What the GOP and Democratic platforms say about assisting first time homebuyers

Now that the RNC and DNC conventions have passed, many voters might still be left wondering about the policies the parties have included in their platforms, particularly regarding assistance to first-time homebuyers. One structural problem in the current housing market facing first-time homebuyers is that while they can afford a monthly mortgage payment, they do not have enough saved for a downpayment, placing them in the rental market with few prospects of escaping.

Since 2019, the median home prices of properties sold in the US have risen 27 percent from $322,500 to $412,300. Meanwhile, median earnings have only grown by 2.7 percent over the same period, highlighting the widening ratio gap between income and home prices.

Homeownership in the United States has been falling since 2004 when it hit a high of 69.2 percent. The current figure sits at 65.6 percent.

The inaccessibility of the housing market is not a new issue, and both parties have had over a decade to put forward proposals that would help millions achieve their dream of owning a home, few leaders have. The issue sits at the heart of many families because homeownership remains one of the few avenues to generate wealth in the country.

The Republican approach

The Republican platform says that if elected, the party will address the housing affordability problem for all homeowners by “slashing Inflation,” leading to a decrease in mortgage rates. Presumably, mortgage rates will fall because the Federal Reserve will begin to bring down the federal funds rate (FFR). The FFR is the rate established by the Fed that other lenders incorporate into their own loans to limit their financial risk. The White House does not have the power to determine the monetary policy set by the Fed, meaning that what the GOP is offering is not that different from the status quo. Republicans say they will be able to cut inflation faster than a Democratic administration because they will increase fossil fuel production in the US, bringing down energy and transportation costs for consumers and businesses. However, such policies could dramatically increase carbon emissions at a time when all over the country communities are experiencing the impacts of climate change: hotter heatwaves, more destructive wildfires, and stronger hurricanes are just a few examples of how dangerous the climate crisis is already becoming, even before major warming tipping points are reached.

On the supply side, Republicans plan to “open limited portions of Federal Lands to allow for new home construction.” This would help, but it is also worth considering where such houses would be built and how demand looks. Will the new construction reduce costs in areas that are desirable to families or seniors looking to downsize? What are the schools and healthcare systems like in those areas? The party’s platform briefly references “Tax Incentives and support for first-time buyers” but does not provide any specifics. Donald Trump is said to be considering direct assistance to first-time buyers, but the campaign has not confirmed any change in their position.

The last component of the Republican plan centers on reducing regulation at the federal, state, and local levels. These policies are supported by the more libertarian-minded factions of the GOP base. The Cato Institute’s Scott Lincicome told Newsweek that the increases in housing prices had less to do with the growing presence of investors and “land use regulations at the state and local level” that “jack up construction costs.” These additional costs can come in the form of “tariffs on construction materials or building and permitting fees,” said Lincicome. The argument is that these costs reduce investment in constructing new housing units, limiting supply and driving up prices. However, around 16 million housing units in the United States are already unoccupied. Surely, if building new units is so costly, penalizing investors who use housing to generate profits and make the market more inaccessible would be an easier solution. But for the GOP, policies that prioritize the rights of families to shelter over the right of property owners are not feasible proposals.

Such proposals that threaten property rights are non-starters within the GOP caucus. Even looking at what the Democrats have put forward in terms of limiting the power of major investors in the housing market shows a reluctance within the Democratic party to intervene in the rights of property owners. Vice President Harris said on August 16 that if elected, she would urge Congress to pass the Stop Predatory Investing Act, which would deny “taxpayers owning 50 or more single-family properties any tax deduction for interest paid or accrued in connection with any single-family residential rental property.” This proposal, which is seen by many as a first step, are only tolerated within the Democratic caucus, and many housing experts would like to see the party go further. Mathilde Lind Gustavussen made that argument in Jacobin earlier this week.

What the Democrats are offering

The Democrats take a slightly different approach, which, depending on what kind of “tax incentives” the Republicans are talking about, could find popularity in Washington should Democrats actually bring such a proposal to the floor in Congress. “President Biden,” reads the platform, “has also proposed a $10,000 tax credit for first-time homebuyers and people selling their first homes to help reduce housing costs for working families.” Those eligible would claim two $5,000 tax credits over two consecutive years, which the White House argues equates to a 1.5 percent reduction in the mortgage rate. The White House claims the program could “help more than 3.5 million middle-class families purchase their first home over the next two years.” On the campaign trail, Vice President Kamala Harris has said she would bump the value of the credit up to $25,000. The campaign has not clarified if the credit President Biden had envisioned would be extended, if more could be claimed each year, or if the scale of the impact it would have compared to the original $10,000 plan. Forbes reported in April that the median downpayment in the US was around $34,248, which is higher than the value of the credit being offered.

Some critics argue that unless an advantage is given to first-time homebuyers in the market, compared to Wall Street hedge funds and those looking to purchase a second, third, or fourth property to rent out, a tax credit would only fuel demand and drive prices up. And, if forced to compete against those other buyers in a more expensive market, many first-time buyers could be priced out of the market yet again. The legislation supported by the vice president to limit the power of investors, Stop Predatory Investing Act, is considered by many a first step in correcting the issues that plague the market and make it less affordable for first-time buyers.

As the campaign heats up and voters begin to look past the candidate and towards the policy, the offer from each ticket could change. The parties will not want to offer too much but will want to differentiate themselves. Be critical of the proposals, and read them all with a lens that asks questions rather than accepts answers. Not just with housing policy, with all issues that matter.