The American Dream Deferred: Why House Prices May Be a Problem for Biden


Cameron Ambrosy spent the first weekend of December attending 10 open houses, solely for research purposes. The 25-year-old from St. Paul, Minnesota, 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 a much more long-term goal than my parents or my grandparents, or even my peers who are a little older,” Ms. Ambrosy said, adding that for many of her friends, owning a housing is even further away. “There's a lot of nihilism around long-term goals like buying a home.”

As many people pay more for rent and some struggle to save to buy a home, political and economic analysts warn that housing affordability may be contributing to economic unhappiness, and is likely to be a more prominent issue in the election. 2024 presidential elections than in previous years. .

Many Americans view the economy negatively even though unemployment is low and wage growth has been strong. Younger voters cite housing as a particular source of concern: Among respondents ages 18 to 34 in a recent Morning Consult poll, it ranked second only to overall inflation.

Wary of the issue and its political implications, President Biden has directed his economic advisers to propose new and expanded efforts for the federal government to help Americans struggling with the costs of buying or renting a home, his advisers say. The administration is using federal grants to prompt local authorities to relax zoning regulations, for example, and is considering executive actions that focus on affordability. The White House has also sent top officials, including Lael Brainard, who heads the National Economic Council, give speeches about the administration's efforts to help people buy homes.

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

Housing has traditionally not been a major factor in motivating voters, in part because key market drivers, such as 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 gone up about 22 percent since the end of 2019, and a key house price index has increased by an even more considerable 46 percent. Mortgages now hover around 7 percent as the Federal Reserve has raised rates to the highest level in 22 years in an attempt to contain inflation. Those factors have combined to make both monthly rent and the dream of first-time homeownership increasingly unattainable for many young families.

“This is the unique economic issue of our time, and they need 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, Missouri. referring to the White House.

The housing affordability crisis comes at a time when many consumers are facing higher prices overall. A bout of rapid inflation that began in 2021 has caused households to pay more for everyday needs such as milk, bread, gasoline and many services. Although costs are no longer rising as quickly, those higher prices continue to weigh on consumer confidence, eroding Biden's approval ratings.

While incomes have recently kept pace with price increases, that inflationary period has caused many young households to spend more of their budgets to rental costs. That makes it harder for many to save for now higher down payments. The situation has caused a wave of virality. social media content about the difficulty of buying a home, which has long been a stepping stone to the middle class and a key component of wealth creation in America.

That's why some analysts think housing concerns could become a major political issue, particularly for the most affected demographics, such as younger people. While about two-thirds of American adults overall are homeowners, that share drops to less than 40 percent for those under 35 years of age.

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

However, there are reasons why presidential candidates have rarely emphasized housing as an electoral issue: It is both a long-term problem and difficult for the White House to address alone.

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

The United States has a housing supply deficit that has been developing for years. Builders pulled back on construction after the 2007 housing market crash, and years of underconstruction have left too few properties on the market to meet recent strong demand. The shortage has been exacerbated recently as higher interest rates discourage homeowner families left with low mortgage rates from moving.

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

And even voters who feel bad about housing might support Democrats for other reasons. Ms. Ambrosy, the prospective buyer in St. Paul, said that she had voted for President Biden in 2020 and that she planned to vote for the Democratic candidate in this election based solely on social issues, for example.

But housing affordability is enough of an issue for young voters and renters (who tend to lean heavily Democratic) that it has left the Biden administration struggling to emphasize possible solutions.

After including emergency rental assistance in his 2021 economic stimulus bill, Biden has devoted less attention to housing than other inflation-related issues, such as reducing the cost of prescription drugs. His more aggressive housing proposalsas an expansion of federal housing vouchers, were removed from last year's Inflation Reduction Act.

Still, his administration has pushed several efforts to liberalize local housing laws and expand affordable housing. He released a “Housing offer action”plan that 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 easy. The plan also gives governments more leeway to use transportation and infrastructure funds to produce housing more directly (for example, with a new program that supports conversion of offices to apartments).

The administration has also floated a number of ideas to help tenants, such as a Flat for future tenant laws and a new Federal Trade Commission proposal to ban “junk rates” 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 raised 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 housing developments. Ms. Raghuveer, the tenant organizer, has argued that the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, could unilaterally impose a limit on annual rent increases for landlords whose mortgages are supported by agencies.

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

Republicans control the House and have opposed nearly all of Biden's plans to increase government spending, including on housing. But his advisers say Biden will push the case and seek new executive actions to help with housing costs.

While there might be value in starting to talk 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 developing for 15 years, since the financial crisis, and it will take another 15 years to get out of it.”

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