How the 2024 Presidential Election Could Shape Rents – Forbes Advisor

As voters go to the polls on November 5, the next president’s policies will play a critical role in shaping housing affordability.

Vice President Kamala Harris’ detailed, targeted approach focuses on building more housing and providing direct relief to renters and homebuyers, while former President Donald Trump’s broader economic strategy relies on deregulation and reducing demand through through immigration reform.

The cost of rent (including rent, utilities and fuel) will rise faster than home values ​​for the first time in ten years in 2023.

According to the American Community Survey, rental costs rose 3.8%, compared to a 1.8% increase in home values. George Guszcza, president and CEO of the National Institute of Building Sciences, summarizes why rents have risen: The problem comes down to supply and demand, and solving it will require both federal and state policymakers.

“The cost of housing – whether renting or owning – is rising much faster than incomes.” Guszcza points to more than 90,000 local areas, each with its own building codes, underscoring the need for a federal and local partnership.

Amalie Zinn, research analyst at the Urban Institute, notes that renters are often overlooked in policy conversations. “There’s a lot of energy around homeownership, but renters are often left out,” she says.

Here’s a look at how Harris and Trump’s proposals could help renters directly and indirectly.

How a President’s Tariff Decisions Affect Housing Costs

One of the main catalysts of the housing shortage is the high cost of building materials, driven in part by tariffs. According to an analysis by Zillow, the U.S. housing shortage will affect 4.5 million homes in 2022, up from 4.3 million the year before.

Trump’s tariffs

In 2018, Trump imposed a 25% tariff on imported steel and a 10% tariff on aluminum. The goal was to protect American industries and encourage more domestic production. While this helped some sectors, costs for building materials used in residential construction increased for two reasons:

• Rising material costs: Jamie Spurlock of Limitless Construction in Dayton, Ohio, explains, “Basic materials like fences and decks are now two to three times more expensive.” Lumber prices have stabilized, but aluminum continues to rise, making projects significantly more expensive.
• Impact on construction: According to the U.S. International Trade Commission, steel prices increased 166% between 2017 and 2021, and aluminum prices increased 45%. Steel imports fell 17%, while aluminum imports fell 19%, but are still higher than pre-tariffs. This created a perfect storm for rising construction costs, affecting housing supply.

Adjustments from the Biden-Harris Administration:

The Biden administration has revised Trump’s tariffs and introduced a quota system for steel and aluminum imports from the EU, Japan and the UK. Under this system, imports are tariff-free up to a certain threshold, but anything above that limit is subject to tariffs.

• Effect on costs: Although this system reduced costs somewhat for American companies, it kept prices high due to the quota system. As of 2024, tariffs on these metals will add $2.7 billion to the total U.S. tariffs of $79 billion, while retaliatory measures from other countries will add $1.6 billion in additional taxes on U.S. goods.

Harris’ position on tariffs

While Harris has been critical of the widespread tariffs, arguing that they contribute to inflation, she has supported Biden’s policy adjustments. She believes that tariffs should be used selectively to protect crucial US industries such as steel, as evidenced by her opposition to the sale of US Steel to Japan’s Nippon Steel.

Both candidates will have to deal with tariffs’ consequences for housing costs. How they handle trade policy will directly impact material costs and the cost of building new homes, easing pressure on rental properties.

Harris’s housing plan: detailed and direct

Harris has released details of how she would tackle the housing crisis. Her plan focuses on expanding affordable housing and providing assistance to starters on the housing market through the following actions:

• Build 3 million homes: Harris would work with the private sector to create 3 million new homes to help alleviate and stabilize the current housing shortage rental prices.
• $25,000 down payment assistance: First-time buyers would receive $25,000 to make homeownership more affordable, especially for low- and middle-income Americans.
• Expand LIHTC: The Low-Income Housing Tax Credit (LIHTC) would be expanded to finance the construction of 1.2 million new affordable rental units, lowering rents for millions of Americans.
• $40 billion local innovation fund: Harris is also proposing a $40 billion fund to help local governments cut red tape and implement innovative solutions to housing problems, such as zoning reforms and creative financing options for developers.
• First ever tax incentive for starter homes: A tax incentive for builders who build starter homes for starters, reducing the shortage of starter homes.
• Extensive tax incentives for affordable rental housing: Increased tax breaks for companies building affordable rental units to encourage more construction.
• Repurposing of federal lands: Certain federal lands will be available for affordable housing development.
• Reduce administrative burden: Streamlined permitting and approval processes to accelerate housing construction, including transit-oriented and conversion projects.

Trump’s housing plan: broader and economically focused

Trump’s approach to housing is less detailed, but he focuses on broader economic measures that could impact housing costs. His plan focuses on deregulation, reducing inflation and curbing immigration, which he says would free up housing for Americans.

• Deporting undocumented immigrants: Trump argues that deporting millions of undocumented immigrants would reduce demand for housing, especially in lower-income areas, freeing up rental properties and lowering prices.
• Reduce construction costs: Trump’s strategy includes cutting regulations and lowering inflation, which he says will lower construction costs and make homeownership more affordable.
• Opening of federal land for housing: Trump proposes using federal land for new housing projects, expanding the space available for builders to create more affordable housing.
• Tax incentives for starters on the housing market: To encourage homeownership, Trump plans to offer tax breaks to first-time buyers, making it easier for people to buy homes.

Unlike Harris’ plan, Trump’s proposal does not directly focus on building affordable rental housing, but rather emphasizes broader economic measures such as deregulation and immigration reform.

More than half of full-time workers cannot afford basic housing

The scale of the housing affordability crisis is staggering. According to the Census Bureau, more than half of U.S. renters – 21 million households – spend more than 30% of their income on rent, the benchmark for what is considered affordable housing.

The National Low Income Housing Coalition reports that more than 50% of full-time workers cannot afford a modest one-bedroom apartment at fair market rent, and more than 60% cannot afford a two-bedroom apartment.

• In big cities: In New York City, a two-bedroom apartment requires an income of $52.92 per hour, but the The city’s minimum wage is $16.00. Los Angeles paints a similar picture: a renter must earn $48.92 per hour, while the minimum wage in Los Angeles is only $17.27 per hour.
• Minimum wage employees: Minimum wage workers are hit hardest. A full-time minimum wage earner earning $7.25 per hour brings in just $1,257 per month, before taxes. This means that the “affordable” rent would be $377 per month – well below the cost of a one-bedroom apartment in virtually any American city. Even in Buffalo, the most affordable metro to rent for a minimum-wage worker, you’d still spend 39% of your income on rent, according to an analysis by Clever Real Estate, an online real estate referral service.