The Harris/Walz economic agenda might be called “Free Stuff Socialism” where government taxes the "super-rich" to provide ordinary Americans with “free stuff,” or at least stuff at sharply reduced prices. Obviously, the aim is to secure votes and, no doubt, many Americans will find these lures convincing. Unfortunately, as is often the case with “too good to be true” proposals, this “free” or “drastically reduced” stuff may prove to be a terrible bargain. What makes this pandering particularly odious is that it does not take much to see through the deception.

Consider, for example, the proposal to pay 400,000 first-generations home buyers $25,000 towards their down payment and a $10,000 tax credit for first-time home buyers. All told, this plan is to help one million first-time home buyers per year while simultaneously boosting the home construction industry. The estimated cost of the program would be $200 billion over four years. (Note: These numbers are fuzzy but, they still reflect “official” pronouncements. The proposal is clearly a work in progress.) 

Her proposal anticipates the construction of three million new homes per year and to encourage ordinary people to become homeowners, Wall Street investors would also be forbidden to purchase large numbers of homes as rental properties. Finally, the government will create a $40 billion “innovation fund” to assist local communities solve the housing shortage while opening certain federal lands for home construction. Home ownership, the great engine of asset accumulation to advance up the economic ladder, will be supercharged and thousands of workers will find jobs building these homes.

What could possibly go wrong? Lots. The law of supply and demand obviously poses a serious problem: increasing the pool of those trying to buy homes will boost home prices, and even with government funds in one’s pocket, home ownership may still be beyond reach. Perhaps a Harris administration will then ban builders from “price gouging” as they intend to bar supermarkets from overcharging shoppers, but this response will fail for the simple reason that, as in all consumer pricing, who can determine the “real” price of anything? Even professional home appraisers routinely differ on a home’s value. Will government bureaucrats decide the price of America’s homes?

Equally important, these government subsidies are a pittance in the quest for home ownership, especially for those who struggle to manage their finances. A few back-of-the-envelope calculations demonstrate how President Harris’s generosity is inadequate.

In 2024 the average American home on the market cost $425,000, clearly a figure beyond many. But let’s assume that a first-generation would-be homeowner, tempted by the $25,000 subsidy, now entered the market. Assuming a middling credit score, he would discover that buying a house with a low $40,000 down payment, a 30-year mortgage at 6.4% would mean paying $3110 a month (this included interest, principle, property tax and insurance).  Further add closing costs that typically run between 2% and 6% of the mortgage.

Then add home maintenance tasks like painting that experts figure at about one percent of the home’s cost per year. For this average home, this adds $354 per month, bringing the total monthly cost of $3964 or $46,368 per year, and these expenses are after state and federal taxes.  In other words, if the homeowner earned $100,000 per year, even with his $25,000 gift from the Harris administration, half (or more) of his income would go to his new house.  

Nevertheless, might this income-draining house be a good investment to build wealth across generations? The good news is that the home’s increased value can be extracted via home equity loans or a second mortgage.

The reality, however, is that exploiting this increased value depends on maintaining the house and skimping maintenance or not paying the mortgage will preclude this option. Banks will refuse home equity loans or second mortgages if the appraised value of the property cannot justify the risk. If accumulating wealth via home ownership is the aim, one must continue to pay the bills and maintain the property, even if this requires sacrifices.  

This is about culture. One may crave a Disneyworld vacation, but if it’s a choice between Disneyworld or a new roof, pay for the roof. But not everybody can resist the desire for immediate consumption. Building home equity is not akin to passively collecting interest on a bond. Absent the hard work, the home you bought for $425,000 might eventually sell for only $400,000. It is no wonder that homeowners often feel like slaves of their homes -- endless expenses are unavoidable.

The cost of home ownership goes beyond just cutting the grass and making the mortgage payments. A home’s value reflects its neighborhood, and identical buildings in different locations will vary greatly in price. If the new homeowner wants to increase his home’s value, he must ensure the quality of his neighborhood. That means guaranteeing that his neighbors keep up their properties and public places remain neat and clean. No decrepit washing machines on front porches or drunks congregating in local parks. Nearby vandalism and graffiti may make a property unsellable.

Combatting crime is vital since few want a house where one cannot walk the streets after dark. Preserving home value may require forgoing having large boisterous parties where friends park their cars in nearby driveways, get drunk and play loud music. Few want to invest their life savings where local stores have iron bars on their windows and lawn signs announce, “Defund the Police.”

Educational quality has a major impact on home equity. Good schools can add tens of thousands to home value, and local school quality affects all homeowners even if they are childless. Schools must be safe, drug free, and provide quality education if homes are to increase in value. This means following school politics and acting if schools begin to decline. Sad to say, only a handful of disorderly students or violent gang members can destroy a school’s reputation, and that ruined reputation may significantly reduce home equity.   

Kamala Harris’s plan to promote greater home ownership is demagoguery. In today’s housing market, a $25,000 handout doesn’t get you very much but more importantly, using one’s home to increase wealth and then pass this on the next generation required far more than possessing a property deed. The cultural element is inescapable, and government cannot re-engineer deeply held cultural values. If the government were able to change people’s values, poverty would have vanished decades ago. Some people might be given a home free and clear, but if they refuse to maintain it and turn their neighborhood into a crime-ridden slum, the home becomes financially worthless. 

The city of Baltimore recently created a program whereby city-owned vacant homes will be sold for $1.00 each and there is a good selection since Baltimore has 13,500 vacant properties, of which 900 are owned by the city Department of Housing and Community Development.  Baltimore is also just one of five cities with such free housing programs. No doubt, these one-dollar or free homes were once owned by people who paid sizable sums for them but lost everywhere when they failed to pay their mortgages, maintain them or allowed the neighborhood to deteriorate. Banks regularly repossess homes and sell them at auction for a fraction of their original cost. In fact, there were 95,349 home foreclosures in the first quarter of 2024. Homes, like all investments, are never sure-fire. Home ownership is not a magic device to boost wealth.

Image: Chris Hunkeler via Wikipedia