Both presidential candidates assert they can resolve the pressing housing affordability crisis affecting millions of Americans. However, neither candidate’s proposals will actually increase the supply of affordable homes, and Vice President Kamala Harris’s plan could exacerbate the situation.
As of late July, the median sales price of homes in the U.S. surpassed $412,000, a $90,000 increase (about 28%) since 2019, according to the Federal Reserve Bank of St. Louis. In addition, 30-year fixed-rate mortgages, which were below 5% during most of the 2010s, now average 6.2%, following a dip to below 3% during the pandemic. The combination of rising home prices and interest rates has excluded millions of potential homebuyers from the market.
This nationwide spike in home prices and mortgage rates is largely linked to inflation driven by increased federal spending and the Federal Reserve’s expansionary monetary policies, which have expanded the money supply without corresponding economic growth.
The real culprit behind the housing affordability crisis is a plethora of state and local regulations that complicate and increase the cost of new home construction. Restrictions such as density limits, minimum lot sizes, development fees, building permit quotas, parking requirements, and environmental regulations significantly hinder housing supply.
Regions on the East and West Coasts face the most stringent regulations and consequently the least affordable housing. Economists from the University of Pennsylvania’s Wharton School have estimated that these zoning restrictions inflate housing costs substantially—by over $1.6 million per acre in San Francisco, nearly $600,000 in New York City, and $800,000 in Los Angeles.
While candidates may promise change, they cannot alter the reality that most supply-restricting regulations are state, county, and local impositions. Without a Supreme Court reversal of the 1926 Village of Euclid v. Ambler Realty ruling, which allows local zoning control, a president’s ability to enact significant change is limited.
Harris’s plan includes constructing three million new “housing units,” addressing “corporate landlords,” and providing $25,000 in down-payment assistance for first-time buyers. However, her proposals to tackle the root cause of affordability—through tax incentives and federal funding—lack the power to significantly increase housing supply, as the president cannot unilaterally override state and local regulations.
Additionally, her crackdown on corporate landlords may shrink rental unit availability and drive rents higher. Providing down-payment assistance could benefit a few buyers but would likely lead to increased prices for everyone else. Essentially, boosting demand without addressing supply constraints tends to inflate housing costs.
Former President Donald Trump has pledged to reduce regulations limiting housing supply and to “open up federal land for large-scale housing construction” with minimal regulations. Yet, like Harris, he cannot unilaterally change state and local laws. While opening federal land could help, much of this land is not in high-demand areas, limiting its effectiveness.
The federal government could enhance housing affordability by maintaining lower mortgage interest rates through disciplined fiscal policies to combat inflation. Unfortunately, both campaigns appear uninterested in pursuing this route.
Benjamin Powell, a senior fellow at the Independent Institute and director of the Free Market Institute, teaches economics at Texas Tech University and co-edited “Housing America: Building Out of a Crisis.”
