VP Harris’ Proposal Will Increase Housing Prices – OpEd

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

The price of anythingis determinedby supply and demand. If demand increases with no change in supply, thepriceof that item will rise. If supply increases with no change in demand, the price will fall.That’sbasic economics.

Kamala Harris’sproposal would enable more people to enter the market to buy homes, and thatincrease in demand would raise theprice 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 intomore 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, policiesshould 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.

• This article was published at The Beacon