Harris' affordable housing proposals include tax breaks and aid for first-time buyers of 'starter homes'.

• Over the next four years, Vice President Kamala Harris urged the construction of 3 million new housing units, which would be available for both rental and purchase.
• Other proposals include tax breaks for homeowners and subsidies for low-income families to purchase homes.

Lowering the costs of owning and renting a home in the U.S. is a key component of Vice President Kamala Harris' "opportunity economy" vision.

Harris stated in her Raleigh, N.C. speech that we should focus on making everything more affordable to buy a home, rather than making it less.

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Over the next four years, the Democratic presidential nominee proposed to build 3 million new housing units, which experts say would enhance affordability.

Daryl Fairweather, Redfin's chief economist, said that the most exciting part of her plans was to me.

Supply is housing policy's 'bipartisan sweet spot'

According to Dennis Shea, executive director of the Bipartisan Policy Center's J. Ronald Terwilliger Center for Housing Policy, the solution to the housing affordability challenges we face today lies in increasing supply.

Since the foreclosure crisis, which occurred between 2007 and 2010 and resulted in a significant increase in property seizures in the U.S., the construction of new single-family homes and multi-family rental buildings has decreased significantly, according to Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute, a non-profit think tank located in Washington, D.C.

The shortage of affordable homes is more acute, whether for renters seeking quality rental units or first-time buyers searching for their first home.

Last week, proposals were unveiled that suggest a Harris-Walz administration will introduce a "first-ever tax incentive" for home builders who construct starter homes for first-time homebuyers in order to achieve the goal of 3 million new units.

The Neighborhood Home Investment Act, a bill pending in Congress, would create a tax credit to promote the creation and rehab of starter homes for sale in distressed communities, according to Shea.

He stated that there is strong bipartisan support for creating a tax credit.

As part of his presidential campaign proposals, former President Donald Trump discussed increasing housing supply.

"Trump announced in an Aug. 15 press conference that federal land would be opened up for housing construction to address the housing affordability crisis."

According to Edward Pinto, senior fellow and codirector of the American Enterprise Institute's Housing Center, it is significantly more challenging for the government to implement supply-side proposals compared to initiatives that facilitate demand by simplifying the homebuying process for consumers.

He stated that his conclusion was that [Harris'] housing plan was worse than taking no action.

'It's hard to define what a starter home is'

James Tobin, CEO of the National Association of Home Builders, emphasized the importance of Harris clarifying her definition of "starter home."

Tobin stated that it's difficult to define a starter home because of the underlying costs that make it challenging to maintain low building expenses.

"It's challenging to construct a first-time home for most buyers in the country due to high labor, land, borrowing, and material costs," he stated.

It is crucial to establish a range of price points for a starter home, as it can differ significantly among various markets, according to Tobin.

In California, a starter home could cost between $700,000 and $800,000, while in the South, it might be priced between $250,000 and $300,000, he stated.

The $40 billion innovation fund seems 'very high'

Harris' proposals include a $40 billion innovation fund to empower local governments to fund local solutions for building housing.

Yet some experts are skeptical it will fulfill the intended goal.

"According to Fairweather, the federal government has limited authority over local affairs, and it is up to local planning commissions to decide whether to permit more housing in order to obtain the innovation fund money."

Fairweather stated that locals and local governments, as well as local homeowners, consistently disregard incentives due to their resistance to constructing additional housing.

The $40 billion housing innovation fund may be too expensive, making it difficult to gain bipartisan support, according to Shea.

Aid for first-time home buyers has less support

First-time homebuyers who have paid rent on time for two years may receive $25,000 down-payment assistance from Harris, with more generous support for first-generation homeowners.

The proposal is based on an earlier idea presented by the Biden-Harris administration, which recommended that Congress provide $25,000 in down-payment assistance exclusively for first-generation buyers (or first-time buyers whose parents weren't homeowners) and a $10,000 tax credit for first-time buyers.

Over four years, Harris' blueprint would broaden the reach to more than 4 million qualifying first-time buyers.

Shea stated that there is limited bipartisan backing.

In an interview on Fox Business on Aug. 16, Sen. Tim Scott, R-S.C., stated that Harris' $25,000 down payment assistance would increase demand without increasing supply, resulting in higher prices and fewer people being able to afford it.

Unless financial literacy is incorporated into any program, there will be a higher default rate, according to Scott.

Harris, the Democratic presidential nominee, urged Congress to pass the Stop Predatory Investing Act, which aims to eliminate tax benefits for those who own 50 or more single-family properties, thereby preventing major investors from purchasing large numbers of single-family rental homes.

The Act would target companies that use algorithms to manipulate rental housing prices.