Democratic nominee Kamala Harris has pledged to work towards the construction of 3 million new housing units during her term. Setting aside the methods, what does that mean? And, as she said in a speech last week, would it “end America’s housing shortage“?
First, it’s pretty obvious that Harris doesn’t mean 3 million total. That would represent a large drop in housing production; almost 1.5 million residences were completed in 2023. So it must be relative to something – the last four years, a projection into the next four, or some longer-term average.
The business cycle isn’t going to make this easy for Harris – starts in July were 33% below their 2022 peak. Just getting back to 2023 completion rates would be a policy victory! But Harris is right to want more.
How much would 3 million homes lower costs?
In a previous post, I explained how reasonable people can say that America has a 4-million home deficit or a 20-million home deficit. Both are useful ways to look at the problem. And no single cutoff is “right” in the sense that a housing cost crisis is a matter of degrees: each additional house lowers local rents by a tiny amount.
How much would 3 million new homes lower rents? We might like it if all of them were in high-demand places. But that’s not how politics works. So let’s say (optimistically) that 0.5 million net new units end up in the cheaper half of the country and 2.5 million end up in the expensive half. Let’s also assume that the new units are distributed in geography and typology in the same way as the existing stock.
A typical apartment in the expensive half of the country might have a rent of $3,000. Increasing the housing stock in that half by 3.4 percent (2.5m / 73m) would lower rents by something like 5 percent, bringing it down to $2,850. That’s really good!
In the cheaper half of the country, there’s more supply (we’ve assumed half a million homes) but also some outmigration. I’ve got no basis for this, but let’s guess that two-fifths of the new households in the expensive part of the country would otherwise have demanded housing in the cheap half. That gets us a 0.5 million unit increase in supply and a 1 million unit decrease in demand. A typical $1,200 apartment might decrease by 2.25%, to $1,173.
Devilish details
Of course, actual proposals cannot be as broadly simplistic as what I’ve sketched above. Some of Harris’ proposals, like giving large grants to first-time homebuyers, will tend to increase prices rather than decrease them. Others would affect only select cities (those adjacent to federal lands, for example). Nothing I’ve seen from the Harris campaign is likely to shake loose 300,000 building permits, let alone 3,000,000.
But the Harris target is good for two reasons:
- It explicitly acknowledges that availability is the central issue. It’s the reason prices are high, the reason inventory is low, and the reason people can’t find housing where they want it.
- The only way to measure success in an area as multifaceted as housing is to look at big-picture results. A Harris (or Trump) administration should take the same approach to federal grantees: don’t tell me your plans, tell me your accomplishments.
