever federal ban on price-gouging on food,” she really just means “robust antitrust enforcement.”
In any case, supporters say, her best ideas are very good, especially her housing agenda. America’s housing crisis makes everything else about the U.S. economy worse: It exacerbates homelessness, slows family formation, prevents workers from moving to opportunity and puts an enormous strain on the budgets of hardworking people. Harris’s promise to build 3 million homes by the end of her first term is a signal that she understands what it takes to fix the problem and is serious about doing so.
It’s certainly true that America’s housing problems can’t be fixed without new supply. Unfortunately, it’s unlikely that 3 million homes, or anything close to that number, could be added in the next four years. Meanwhile, the other, not as good, parts of her housing agenda will be both easier to achieve and, absent the new housing supply, counterproductive.
Harris’s housing plan has three main planks. One of these is $25,000 in down payment assistance for first-time home buyers, which she says will help more than 4 million home buyers over four years. Another is a plan to punish corporate landlords who buy up lots of single-family rental properties or use algorithmic software to set prices.
The third plank is the 3 million new homes, which Harris promises to get built with a combination of initiatives: a $40 billion “innovation fund”; “a historic expansion of the existing tax incentive for businesses that build rental housing that is affordable”; a new tax credit for building starter homes; and a red-tape initiative that is meant to streamline permitting processes for builders.
Without the millions of new houses, the two other initiatives risk making the housing situation worse. Restrictions on corporate landlords could shrink supply by undermining the build-to-rent market, which is currently one of the strongest sectors in new construction, according to developer Bobby Fijan. And that down payment assistance for first-time home buyers would likely end up in the pockets of existing homeowners, as newbies use it to bid up prices in a tight market.
It’s not impossible to construct 750,000 extra homes a year — housing starts, which were about 1.2 million last year, hit 2.2 million at the peak of the housing bubble. But ramping up production to that level would take years, and might never happen, because the only real way to get there is via the one promise Harris will find hardest to keep — that is, to make it much easier for builders to build.
Although the subsidies for affordable housing might help on the margin, the more targeted they are to low-cost housing for people with modest incomes, the more red tape will be required to ensure they hit those targets and the less housing they’ll help build. For example, one major source of affordable rental housing is the low-income housing tax credit, which has been around nearly 40 years, and has built a total of 3.6 million units in that time. It would be hard for tax credits to produce even one-third of that number, again, in just four years.
Her new tax credit for starter homes will likely have similarly modest effects — both because it would take time to pass legislation and write regulations defining what exactly counts as a “starter home,” and because the more the regulations are tightly targeted to very cheap homes, the fewer homes she will build overall.
Perhaps such volume would be possible if government could speed things up and lower costs by streamlining red tape. But that is harder than it sounds, politically and practically.
Most regulatory barriers to building are state and local, not federal, and any attempt to override them must pass strict constitutional review, which could tie them up in court for years. Even if the administration finds some way around the federalism issues, actually getting local governments to expedite reviews is as much a management problem as a legal one, and her administration cannot micromanage every county seat and town hall.
Another problem is that, although “reducing obstacles to construction” is a nice-sounding policy proposal, the reason the construction obstacles still exist is that reducing them would mean angering a lot of voters — by slashing the number of inspections and reviews, paring back environmental standards and building codes, doing away with existing parking requirements and generally gutting communities’ ability to control how their neighborhoods develop, a power to which they are often very attached.
At every step Harris will be faced with angry interest groups looking to gum up the works with lawsuits and pressure campaigns. Her reward, if she persists, would be that at some point in the distant future, some extra houses would be built, a fact for which she’ll get little credit. In contrast, bashing corporate landlords and handing out checks will produce big headlines and grateful voters right now.
So, if her policies are to be gauged by their political payoff, this one probably won’t measure up. Instead of a good housing plan marred by a few bad additions, the counterproductive stuff might be all we get.
