Housing costs become top economic issue in presidential race 

In order to tame housing costs and expand homeownership, Vice President Kamala Harris has unveiled a new economic plan that seeks to help more first-time buyers afford homes and pushes builders to produce millions of new units in the coming years.

Bolstering homeownership

Multiple media sources — including the Wall Street Journal, New York Times and Washington Post — report that Harris is seeking $25,000 in down payment assistance for first-time homebuyers and the delivery of 3 million new housing units over the next presidential term. 

"This plan will significantly simplify and expand the reach of down-payment assistance, allowing over 1 million first time-buyers per year — including first-generation home buyers — to get the funds they need to buy a house when they are ready to buy it," the Harris campaign said in a statement to press. The Harris camp is also seeking a $40 billion "innovation" fund to help fund "local solutions" to add more housing. 

"There's a serious housing shortage in many places. It's too difficult to build, and it's driving prices up," Harris said during a speech today in North Carolina. "As President, I will work in partnership with the industry to build the housing we need — both to rent and to buy — and we will take down barriers and cut red tape, including at the state and local levels."

Harris also commented on corporate ownership of rental properties, vowing to curb "collusion" among corporate landlords who "set artificially high rental prices, often using algorithms in price fixing software to do it," a theme that President Biden had also addressed last month.

Will adding more homes fix the affordability issue?

High housing costs — largely exacerbated by high borrowing rates and inventory shortages — have pushed many prospective homebuyers to the sidelines over the last year and a half. While mortgage rates have dropped in recent weeks, home prices have continued to hit new highs during much of this year. With affordability challenges, both homebuyers and builders are less confident about the market. 

But delivering new housing is something that zoning reform advocates and economists alike have called for. And delivering millions of new units could help with the inventory crunch and affordability. 

"Economists have recognized the housing shortage as a major driver of inflation over the past four or five years, so the Vice President coming out with a plan to add three million new homes to the market should certainly be welcomed by most economists across the board," Brookings Institute VP and Director of Economic Studies Ben Harris said today on CNBC.

The Fed remains a key player

The Fed and monetary policy continues to play a crucial role in overall consumer and builder sentiment. During the most recent Fed meeting, there were hints that the cuts could be "on the table" in September, which some experts expect could help bolster builder confidence.

"We expect housing starts and building permits to increase as we approach an official Fed interest rate cut," CoreLogic Chief Economist Dr. Selma Hepp said today in response to housing starts data, which showed a significant decline in July.

"This prolonged high-interest-rate period has also negatively impacted recent homebuilder confidence. These negative sentiments are already improving through August's early indicators and should see a slight boost month on month going into 2024," she added.