There鈥檚 good news about this year鈥檚 presidential election results and what it means for the U.S housing market: no matter who wins, we鈥檒l likely get federal policies aimed at boosting much needed housing supply. The not so great news? Each candidate is also proposing counterproductive housing market policies that could stymie the broader housing market in the long-run. Let鈥檚 take a more detailed look at each of these, in turn.
The Good News: Housing Supply is on the Federal Radar
It is certainly welcomed news to hear discussions by both candidates on how to address housing supply issues. Housing supply, or lack thereof, has plagued the U.S. housing market for at least a decade, with our estimate of a range of 2.5 -7.2 million unit gap from 2012 to 2023, depending on the assumptions of the analysis. Due to a combination of both geographic and legal constraints on development, we simply haven鈥檛 built enough housing when, and where, we needed it most. And this has, in part, contributed to a large housing shortage and affordability pressures in both the and rental market.
The Harris/Walz campaign has released on how to address this dearth of supply, with ambitious goals to produce 3 million new housing units during her term as president by incentivizing local governments to remove restrictive land use regulation. While this falls short of some estimates of the structural supply gap in the U.S., any new supply helps bridge that gap and would be a boon for the housing market. What鈥檚 more important, Vice President Harris also has centered her supply policies on affordable (both subsidized and market rate) housing to help households who are most affected by rising prices and rents.听
The Trump/Vance campaign has suggested a more broad, but less detailed, approach to boosting housing supply by targeting regulations on housing development that he has referred to as both 鈥�鈥� and a 鈥�鈥�
Both campaigns have also discussed making federal lands available for housing development, again with the Harris campaign targeting its use for affordable housing while the Trump campaign has focused on using the land for market-rate development.听
The Not So Good News: Rent Control, Down-Payment Assistance, and Immigration Restrictions May Be Counterproductive
The not-so-great news is that there are policies proposed by both candidates that we view as potentially counterproductive to improving the state of the U.S. housing market, namely rent control, down-payment assistance, and immigration controls. While the proposed policies are aimed at improving market conditions, we lay out the potential for unexpected consequences below.
First, the Harris/Walz campaign has proposed de-facto rent control on corporate landlords by .鈥� While we certainly don鈥檛 condone price collusion, anti-competitive market activity, or spatial monopolies, discouraging private investment in rental housing has the potential to increase rents by reducing the supply of the rental housing stock in the aggregate.听
Second, the Harris/Walz campaign has also proposed up to $25,000 in down payment assistance to help first-time homebuyers get their foot in the door of homeownership. As home prices go, so do typical down-payments. Over the past four years the required downpayment to buy a home – keeping the percentage of purchase price constant – has risen more than 50% for an otherwise identically-sized home. However, housing markets work like auctions, where prices are bid up based on the buying power of buyers, so increasing the buying power of buyers via down payment assistance programs may have the potential to further increase the prices of starter homes. Though the Harris/Walz campaign hasn鈥檛 explicitly mentioned this, it is possible the intent of down-payment assistance is to give a competitive edge to first-time home buyers over investors, the latter of which tend to be more active in the starter-home market than other tiers.听
Last, the Trump/Vance campaign has hinted they can improve the housing shortage by reducing aggregate demand via restrictions on illegal (and possibly legal) immigration. We believe this policy would potentially have large and negative consequences on the U.S. housing market in both the short and long-run.听
In the short-run, reducing immigration could severely hurt the labor supply needed for new home building since . In the long-run, reducing immigration could lead to negative population growth in the U.S., since the total fertility rate nationally in the U.S. sits at 1.67, well below the population-sustaining rate of 2.1. In other words, without immigration to fill the population replacement gap, the country would likely see falling aggregate demand for housing. The consequences of that could include a reduction in homeowner鈥檚 equity via falling home prices and a contraction of employment in the homebuilding sector, which could have . The magnitude and timeline of these effects would be heightened and shortened if the campaign also followed through with their promise to .鈥�
Summary
In short, we鈥檙e encouraged to see that no matter which candidate wins the election, we鈥檒l likely get new federal policies aimed at promoting new housing supply. Though the flavor of such policies would skew towards below-market rate rental housing in a Harris/Walz administration and toward market-rate owner-occupied housing in a Trump/Vance administration, the welcomed news is that local and state regulatory barriers – which have long restricted the supply of both types of housing – would likely be a target in the crosshairs of either administration. The wildcard with either administration, however, is where such supply-boosting policies would rank on their priority chart compared to the counterproductive policies of disincentivizing certain kinds of housing investment, down-payment assistance, and immigration restrictions mentioned above.听