Worst housing crisis in decades echoes into 2024 election – Daily News

Authors: Shruti Date Singh, Skylar Woodhouse and Prashant Gopal | Bloomberg

The Democratic mayor of Phoenix recently declared the housing crisis in the United States “a challenge for everyone.” Her counterpart in Columbus, Ohio, lamented its impact on “every rung of the socioeconomic ladder.” The mayor of New York City bluntly declared, “We have to get housing.”

Their words reflect a growing sense of urgency about the nation’s worst housing problem in decades — and help explain how a topic that is often confined to local zoning committee hearings and City Council meetings has found itself at the center of national politics.

Democratic candidate Kamala Harris has made housing one of the few areas where she has outlined relatively detailed policy proposals, including tax breaks for developers who build homes for people starting out on their own and $25,000 in down payment assistance for some buyers.

See also: A 44% increase in the number of home sellers in Orange County did not spur buyer activity

Republican challenger Donald Trump wants to open up federal land for housing development and has promised to help ensure affordable housing by eliminating regulations.

The ideas are pitches to voters who are facing a stark reality: Housing affordability hit its lowest point since at least 2006 in October and remains near that level, according to the Federal Reserve Bank of Atlanta index. That reflects in part the higher interest rates the Fed has used to tame inflation, but also a severe supply shortage that has been building since the housing market collapsed in 2008.

“We need to make housing a national priority,” San Diego Mayor Todd Gloria said during an event at the Democratic National Convention in August. “We have local responsibilities, but we need federal help to get the job done. Federal intent and investment can be a game-changer.”

More about housing: Got $300K? That’s the typical down payment in Orange County, 3rd highest in the U.S.

At stake over the next two months are the votes of frustrated homebuyers and renters in key swing states that could decide who ends up in the White House and which party controls Congress.

In the long term, without more supply, U.S. cities face the potential loss of teachers and first responders who can’t afford to live where they serve. And as in other countries around the world grappling with housing shortages, legions of voters could miss out on the wealth accumulation that homeownership has provided for generations.

The influence of the oscillating state

In key states like Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin, the median monthly payment for homebuyers has nearly doubled since the 2020 presidential election, reaching a record high of $2,161, according to a July report from brokerage firm Redfin.

See also: Interest rate cuts won’t solve the global housing affordability crisis

A Bloomberg News/Morning Consult poll of those seven states found that voters consistently say the economy is their top priority in the 2024 election. Asked in August which economic factors mattered most to them in their vote, voters in the swing states were more likely to cite housing costs than unemployment, wage increases or interest rates.

The Democratic Party, in particular, seems focused on this. Harris was quick to mention her housing plan in her first response during Tuesday night’s debate with Trump.

Her campaign aired in Arizona and Nevada — which have been hit particularly hard among swing states by rising housing costs — with ads promoting her housing program. A group called YIMBYs For Harris — a backhanded reference to opponents of “not in my backyard” thinking — raised more than $100,000 in an August fundraising call.

The vice president has an advantage on this issue that she and her allies can exploit: In an August poll, voters in swing states said they trusted Harris, not Trump, to handle housing costs by a 4-percentage-point margin.

“I know what it means to own a home, but unfortunately, it’s out of reach for too many American families right now,” Harris said in a new campaign ad. “We will end America’s housing shortage by building 3 million new homes and rental units.”

Harris’ plans also include “cracking down on corporate landlords and Wall Street banks that raise rents and housing costs to keep prices down for our families,” Dan Kanninen, her campaign director in battleground states, said in an emailed statement. “But life will only get more expensive under Trump, and his Project 2025 agenda will raise housing costs for millions of Americans while his wealthy friends profit.”

Political obstacles

Still, it won’t be easy for Harris to score political points with her plan — or implement it if she wins the presidential election.

In a Bloomberg News/Morning Consult poll, her down payment relief plan was widely favored by Democrats, who make up her base, but had less appeal among independents and undecided respondents. That suggests the plan is working best among voters who are already on Harris’ side.

Trump will also criticize Harris’ plan during the campaign, saying she and President Joe Biden’s administration caused the housing affordability crisis.

The former president “has a real plan to beat inflation, lower mortgage rates and make home ownership much more affordable,” Karoline Leavitt, his national press secretary, said in an emailed statement. She added that “illegal immigrants” were driving up housing costs, but Trump “would cut taxes on American families, eliminate costly regulations and free up appropriate portions of federal land for housing.”

As for Harris’s implementation of her proposal, Mark Zandi, an economist who advised her campaign on the plan, said it would make sense for down payment assistance to only come after supply increases — otherwise, it could simply spur demand, and thus drive up prices even further. While a four-year period might be an ambitious timeline for building 3 million housing units, Zandi said five to eight years is possible.

As for the likelihood of Congress passing the proposals, Zandi said the strategy of focusing on private-sector solutions, such as a tax break for builders, would have the advantage of appealing to lawmakers on both sides of the political aisle.

Sure, builders will need labor, materials and other resources that are already stretched by infrastructure and manufacturing projects. But given the government’s tax breaks, “there’s a big incentive to set labor constraints and do it,” said Zandi, chief economist at Moody’s Analytics.

Trump will have his own challenges stepping into this issue. The federal lands at the heart of his plan are often far from metropolitan areas with lots of jobs. Moreover, the role of migrants in the housing market is nuanced. Newcomers are driving demand, but in some markets, such as New York, they are also a major source of construction labor, and so would be integral to efforts to increase supply.

In addition, whichever candidate wins the White House will still have to contend with a tangle of local laws and zoning ordinances, which are often shaped by an area’s political leanings, changing demographics, and socioeconomic composition. These local regulations play a key role in encouraging or deterring housing starts.

“On steroids”

Multifamily developers have focused on market-rate units, including many more expensive studios and one-bedroom apartments for affluent young singles. There is a shortage of affordable housing, with the National Low Income Housing Coalition estimating that the U.S. has a shortfall of 7.3 million affordable rental homes that are affordable for extremely low-income renters.

The beginnings of today’s housing crisis — lamented by Phoenix Mayor Kate Gallego, Columbus Mayor Andy Ginther and New York Mayor Eric Adams, among others — began more than a decade ago. After the 2008 financial crisis that resulted from the housing bubble, construction projects slowed dramatically and workers fled the industry.

But newer conditions have heightened tensions and helped draw public attention to the issue. In particular, high interest rates have convinced many homeowners to stay put, causing annual sales of existing homes to fall to their lowest level in nearly 30 years in 2023.

The crisis has been “amplified on steroids and made more severe by the pandemic, inflation, interest rates and everything else we know,” said Patrick Gaspard, president of the left-leaning think tank Center for American Progress.