Vice presidential candidate Tim Kaine’s outline of Hillary Clinton’s housing plan focused on racial discrimination. While that’s an important issue, it isn’t really at the heart of Clinton’s housing plan. In fact, it isn’t even mentioned in Clinton’s platform.
Instead, the heart of the plan is huge subsidies to middle-class homebuyers aimed at increasing homeownership. Clinton proposes to give anyone who earns less than a region’s median income up to $10,000 to help with a downpayment on a house.
There are several problems with this idea. First, Clinton doesn’t restrict the grants to first-time homebuyers, so it is likely that the program won’t significantly increase homeownership. Second, the median family income in a dozen urban areas, from Boulder to San Jose, is more than $100,000 a year, so a lot of well-off people would qualify free federal money. Third, the $10,000 would only be given to people who can match it with their own savings, and since nearly half of all Americans don’t even have $400 to spare, not much of Clinton’s promise will reach low-income people.
In addition, Clinton proposes to spend $25 billion on a housing investment program aimed at cleaning up blight. But, outside of Detroit, there isn’t much blight–in the sense of a neighborhood being so run down that no one will invest in it–left in the United States, so most of this money is likely to support crony capitalism and social engineering.
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To the extent that the Clinton platform aims to increase homeownership among low-income families, it sounds a lot like the programs of the previous Clinton administration that many people say contributed to the 2008 financial crisis. The Antiplanner disagrees with that claim, but it is strange that Clinton doesn’t seem to have learned that these programs don’t work.
As it turned out, the Clinton programs did increase homeownership, which reached a record level in 2004. The problem is that this was followed by a crash that reduced homeownership rates to their lowest levels in 20 50 years. Low-income families were hurt the most, not only losing their homes but losing a larger share of their wealth than wealthier families.
The reason for this is the increased volatility in housing prices caused by land-use regulation. By promoting low-income homeownership without addressing that regulation, Clinton proposes to repeat the impact of that volatility on low-income families.
For what it’s worth, the Republican party platform specifically states that federal housing programs “should no longer support high-income individuals.” Unfortunately, that platform also fails to recognize the effect of land-use regulation on housing affordability and volatility. At least, unlike the Democrats, the Republicans aren’t likely to make that regulation worse.
Can you say bubble? The biggest problem with this plan is that by giving people an extra $10,000 to spend, sellers will just raise their prices to meet the new demand. Same problem with education – give people more money to spend on college and colleges raise prices.
FantasiaWHT has discovered reality: newly printed FRNs and credit dumped into markets inflate prices. The extreme increases in housing has very little to do with “government land-use restrictions”. But the Antiplanner keeps repeating this assertion over and over and over as if repeating it over and over and over will make it true.
No, he keeps saying it because it is true. If it isn’t why are the biggest increases seen in the most regulated markets?
“No, he keeps saying it because it is true. If it isn’t why are the biggest increases seen in the most regulated markets?”
Ah, yes. “Truth” versus fact.
The largest increases are seen in the largest cities, which have highly regulated markets, because that’s where wealth is concentrated and that’s where new credit and FRNs will have the highest returns.