After the RNC and DNC conventions, many voters may still be wondering what political goals the parties have anchored in their platforms. particularly in relation to supporting first-time home buyersA structural problem in the current real estate market for first-time buyers is that although they can afford a monthly mortgage payment, You haven’t saved enough to make a down paymentwhich forces them into the rental market with little prospect of getting out.
Median home prices in the US have risen since 2019 27 percent from USD 322,500 to USD 412,300At the same time, median incomes only rose by 2.7 percent over the same period. Highlighting the growing gap between income and property prices.
The home ownership rate in the United States has been declining since 2004, when it peaked at 69.2 percentThe current value is 65.6 percent.
Housing inaccessibility is not a new problem. Both parties have had over a decade to put forward proposals that would help millions of people achieve their dream of home ownership, but few politicians have done so. The issue is central to many families, as home ownership remains one of the few ways to create wealth in the country.
The Republican approach
The Republican platform states that if elected, the party will address the issue of housing affordability for all homeowners by “Reducing inflation”, which will lead to a decline in mortgage rates. Presumably, mortgage rates will fall because the Federal Reserve will begin lowering the Federal Funds Rate (FFR). The FFR is the interest rate set by the Fed that other lenders include in their own loans to limit their financial risk.. The White House does not have the power to determine Fed monetary policy, meaning the Republicans’ offer is not much different from the status quo. Republicans say they will be able to reduce inflation faster than a Democratic administration because they will increase fossil fuel production in the U.S. Reducing energy and transport costs for consumers and businessesBut such measures could lead to a dramatic increase in carbon dioxide emissions at a time when people across the country are feeling the effects of climate change: more severe heat waves, more destructive wildfires and stronger hurricanes are just a few examples of how dangerous the climate crisis is already becoming, even before the tipping points of major warming are reached.
On the supply side, Republicans plan:open up limited parts of the federal territory for the construction of new housing.“That would help, but you should also consider where such homes are being built and what the demand is like. Will the new buildings lower costs in areas that are attractive to families or seniors who want to downsize? What are the schools and health systems like in those areas? The party platform briefly mentions “tax incentives and support for first-time buyers” but does not provide any details. Donald Trump is reportedly considering direct support for first-time buyers, but the campaign has not confirmed any change in its position.
The final component of the Republican plan focuses on reducing regulation at the federal, state and local levels. This policy has support among the more libertarian-leaning factions of the GOP base. Scott Lincicome of the Cato Institute told Newsweek that rising housing prices have less to do with the growing presence of investors and “land-use regulations at the state and local level” that “drive up construction costs.” These additional costs could come in the form of “tariffs on building materials or construction and permitting fees,” Lincicome said. The argument is that these costs reduce investment in building new housing units, limiting supply and driving up prices. However, there are already about 16 million vacant housing units in the United States. If building new housing units is so expensive, surely a simpler solution would be to punish investors who use housing to generate profits and make the market more inaccessible. But for the GOP, measures that put families’ right to housing above property owners’ rights are not viable proposals.
Such proposals that threaten property rights are a thing of the past within the GOP caucus. Just a look at the Democrats’ proposals to limit the power of large investors in the real estate market shows that the Democratic Party is hesitant to interfere with the rights of property owners. Vice President Harris said on August 16 that if elected, she would call on Congress to pass the Stop Predatory Investing Act, which “Taxpayers who own 50 or more single-family homes, any tax deduction for interest paid or accrued in connection with a single-family home as a rental property.” This proposal, seen by many as a first step, is tolerated only within the Democratic caucus, and many housing experts would like to see the party go even further. Mathilde Lind Gustavussen made this argument in Jacobin earlier this week.
What the Democrats are offering
The Democrats are taking a slightly different approach that – depending on what kind of “tax incentives” the Republicans are talking about – could resonate in Washington if the Democrats actually bring such a proposal to Congress. “President Biden,” the platform says, “has also proposed a $10,000 tax credit for first-time buyers and people selling their first home to help reduce housing costs for working families.” Eligible people would be able to apply for two $5,000 tax credits in two consecutive years, which the White House says is equivalent to a 1.5 percent reduction in mortgage rates. The White House claims the program could “help more than 3.5 million middle-class families buy their first home in the next two years.” During the election campaign, Vice President Kamala Harris said she would increase the value of the credit to $25,000. The campaign has not clarified whether President Biden’s proposed credit would be extended, whether more could be claimed each year, or how big the impact would be compared to the original $10,000 plan.Forbes reported in April that the average down payment in the U.S. is around $34,248. which is higher than the value of the loan offered.
Some critics argue that if first-time home buyers are not favored, Compared to the hedge funds on Wall Street and those looking to buy a second, third or fourth property to rent out, a tax credit would only stimulate demand and drive up prices.. And when they are forced to compete with these other buyers in a more expensive market, many first-time buyers could be pushed out of the market again. The Vice President-sponsored bill to limit investor power, the Stop Predatory Investing Act, is seen by many as the first step in fixing the problems that plague the market and make it less affordable for first-time buyers.
As the election campaign gains momentum and voters start to look beyond the candidate to the policy, what each party offers may change. Parties will not want to offer too much, but will want to differentiate themselves. Be critical of the proposals and read them all through a lens that asks questions rather than accepts answers. Not just on housing policy, but on all major issues.
