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bofa.com slash newprosmedia. I'm Nichole Lappin, the only financial expert you don't need a dictionary to understand.It's time for some money rehab.
OK, it's time to break down another economic proposal of the 2024 presidential race so you know how you'll be affected.
From the questions I've been getting in my DMs, it is clear that housing and the election are top of mind for many, many rehabbers.So we're going to do a mashup episode today.Today, we're covering both candidates' housing plans.
But first, let's address the elephant in the room.There's a problematic contradiction with real estate.Either housing is affordable, or it's a way to build wealth and store value.It is really tough to be both.Think about it.
There's a world in which everyone can afford to buy a house on an average salary, or there's a world in which the price of real estate keeps going up so homeowners can make a return on their investment.
And maybe there's another world where both can be true.But if that exists, it sure isn't this one.Not right now, anyway.So how are the presidential candidates thinking about housing policy?Well, let's start with Trump's plan.
For his official stance, I'm pulling from the RNC policy linked on Trump's website.I'm just going to read you the quote word for word because it's honestly not that long.
Here it is, quote, To help new homebuyers, Republicans will reduce mortgage rates by slashing inflation, open limited portions of federal lands to allow for new home construction, promote homeownership through tax incentives and support for first-time buyers, and cut unnecessary regulations that raise housing costs, end quote.
Trump plans to cut inflation by increasing American energy production, even though we're already the second largest energy producer globally.
He also says he plans to reduce inflation by cutting government spending, but it is unclear how that works alongside his support for first-time homebuyers.My guess would be the way that inflation and interest rates work like a seesaw.
If inflation cools, the Fed will continue to cut rates, and that trickles down to lower mortgage rates. Housing support is a new part of his campaign strategy and not something that we've seen strong policy on before.
When he was in office, Trump significantly slashed the budget of the Federal Housing Administration and repeatedly cut housing and rental assistance programs.
Something that's not mentioned in his official policy, but that he's brought up a lot on the campaign trail, is his plan for mass deportation of undocumented people, which he claims would drive down housing costs.
Setting aside the ethical and financial issues of mass deportation, if he deported 1 million people a year for a total of 4 million people, that is not going to free up 4 million units of affordable, safe starter homes in desirable areas for young couples and families.
It's not even going to free up four million units of crummy apartments because undocumented people tend not to live alone.
What mass deportation will do is slow down the construction of new housing and drive up building costs, considering that 10 to 19 percent of the construction industry is believed to be undocumented workers.
Trump also supports opening up federal lands for development and reducing red tape for building houses. Since Harris also backs these ideas, too, we'll discuss them together.
Opening federal lands has some merit, but let's be real, most of the land isn't in highly desirable areas.The federal government owns 60% of the land, for example, in Alaska and 0.3% of the land in Connecticut.
The majority of federal land is in undeveloped parts of the West.
In places like Nevada or Arizona, it could help alleviate some housing issues, but these lands don't have basic infrastructure like electricity or sewers, so this needs to be part of a much bigger strategy.
Both Trump and Harris also support cutting regulations to make home buying easier, but zoning and construction issues are hyper-local.They're under the control of the state, city governments, or municipalities.
What this would look like in practice under Trump's plan is anyone's guess.Harris is proposing a 40 billion dollar fund for local governments to ease zoning restrictions and other regulations, but only if they build more affordable housing.
Now, let's get further into Harris's plan.It's detailed and thoroughly footnoted.Definitely way too long to read here.But if you're curious, it's under the New Way Forward section on her website.The Harris plan comes down to three major ideas.
Build three million new housing units in four years.Give new homebuyers $25,000 for a down payment.And make it less appealing for large companies to buy up rental properties.
Much like mass deportation, kicking out institutional investors is not really going to free up that much housing.There are places where this would help a lot.
In Atlanta, for example, institutional investors own 25 percent of single family rental homes.If you're bidding for a house, you can't just compete with Blackstone.So for some markets, this will really help.
But nationally, institutional investors only own 2 percent of single family rental homes.So this is just one piece of a much bigger puzzle.
Now, you know I love me some free money, but I am going to pass on the 25 grand down payment initiative from the Harris campaign.
If everyone suddenly has 25 grand burning a hole in their pocket, can you guess what happens to home prices if you said they're going to go up 25 grand? Well, congratulations, you're on the same page as a lot of economists and yours truly.
The best way to make homes more affordable is to build more of them, not to enable more people to buy more.The Harris plan has some strategies for that.
There's the $40 billion fund to encourage growth in the affordable housing segment that I already mentioned.Plus, there's a tax credit to help renovate dilapidated homes or build new ones.These homes would be owner occupied in low income communities.
Harris is also offering tax credits to encourage commercial builders to construct affordable rental units, with the federal government footing some of the bill.These initiatives could increase housing supply without driving up home prices.
But remember, no president has a magic wand here. Their ideas need to get through Congress first.I wish there was a simple solution to the housing crisis, but it is complicated.
The good news here, we're having a conversation about it and we are a smart country.
So if we buckle down and really work on this issue, I believe we can solve it because the way we're doing things now, it's just not working and we need to fix it fast. For today's tip, you can take straight to the bank.
When housing prices are climbing, it is tempting to stretch your budget for a home you might not be able to afford in the long run.
But my advice is really stick to a payment plan that doesn't exceed 30% of your monthly income and leave room in that budget for unexpected home ownership costs.Hello, busted water heater.
Remember, your dream home should be a blessing, not a financial burden. Money Rehab is a production of Money News Network.I'm your host, Nicole Lappin.Money Rehab's executive producer is Morgan Levoy.Our researcher is Emily Holmes.
Do you need some Money Rehab?And let's be honest, we all do.So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me.
And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you.No, seriously, thank you.
Thank you for listening and for investing in yourself, which is the most important investment you can make.
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