VP Harris’s Proposal Will Increase Housing Prices

Presidential candidate and VP Harris has proposed giving first-time home buyers up to $25,000 to go toward their down payments, plus another $10,000 tax credit. If enacted, this proposal would raise the price of housing.

The price of anything is determined by supply and demand. If demand increases with no change in supply, the price of that item will rise. If supply increases with no change in demand, the price will fall. That’s basic economics.

Kamala Harris’s proposal would enable more people to enter the market to buy homes, and that increase in demand would raise the price of housing.

Because only some potential home buyers would get the funds, the price of housing would not rise by the full $25,000, so first-time home buyers would benefit. However, those who are not first-time buyers and are in the market because they are relocating or because they want more space will find housing less affordable.

Increasing the housing supply is the way to make housing more affordable. Many governments artificially restrict the ability to increase housing stock through zoning laws, growth management policies, and other restrictions that raise the price of housing.

I could go into more detail and make this more complicated, but there is no need to do so to make this simple point. Harris’s plan would increase the demand for housing, raising the price of housing. To lower housing prices, policies should be oriented toward increasing the supply of housing.

At the risk of diluting my main point, one might also ask where VP Kamala Harris intends to get the money to fund her proposal. We’re already running a huge deficit. But in this case, it’s not a matter of weighing the proposal’s costs against the benefits because the proposal would impose costs on almost everyone—both in funding it and through an increase in housing costs.