The cost of buying a home in the U.S. has reached historic highs, with the median price of a home at $420,800. Housing and mortgage costs are becoming a significant issue in the upcoming November election as home shoppers need an annual income of $114,000 to afford a typical home, nearly double the amount needed in 2020. Higher prices are being driven by soaring interest rates, with rates now exceeding 7%, the highest they’ve been since 2001. President Joe Biden has emphasized the independence of the Federal Reserve, which sets interest rates, and the Fed has been raising rates since 2021 to combat inflation.
To make home ownership more affordable, the federal government can consider several strategies. One approach is to provide tax benefits for builders who produce entry-level homes to increase the housing stock of smaller, more affordable homes. Another suggestion is to withhold funding from localities that do not change zoning laws to allow for denser residential construction. Selling federal land for housing projects is also proposed as a way to increase the housing supply. Additionally, improving consumer access to financing for manufactured housing can make it easier for buyers to secure loans for these homes.
Eliminating tax breaks for second and third homes could also help increase the national housing stock over time. By removing the mortgage interest rate deduction for non-primary residences, homeowners may be incentivized to sell these properties, leading to more available homes in the market. Lowering interest rates may not have a significant impact on housing costs, as the effects would depend on changes in housing supply and demand. Both President Biden and former President Donald Trump have proposed policies to address housing affordability, with differing approaches that could impact home prices.
The cost of home ownership has become a top concern for both Democrats and Republicans, urban and rural residents. The issue of high housing costs has transcended political divides and is now a priority that could influence elections. President Biden could be held accountable by voters for the cost of homeownership and mortgage rates, with economists predicting that rising rates could impact his reelection odds. Overall, addressing high housing costs will require a combination of policy solutions to increase affordable housing options and make home ownership more accessible for all Americans.
