or beware of unintended run-on effects. In the Wall Street Journal Andrew Restuccia and Tarini Parti report:
Housing is one of the most stubborn costs facing the country, even as inflation is slowing.
“Costs are still too high and on a deeper level, for too many people, no matter how much they work, it feels so hard to just be able to get ahead,” Harris said.
Mortgage rates are at the lowest level in more than a year, but they are unlikely to soon return to anywhere near the levels before the Federal Reserve started raising interest rates in early 2022.
Home-buying affordability dropped last fall to the lowest level since September 1985, and it fell near that level again in June.
Harris proposed a $40 billion fund to help local governments develop innovative solutions to the lack of housing supply. It is an expansion of a similar $20 billion fund proposed by the Biden administration.
No word on how Vice President Harris intends to pay for all of the spending she’s proposing. Presumably, she plans to put it on the cuff.
Unless there is unused productive capacity lying idle (there isn’t) and unless taxes are increased to cover it, that will increase inflation. The Fed will try to handle that by increasing interest rates which will make housing that much less affordable.
Besides we don’t have a housing or even a homelessness problem. We have zoning, mental illness, substance abuse, underemployment, and an admitting-too-many-poor-and-unskilled-people-into-the country problems. Unless those problems are addressed first no housing plan will solve the problem she is presumably trying to address.
Restrictive zoning prevents homes from being built in places like San Francisco, New York, Los Angeles, etc. People live on the streets for many reasons. Many are mentally ill. Others have substance abuse problems. Some just don’t want to work or have financial responsibilities. Others are employed but don’t earn enough money to pay rent. I could explore that last issue at length but the bottom line is the unemployment rate doesn’t reflect people who are employed but don’t earn enough so politicians aren’t interested in it.
I could also delve into how subsidies will actually increase prices but why bother? You get the idea. She’s trying to move a rope by pushing on it.
I think housing is mostly a local issue and dont think there is much of a role for the federal govt. Mortgage rates are still at pretty low rates by historical averages.
https://www.bankrate.com/mortgages/historical-mortgage-rates/#rates-over-time
Steve
The problem is not so much rising housing costs as it is declining real incomes, and that is connected to deindustrialization.
Wonder when the plan will include a ban on single family zoning, which everyone who matters knows is racist in its origins and practice.
First, what Bob S said.
I chuckled at a waggish headline: Since we took office you can’t afford food or shelter, but hell, vote for us anyway. And now, free beer for everyone!!!
I understand that politicians are gonna be politicians, and that KH isn’t the brightest bulb. But the saddest observation is that media is promoting this with vigor. The WaPo, of all places, is one outfit that is not. Good for them. But the major networks? NPR? Dare I say the comments section at OTB? (And two of their writing staff) Raw Story. Huffpo. Their tongues have become wet wipes…..
Meh. Trump is going to have all of our tax revenue come from tariffs, which as he explains means other countries will pay our taxes. And then he is going to cut energy prices 50%. Free buzz!
Steve
As an aside, Cowen linked to paper looking at the regional effects of inflation looking at purchasing power. Prices have gone up but so have wages but there are geographical effects. In the east and west pay increases exceeded cost increases. In the south, cost increases were about the same as everywhere else but purchasing power decreased because pay increases were less. The Midwest was mixed.
Steve