Additional Coverage:
Vice President Kamala Harris recently addressed her supporters at the Democratic National Convention, where she outlined several policy initiatives aimed at tackling the housing affordability crisis in the United States. Among these proposals, Harris introduced a plan to offer $25,000 in down-payment assistance to first-time homebuyers, with even more substantial aid for first-generation homeowners.
However, Zillow’s Chief Economist, Skylar Olsen, has expressed skepticism about the effectiveness of this strategy. Olsen argues that such down payment assistance programs might ignite an initial surge in housing demand, but without addressing the underlying shortage of housing supply, these policies are likely to exacerbate the affordability crisis rather than resolve it.
Olsen emphasizes the need for housing policies that focus on increasing supply to have a durable impact on affordability. She pointed out that incentives centered on first-time buyers might unfairly benefit those who already have access to financial help from family, thus not aiding those who need it most. Instead, she praises parts of Harris’s plan that aim to boost first-generation homeownership, although details on this are still forthcoming.
In her critique, Olsen mentioned that while federal down payment assistance might appear advantageous, it essentially acts as a temporary solution that fails to tackle the structural challenges of the U.S. housing market, primarily the lack of adequate housing supply. She suggests that locally implemented homebuying incentives could prove more effective by being more targeted compared to broad federal policies.
Highlighting some constructive approaches, Olsen indicates how state-specific incentives might redistribute populations to underpopulated areas with sufficient infrastructure but low demand, thus addressing the mismatch between housing supply and demand regionally.
Moreover, Harris has proposed other initiatives aiming at the housing supply side: the Innovation Fund for Housing Expansion and the Low-Income Housing Tax Credit. These programs are designed to encourage the construction of new housing units by easing land use and zoning regulations and offering tax credits for the development of affordable housing, respectively. These measures aim to significantly increase the availability of housing and make rents and homeownership more accessible, particularly through the construction of multifamily rental units and starter homes for middle-class families.
For a deeper dive into these policies and their potential impacts on housing crisis, refer to the original discussion in Business Insider.