High housing prices could pose a problem for Biden

Cameron Ambrosy spent the first weekend of December attending 10 open houses – purely for research purposes. The 25-year-old from St. Paul, Minn., has a well-paying job and she and her husband are saving diligently, but she knows it will be years before they can afford to buy.

“It’s much more of a long-term goal than it was for my parents or my grandparents, or even my peers who are a little older,” Ms. Ambrosy said, adding that for many of her friends, attaining the property is even further away. “There’s a lot of nihilism around long-term goals like buying a house.”

With many people paying more for rent and some struggling to save for a first home, political and economic analysts warn that housing affordability could worsen economic woes – and will likely be a bigger problem when of the 2024 presidential election than in previous years. .

Many Americans have a negative view of the economy, even though unemployment is low and wage growth is strong. Younger voters cite housing as a particular concern: among those aged 18 to 34 in a recent Morning Consult poll, it came in second after overall inflation.

Wary of this problem and its policy implications, President Biden has directed his economic aides to make new and increased efforts to get the federal government to help Americans who are struggling with the costs of purchasing or renting a house, according to their assistants. The administration is using federal grants to incentivize local governments to relax zoning regulations, for example, and is considering executive actions focused on affordability. The White House also dispatched senior officials, including Lael Brainard, who heads the National Economic Council, give speeches on the administration’s efforts to help people afford housing.

“The president focuses a lot on housing affordability because it is the largest monthly expense for many families,” Ms. Brainard said in an interview.

Housing has not traditionally been an important factor motivating voters, in part because key market drivers, like zoning policies, tend to be local. But some political strategists and economists say the rapid rise in prices since the pandemic could change that.

Rents have increased about 22 percent since the end of 2019, and a key house price index is up an even bigger 46 percent. Mortgages now hover around 7 percent as the Federal Reserve raised rates to the highest level in 22 years in an effort to contain inflation. These factors have combined to make monthly rent and the dream of homeownership increasingly out of reach for many young families.

“This is the unique economic issue of our time, and they have to figure out how to talk about it with voters in a way that resonates,” said Tara Raghuveer, director of KC Tenants, a tenants union in Kansas City, in Missouri. referring to the White House.

The housing affordability crisis comes at a time when many consumers are facing higher prices in general. A rapid surge of inflation that began in 2021 has forced households to pay more for basic necessities like milk, bread, gasoline and many services. Even though costs are no longer rising as quickly, these higher prices continue to weigh on consumer confidence, eroding Mr. Biden’s approval rating.

Although incomes have recently kept pace with rising prices, this period of inflation has pushed many young households to devote more of their lives to the economy. budgets rental costs. This makes it harder for many to save for now-higher down payments. The situation sparked a wave of viral content on social media about the difficulty of buying a home, which has long been a stepping stone to the middle class and a key part of wealth creation in the United States.

That’s why some analysts believe housing problems could turn into a significant political issue, especially for hard-hit demographic groups like young people. While about two-thirds of American adults overall are homeowners, that share drops to less than 40 percent for those under 35.

“The real estate market has been incredibly volatile over the past four years, which has made it very important,” said Igor Popov, chief economist at Apartment List. “I think housing will be a major issue in the 2024 election.”

Yet there are reasons why presidential candidates have rarely focused on housing as an election issue: it is both a long-term problem and a difficult one for the party to solve. White House alone.

“Housing is kind of the economic policy problem,” said Jim Parrott, a nonresident fellow at the Urban Institute and a former economic and housing adviser to the Obama administration.

America has been experiencing a housing shortage that has lasted for years. Builders slowed construction after the housing market crash of 2007, and years of underconstruction left too few properties on the market to meet recent high demand. The shortage has recently been exacerbated by rising interest rates among homeowner families who have locked in their low mortgage rates to avoid moving.

Conditions could improve slightly in 2024. The Federal Reserve is expected to begin reducing borrowing costs next year as inflation slows, which could help make mortgages slightly cheaper. A new supply of apartments is expected to be completed, which could limit rents.

And even voters who feel bad about housing might still support Democrats for other reasons. Ms. Ambrosy, the potential buyer in St. Paul, said she voted for President Biden in 2020 and plans to vote for the Democratic nominee in this election based solely on social issues, e.g. .

But housing affordability is enough of an issue for young voters and renters — who tend to lean heavily Democratic — that the Biden administration is scrambling to emphasize possible solutions.

After including emergency rental assistance in his 2021 economic stimulus bill, Mr. Biden paid less attention to housing than other inflation-related issues, like reducing the cost prescription medications. Her most aggressive housing proposalsmuch like the expansion of federal housing vouchers, were removed from last year’s Inflation Reduction Act.

His administration nevertheless made several efforts to liberalize local housing laws and expand affordable housing. He published a “Action for housing supply” which aims to accelerate the pace of development by using federal grants and other funds to encourage state and local governments to liberalize their zoning and land use rules to make housing construction faster and more affordable. easy. The plan also gives governments more leeway to use transportation and infrastructure funds to more directly produce housing (such as with a new program that supports the conversion of offices into apartments).

The administration has also floated a number of ideas to help tenants, such as a plan for prospective tenant legislation and a new Federal Trade Commission proposal to ban “unwanted charges» for things like roommates, apps and utilities that hide the true cost of rent.

Some affordable housing advocates say the administration could do more. One possibility they have floated in the past would be for Fannie Mae and Freddie Mac, which help create a stronger market for mortgages by purchasing them from financial institutions, to invest directly in moderately priced rental developments. Ms. Raghuveer, the tenant organizer, argued that the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, could unilaterally impose a cap on annual rent increases for landlords whose mortgages are supported by agencies.

But several experts said the White House’s efforts would only be helpful at the margins. “Without Congress, the administration is really limited in what it can do to reduce barriers to supply,” said Emily Hamilton, an economist at the Mercatus Center who studies housing.

Republicans control the House and have opposed nearly all of Mr. Biden’s plans to increase government spending, including on housing. But his aides say Mr. Biden will press his case and seek new executive action to help cover housing costs.

While it might be helpful to start talking about solutions, “nothing is going to solve the problem in a year,” said Mark Zandi, chief economist at Moody’s Analytics and a frequent adviser to Democrats.

“This problem has been growing for 15 years, since the financial crisis, and it will take another 15 years to come out of it.”