What Trump and Harris say they'll do to fix -2-

Unintended consequences: AEI's Pinto said that federal subsidies can become too complex and inefficient. He pointed to the fact that in 2017, an investigation by NPR showed that the LIHTC program had become inefficient and produced fewer units at greater taxpayer expense than 20 years prior.

The bottom line: The fact that Harris is proposing to build more housing, and provide tax incentives to spur more construction, is telling of how important housing is as an economic issue in the U.S., most experts agreed.

That represents a political shift for Democrats, who have traditionally been seen as less enthusiastic than Republicans about real-estate development.

"It used to be that the Democrats were really on the wrong side of history trying to pick a fight with developers," Glenn Kelman, CEO of real-estate brokerage Redfin, told MarketWatch. "America needs more housing. Developers are going to be a partner in that."

"It used to be that the Democrats were really on the wrong side of history trying to pick a fight with developers. America needs more housing."Glenn Kelman, CEO of Redfin

Cut red tape and make it easier to build

Harris's plan: Offer a $40 billion federal fund to push local governments to find solutions to build housing. Those solutions could include making construction financing more innovative, or finding ways to design and build more affordable rental housing.

The plan is to also "cut red tape" and streamline "permitting processes and reviews, including for transit-oriented and conversion development, so builders can get homes on the market sooner and bring down costs."

Has it been done before? Maybe.

Harris's proposal to spur housing innovation has a similar structure to President Barack Obama's Race to the Top education initiative, Ed Glaeser, a Harvard economics professor, wrote in the New York Times. If the federal government likes a certain proposal, it can offer cash to the builder or contractor. The professor argued that the structure of the program holds more promise than actual results.

The federal government has also pushed local and state governments by offering "carrots" and funding to find more innovative ways to build housing and cut red tape, acting secretary of the U.S. Department of Housing and Urban Development told MarketWatch in an exclusive interview.

Unintended consequences: Much of the opposition to building denser housing comes from homeowners looking to protect the value of their own house.

People who embrace this so-called "not in my backyard" or NIMBY ethos and oppose multi-family construction in their neighborhoods include a tech billionaire, an NBA basketball player, and residents of a wealthy suburb of Washington, D.C.

To be sure, there have been studies that have found that there is no negative effect on the value of single-family homes when apartments are built in the area.

The bottom line: Both Democrats and Republicans have proposed addressing the issue of local and state rules around what can be built, which can be broadly referred to as zoning reform.

But it's unclear how far they can go with their ideas. "There's no way that we can increase the supply fast enough to significantly lower home prices when it's both [a person's] shelter and an asset class," Redfin's Kelman said. "And there are many Americans, who are deeply invested in having home prices go up, which is unfortunate for the rest of Americans who need them to come down."

"We hear so much about NIMBYism, and the reality is, if you don't want affordable housing in your backyard, you're going to end up with homeless people in your front yard," Dworkin added.

Harris's overall housing proposal, in one line: It has been "decades since we had a national housing plan, and by that I mean a comprehensive federal approach to the housing issues that we face as the country," National Housing Law Project's Roller said. "This is a start."

To address housing costs, Donald Trump is proposing...

Shutting illegal immigrants out

Trump's plan: Ban undocumented immigrants from accessing home mortgages.

Has it been done before? Unclear.

Home loans to undocumented people living in the U.S. are legal, the Wall Street Journal reported, but they are rare.

Out of about 3.4 million home loans made in 2023, about 5,000 to 6,000 went to borrowers using individual tax identification numbers, most of whom were thought to be undocumented immigrants, a report by the liberal-learning Urban Institute found.

As one immigration lawyer, Greg Siskind, put it on X, "in 34 years of practicing immigration law, I've never encountered a completely undocumented person who got a mortgage."

Unintended consequences: Another of Trump's immigration-related proposals, to enact mass deportations of illegal immigrants, could impact the U.S. housing market.

An estimated 1.6 million immigrants work in the construction industry in the U.S., which is about 20% of the industry's workforce, according to one estimate by the University of Michigan. And within this group, in some states, half or an even bigger share of the workforce are undocumented - or illegal - migrants.

"We don't have enough construction workers, and the lack of any immigration path for skilled trade is a real barrier to lowering construction costs and making sure we have enough construction workers," Roller, of the National Housing Law Project, said.

To meet the demand for labor, the construction industry will need to attract nearly 501,000 additional workers on top of the normal pace of hiring this year, according to the Associated Builders and Contractors.

Immigration reform could help fill the construction industry's labor shortage and help speed the pace of home building, and so could adding more women to the construction workforce, the managing director of Harvard's Joint Center for Housing Studies told Congress earlier this year.

The bottom line: The housing market's two underlying problems are too much demand and too little supply. Trump's plan to crack down on illegal immigrants in the housing market would potentially affect only a small sliver of home buyers.

Privatizing Fannie Mae and Freddie Mac

Trump's plan: Trump allies reportedly have intentions to end federal government control of Fannie Mae and Freddie Mac, two mortgage-finance giants, if Trump takes office, according to The Wall Street Journal. The Trump campaign noted that Trump himself hasn't said anything about this idea.

The two government-sponsored enterprises have been under government control since 2008, in the wake of the financial crisis. They purchase and securitize mortgages, both residential and commercial, and sell them on the secondary market.

Has it been done before? Yes, in a way.

Before Fannie Mae and Freddie Mac went into government conservatorship when they were on the brink of bankruptcy during the subprime mortgage crisis, they were publicly traded companies. Fannie Mae and Freddie Mac were listed on the New York Stock Exchange. They now trade over the counter.

Trump tried to privatize these two housing-finance entities in his first term, but the pandemic hit the brakes on that proposal.

Unintended consequences: While some conservative-leaning analysts and politicians argue for the mortgage market to be fully private, "it was the fully private segment of the market, however, that caused millions of foreclosures and brought down the entire financial system," the Center of American Progress, a liberal D.C.-based think tank, wrote in September 2012.

It added then that withdrawing the government from mortgage finance could also reduce the availability of credit to middle-class borrowers.

The bottom line: One former Trump official said that even if Trump wins, Fannie and Freddie are not going to go private anytime soon, HousingWire reported. While it is doable, it will not happen quickly, he said.

Cracking down on zoning rules

Trump's plan: In a July interview with Bloomberg, Trump mentioned that housing costs are elevated due in part to complicated zoning laws and building permits.

Asked what his plan was to make housing more affordable, Trump responded: "Fifty percent of the housing costs today and in certain areas - like, you know, a lot of these crazy places - is environmental, is bookkeeping, is all of those restrictions. Building permits. Tremendous [restriction]."

"Plus, they make you build houses that aren't as good at a much greater sum," Trump told Bloomberg. "They make you use materials that are much less good than other materials. And the other materials are, I mean, you're talking about cutting your [permits] down in half. Your permits, your permitting process. Your zoning, if - and I went through years of zoning. Zoning is like ... it's a killer. But we'll be doing that, and we'll be bringing the price of housing down."

Has it been done before? Yes.

Many states and localities have already begun to address rules that force builders to build only single-family homes in residential areas, such as in Minneapolis. In 2018, the city came up with the idea of ending single-family zoning citywide. But again, the main challenge has been local homeowners who protest such changes, as detailed above.

"President Trump will Make Housing Affordable Again by defeating historic inflation and reducing the mortgage rate back down to 3%."Taylor Rogers, a spokesperson for the Republican National Committee

Trump's overall housing proposal - in one line: "President Trump will Make Housing Affordable Again by defeating historic inflation and reducing the mortgage rate back down to 3%," Taylor Rogers, a spokesperson for the Republican National Committee, told MarketWatch. In fact, under U.S. law the president does not control interest rates, but Trump has suggested presidents should have more sway over the Federal Reserve, which sets rate policy.

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