AYESHA RASCOE, HOST:
The average cost of a home in the U.S. has risen by nearly 50% over the past decade. That's well ahead of overall inflation, and prices in some of the fastest growing states, like Florida and Idaho, have risen two or three times as fast. Unsurprisingly, housing has become a top issue in this fall's presidential campaign. Atlantic staff writer Jerusalem Demsas is here to talk with us about that. Welcome to the program.
JERUSALEM DEMSAS: Thank you for having me.
RASCOE: So you've written a lot about how cities and towns block new housing developments. Can you explain how approvals at the local level are affecting the supply of new housing?
DEMSAS: There are a couple of ways that this happens. First is that cities and towns are largely in charge of how land in their area is used. Here, we're going to allow large single family homes, and we're going to make sure they sit on at least 10,000 square feet or in some places even an acre of land. Developers can ask for exceptions to these rules. It's called a variance. And so you go to, you know, your local government officials and you ask them for permission, and sometimes they grant permission and a lot of times they don't grant permission. And so these seem like very small minor decisions when they're being made on this individual basis. But when you multiply these across every single town in America, it adds up to a massive housing shortage.
RASCOE: But these zoning laws have been around for a long time. Is there something in particular that's happening now that's leading to this rapid rise in housing prices over the past decade or so?
DEMSAS: Yes, during the pandemic, there was a massive shift in demand. Interest rates were very low inviting a bunch of people to try to buy new homes and remote work made it possible for people to begin moving to the secondary and tertiary markets. This small shift in demand created a bunch of pressure on existing housing markets. But in a normal market, when you have a bunch of people who want something, we just make more of that. But with housing, we have a problem. Even as the demand increases, the market does not respond by providing more housing to accommodate everyone.
RASCOE: Let's turn to Vice President Harris. She said that she'll increase home construction by 50%, and reducing red tape is a big part of that plan. She spoke in Pittsburgh last month.
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VICE PRESIDENT KAMALA HARRIS: The simple truth is in America, it takes too long and it costs too much to build. Whether it's a new housing development, a new factory or a new bridge, projects take too long to go from concept to reality.
RASCOE: Is what she's proposing realistic since so much of this is done at the local level?
DEMSAS: Yeah. So, I mean, I don't think Harris' housing plan really contains a lot of the tools yet. She's obviously articulating the problem quite clearly in the clip you just played. But you would need a lot more pressure from the federal government to get this to change, whether it's in the form of providing funding to states and to localities that are going to make real changes to their zoning laws, or if it's withholding funding that's already going out.
RASCOE: Let me get your thoughts on another one of her proposals. It's $25,000 in down payment assistance for first-time home buyers. Will that help, or will it raise prices by pumping even more money into real estate?
DEMSAS: Yeah, this is the question, right? The Harris campaign clearly recognizes this. They have said that they want to sequence their policies such that you get a bunch of housing built, and then you provide the down payment assistance. I think it's a lot trickier than it sounds. It's very hard to time something like that.
RASCOE: In turning to former President Trump, he said that he'd open up federal land to housing construction. He mentioned that at the Economic Club of New York in September.
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DONALD TRUMP: And we will open up portions of federal land for large-scale housing construction. These zones will be ultra low tax and ultra low regulation. One of the great really small business job creation programs it will be of all time. We're going to open up our country to building homes inexpensively so young people and other people can buy homes.
RASCOE: Is there a lot of federal land like that that could be used for building homes?
DEMSAS: There really does need to be an accounting of this. We would expect places like post offices - right? - the idea of there being apartments and stuff built above those as an innovative idea that people have been exploring. That's federal land in a lot of cities where, you know, you have wasted space. You could have just some nice units sitting above it in a mixed-use kind of way, the way that you see in a lot of main streets these days where you have that first floor being retail and then the two or three to five floors being housing for people.
RASCOE: Another point is interest rates on mortgages. They've been high as the Federal Reserve fights inflation, but now they're easing, and that will make mortgages cheaper. But will housing prices just go up even more because demand is going to increase? I hope not, because I probably want to buy a home soon.
DEMSAS: Yeah. I hope not for you to as well. Interest rates going down is really, really good for affordability. It's really also good for future development. As interest rates come down, it makes it more likely for developers to be able to make affordable housing and market rate housing units. You're right that it can push more people into the market, which can push up prices. You want to get to a good equilibrium though. You want there to be lower interest rates and make sure that there's enough supply because that's the actual controlling factor here, right? If a bunch more people get in because they want to buy housing because interest rates are low, then we should make more housing so that there's enough for everyone to be purchasing.
RASCOE: That's Jerusalem Demsas, who covers housing policy for The Atlantic. Thank you so much for joining us.
DEMSAS: Thank you for having me. Transcript provided by NPR, Copyright NPR.
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