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Affordable Housing has become a major issue in this year’s Presidential election. Low inventory of homes available for sale and rent has been the spark that has shot prices and monthly rents through the roof.
According to Property Management, average rents increased 11 percent from 2016 to 2020, during the Trump administration and more that doubled to 29 percent from 2020 to 2024, during the Biden administration. Previous affordability challenges have been addressed by building more affordable rental housing units. But new housing projects take time to move through the approval and permitting process and available inventory has not kept up.
Prices of single-family residential property has seen a more significant increase. According to the St Louis Federal Reserve during these same time period the average purchase price of both existing and new single-family homes increased 7.2 percent during the period 2016 -2020 from the prior four-year period. Prices have soared 31 percent from 2020-2024. The current national average sale price of a home is $501,000 in 2024. This increase is a direct result of low inventory due to current homeowners with low-rate mortgages in the 2.5 to 4 percent range refusal to sell in market where rates have been near 7 percent. It remains to be seen how the recent Federal Reserve .5 percent rate cut affects mortgage rates.
The price of housing has increased much faster than wages which means families are forced to allocate more of their income to housing leaving less for other spending.
Housing inflation has become a political issue in this campaign. Both candidates have ideas, but are they realistic solutions?
President Donald Trump proposed reducing housing regulations that, by his calculation, adds 30 percent to the cost on new homes. I am not sure how he accomplishes this since building and zoning regulations are locally controlled. Tax incentives for builders and developers can help offset the lower profit margins encouraging more builders and developers to participate. He has also proposed opening Federal Lands and abandoned military bases to large scale housing construction and repurpose Federal buildings for residential use. Something President Biden also has proposed.
Trump has also proposed that the President be made a member of the Federal Reserve Open Market committee that determines and set interest rates. This would impact the Federal Reserves status as an independent agency and introduce political influence on a government body that is supposed to be apolitical.
Vice President Kamala Harris has promised to work with the private sector to build three million new housing units by the end of her first term. She also proposes to expand the low-income housing tax credit and provide $25,000 down payment assistance for first time home buyers. Giving $25,000 to potentially four million first time home buyers will have the opposite effect on prices by creating more demand for limited inventory thus moving prices up even more.
Each candidate has worthy proposals, but at this point that is all they are. A promise made is not always a promise kept. Especially when it comes to a politician seeking a vote.
I do know that prices will remain elevated as long as inventory of available rental units and houses for sale is less than the demand. The simple answer seems to be, build more rental units for those who cannot buy a home and lower interest rates to a level that does not discourage current homeowners from selling and moving up. Interest rates are falling, given the Federal Reserves recent half a percent cut.
If you want to see a comparison of government housing regulations in actions, take a ride to Delaware, Dover especially. It is amazing to see how much new housing has been constructed just in the last three to five years. Ask any builder who does business in both Maryland and Delaware which state they prefer to build in.
As a country we are about to vote in one of the most consequential elections in decades. It has been a long time since we have had two candidates so fundamentally different in their perspective of where we are as a country and their vision for the future. I hope and pray that our electoral process is fair and unbiased, and that regardless of who wins, we can come together as a country and work toward a common good, respecting each others’ thoughts and opinions.
