Over the past 5 years, home prices have surged by over 50%. It’s no surprise that presidential candidates, Kamala Harris and Donald Trump, are eager to unveil their plans to address the affordable housing crisis and win over voters.
Trump and Harris have put forward plans, but their approaches are drastically different. Both aim to prove they can handle pressing concerns such as housing affordability, market stability, and accessibility to homeownership. So what are these plans and how will they impact home buyers?
Which plan will create more housing inventory?
The housing market is currently experiencing a frenzy of activity: homes are often listed and receive multiple offers within hours, and open houses can see lines snaking around the block. This chaotic scene highlights a fundamental issue: there simply aren’t enough homes available in desirable locations.
Here’s a snapshot of the current housing crisis:
- The U.S. is growing by 1.8 million people and 2 million households each year.
- In contrast, only 1.6 million new homes are being built annually, leaving 400,000 more families each year unable to find a home.
- This persistent shortfall has led economists to estimate a backlog of demand for between 1.5 and 3.8 million new homes.
Given this intense shortage, increasing housing inventory is more important than ever. As it stands, real estate typically grows in value over time, which can be a game-changer for many families.
For instance, a $500,000 home could appreciate by $25,000 in the first year alone and $48,812 over three years. In comparison, investing that same amount in the stock market may only bring in about $6,305.
Building more homes isn’t just about numbers—it’s about giving families a chance to build their own financial security and stability. With so many people struggling to find a home, expanding our housing inventory is crucial for meeting this growing need and helping more individuals and families experience the benefits of homeownership.
Trump’s approach:
Trump proposes two things (1) mass deportation of undocumented or unauthorized immigrants to reduce housing demand and (2) deregulation of the housing market to increase housing supply. So, how much would this realistically increase housing inventory?
We wanted to set aside the ethical issues, labor shortage, and overall economic disruption of the deportation plan, and figure out whether this would have any meaningful impact on housing availability. So let’s crunch the numbers: If we use the most recent record of undocumented immigrants in the U.S. (11 million) and the reasonable estimates of deportations per year (J.D. Vance offered the number of “1 million,” which is the same number of deportations per year as Biden, so maybe with expanded law enforcement that number might jump by an incremental 50% to 1.5 million total deportations). This means we should expect somewhere in the realm of 14% deportation rate.
Using numbers from Pew Research Center, 70% of immigrant householders are considered “mixed status” households, where the primary householder is authorized to work and live in the U.S. So, if we apply the 5% incremental deportation rate to the remaining 1.9 million households, that’s about 91,000 more available homes than in years prior.
What does that mean to a new home buyer? Probably not much. We build roughly 650,000 new homes per year in the U.S., for example, and this hasn’t lowered the cost of housing overall because we’re still under-housed (the gap is arguably in the millions of homes and still growing). So, even if we assume 100% of the homes made available through increasing deportation were desirable to typical home buyers or renters, the 14% increase means we’re still in a highly competitive housing market that generally favors existing owners and landlords who’ll have little reason to cut prices.
So, that takes us to deregulation. It’s hard to tell how this would play out at a federal level, as building tends to happen locally. As the economist Bryan Caplan points out, there’s much more building and lower prices in less restricted markets like Dallas and Houston compared to New York City or San Francisco. While there are federal environmental regulations like wetland protections or endangered species protections that can impact builders, it’s more likely that labor laws and workplace safety regulations have a higher impact on home prices.
At the federal level, Trump proposes building on federal lands and creating tax incentives for builders on federal lands (as does Harris), though this is likely to create a minimal number of new homes. He’s called these “Freedom Cities”—but historical examples of planned cities tend to struggle, and aren’t likely to make a lasting impact for most people.
Bottom Line: No, deporting people likely won’t lower home prices. Yes, deregulation can increase housing and lower prices, but it’s unclear how much federal regulations would impact prices (vs. local zoning).
Harris’s approach:
Harris plans to increase housing supply through federal investment and incentives, aiming to build 3 million new homes.
Both Harris and Trump plan to increase the number of new homes through builder incentives (and some deregulation). Harris also points to the total number of homes (3 million) which could have a very significant impact on overall housing affordability.
Harris aims to do this by repurposing federal lands for housing development and curb corporate influence in the housing market. This could lead to more affordable housing and reduce corporate control, but success depends on local government cooperation and effective use of federal lands.
Bottom Line: Yes, building more homes will lower home prices. How we get to 3 million homes raises questions, but that’s the right scale. Yes, investors represent a significant portion of home buyers but real success requires a lot of local partnership.
Which plan will make it easier for people to buy homes?
Trump’s approach:
Trump advocates for lowering interest rates by taking control (or having a heavy hand in) the Federal Reserve. This hasn’t happened before—there’s historically a separation of control between the White House and the FED, in order to preserve overall economic stability.
Lower interest rates could make mortgages more affordable, but risks include runaway inflation and undermining the Federal Reserve’s independence. Historical examples suggest that political interference in monetary policy often leads to negative outcomes, as the independence of the FED from the government provides credibility in the marketplace.
Back in the early 1970s, Nixon decided to flex his political muscle over the Federal Reserve. He pushed Fed Chairman Arthur Burns to slash interest rates, convinced that the tight money policy had cost him the 1960 election. Burns gave in, and by late 1971, rates were on the decline. But this short-term fix turned into a long-term nightmare: inflation skyrocketed, hitting 12.2% by late 1973. This fiasco is now a textbook example of why letting politics mess with monetary policy can lead to some serious economic headaches.
Bottom Line: Yes, mortgage payments might go down, but it might also come with some big unintended consequences.
Harris’s approach:
Harris proposes up to $25,000 in down payment assistance for first-time homebuyers.
This move could make owning a home within reach for more people by cutting down on the upfront costs. But beware—if it’s not handled right, it could end up pushing home prices even higher. Consider the Homebuyer Tax Credit from 2008-2010. The federal government offered up to $8,000 to first-time buyers to stimulate the housing market during the Great Recession. The result? A temporary boost in sales and a lot of happy new homeowners. But this burst of demand also led to a surge in home prices, creating a bubble. Many rushed in to snag the credit, only to face a harsh reality when prices eventually fell and the bubble burst.
Bottom line: Yes, down payment assistance programs can be a game-changer for first-time buyers. But it could backfire, too.
Conclusion:
What both candidates get right is that building more homes will lower prices. Economists are pretty much aligned on that. Now, where they take things beyond that basic supply and demand principle is where the plans might raise some eyebrows.
Trump’s mass deportation effort isn’t realistically about housing (it’s a small dent, at best) and taking over the FED opens a whole other can of worms.
Tax credits are likely just what first time home buyers need—they’ll likely never get on a path to home ownership without it, and as we’ve said before this is vital for long-term wealth building. But it’ll need to be managed very carefully so it doesn’t spark a bubble.
Ultimately, the success of either plan will depend on the balance between ambition and practicality, and their ability to deliver tangible benefits without triggering unintended consequences.
If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.
