A Disturbing Preview of Harris’ Housing Policy – The American Spectator | US News & PoliticsThe American Spectator

By by cutting its mortgage rate by half a percent Wednesday, the Federal Reserve provided some potential relief for aspiring homeowners. The cut will lower mortgage rates and signal a sense that inflation is slowing a bit. With inventories rising and prices falling in many U.S. markets, perhaps more Americans will finally be able to afford a home, even though median home prices remain at a daunting $412,000 nationwide — and above $900,000 in California.

The one bit of good news, of course, doesn’t make housing any less of a hot-button political issue. This is the first presidential election I can remember in which housing has topped the candidates’ list of issues. Housing is a local and, to a lesser extent, state issue. Beyond adjusting interest rates and promulgating regulations that mostly affect public housing and lending standards, the federal government can’t — and shouldn’t — do much about market conditions.

When the federal government acts, it often makes things worse. This has been a source of much debate, but federal housing and credit policies triggered the 2008 market crash, as cheap money and subprime mortgages led to financial catastrophe. In California, prices in some inland areas fell by more than 50 percent. More recently, federal COVID policies — like stimulus spending and stay-at-home orders that allowed people to work from home — have increased demand for housing. Prices have skyrocketed.

Home prices are a matter of supply and demand. A slew of environmental regulations and local building codes (urban development limits, “Not In My Back Yard” sentiments, rising building fees, etc.) have restricted home construction, which has driven up prices for the existing supply. But instead of recognizing this reality, the feds are at it again — and pushing policies that will only make the problem worse, creating unnecessary scarcity.

For example, the U.S. Department of Justice recently filed an antitrust lawsuit against RealPage, a Texas-based company that provides property management software that helps landlords set accurate prices. According to a report by CBS News, the company “engaged in price fixing by sharing nonpublic, confidential information that RealPage’s algorithmic pricing software used to generate price recommendations.”

Homeowners are always looking for the best pricing information and use a variety of sources, from real estate websites to competitive listings. But you know what, it doesn’t really matter what any online source says. They’re just estimates. You can set the “right” price and then list your home for rent — only to find dozens of buyers or no interest at all. Market demand determines price. They’re just tools. They don’t “set” prices.

In her campaign, Democratic candidate Kamala Harris outlined a national program to lower housing costs. Some of it is accurate, though it goes a bit beyond federal authority. For example, she called for action to “cut red tape and build more homes to lower housing costs.” Her plan also includes tax incentives for building homes for people starting out in independent living, an expansion of the existing tax incentive for building rental housing, and a new federal fund to promote “innovative” housing construction. I generally favor tax credits and credits, but oppose federal spending.

Her plan to provide $25,000 in taxpayer-funded down payment assistance to first-time buyers will be expensive and inflationary. Our debt-ridden budget can’t handle another giveaway, and it will end up being a lottery for some lucky recipients. But it will drive up housing prices. Suddenly, I imagine home prices magically rising by about $25,000, if the market allows. But — and I may be being generous here — at least part of her plan focuses on incentives.

But given the Biden administration’s attacks on RealPage, it seems clear that Vice President Harris will focus mostly on her prosecutorial instincts, filing lawsuits against private companies. Dig deeper into her housing plan, and you’ll see that it calls for something like the Justice Department is doing: “Stop rent-fixing companies from fixing prices to drive up rents into double digits.” She also promises to go after “corporate and major landlords” and “stop Wall Street investors from buying up and bidding up home prices wholesale.”

Her model echoes San Francisco’s proposal to ban the use of artificial intelligence in rent setting. As the American Consumer Institute has found, “Rent price growth is driven by complex market factors like inflation, interest rates, and supply-and-demand dynamics—not AI algorithms. Blaming technology for broader market problems is misguided.”

Strict rent controls in San Francisco have led to a 15 percent drop in available rental units, according to a 2018 study by the National Bureau of Economic Research. I reported 52,000 empty homes and apartments in San Francisco, largely the result of city renter laws that discourage people from renting to strangers. Landlords fear that if they rent them out, they will never be able to get rid of the tenants.

Of course, GOP candidate Donald Trump has not offered a coherent alternative message. When he was president, Trump and his Housing and Urban Development Secretary Ben Carson wrote Wall Street Journal column that portrayed efforts to reduce zoning restrictions as a war on the suburbs. He recently rightly called for reducing zoning restrictions in Bloomberg intelligence — but then he got back on track and promised to ban illegal immigrants from getting mortgages.

The good news is that the candidates are at least talking about the housing crisis. The bad news is that much of what they propose — and some of what the current administration does — will only make things worse. It would be nice if they addressed the real problem of the housing crisis, rather than blaming private companies and landlords.

Steven Greenhut is the Western Regional Director of the R Street Institute. Contact him at [email protected].

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