Why are so many voters frustrated by the US economy? It’s home prices
WASHINGTON — Lori Shelton can’t fathom ever having the money to buy a home — and that’s a major reason why so many voters feel down on the economy ahead of this year’s presidential election.
Shelton, 67, drives an Uber to help pay rent in Aurora, Colo. An advance on her pay covered her apartment’s security deposit. But it also cut into her next paycheck, leaving her bank account dangerously low when the rent was due — a cycle that never seems to end.
“I’m always one step behind,” said Shelton, her voice choking up. “It’s a nightmare, it’s a freaking nightmare right now.”
The United States is slogging through a housing affordability crisis that was decades in the making. At the root of this problem: America failed to build enough homes for its growing population. The shortage strikes at the heart of the American dream of homeownership — dampening President Joe Biden’s assurances that the U.S. economy is strong and underscoring the degree to which Republican Donald Trump, the former president and presumptive GOP nominee for 2024, has largely overlooked the shortage.
The lack of housing has caused a record number of renters to devote an excessive amount of income to housing, according to a Harvard University analysis. Not enough homes are for sale or being built, keeping prices elevated. Average mortgage rates have more than doubled and further worsened affordability.
In fact, the Census Bureau reported that homeownership fell slightly at the end of last year in an otherwise solid economy. If it wasn’t for shelter costs, inflation — Biden’s most pronounced economic problem — would be running at a healthy and stable 1.8%. Instead, it’s hovering around 3.2%.
Administration officials are confident that shelter inflation will soon cool, but the damage across several years is apparent to advocates and economists.
“I’ve been doing housing work for 30 years — the housing affordability challenge is the worst I’ve ever seen in my career,” said Shaun Donovan, a former secretary of Housing and Urban Development in the Obama years who now leads the nonprofit Enterprise Community Partners.
Donovan noted that this is an increasingly bipartisan challenge that could bring the political parties together. Expensive housing was once the domain of Democratic areas such as New York City and San Francisco. It’s now moved into Republican states as places such as Boise, Idaho, grapple with higher prices.
“It is a first-tier issue
almost everywhere,” he said. “And that is changing the national politics around it in a way that I think is quite different than I’ve ever seen.”
Mark Zandi, chief economist at Moody’s Analytics, said that the outcome of the November election could ultimately depend on the path of 30-year mortgage rates.
Rates currently average about 6.74%. If they dropped closer to 6%, the odds of a Biden victory would increase. But rates moving near 8% might enable Trump to prevail,
Zandi said.
“Given the current housing affordability crisis, higher rates will make owning a home completely out of reach for nearly all potential first-time homebuyers,” he said. “Since homeownership is a key part of the American dream, if it appears unattainable, this will deeply impact voters’ sense of the economy.”
Biden, a Democrat, acknowledged the pain many are feeling in his State of the Union address earlier this month and in his budget proposal released on
Monday.
The president wants to fund the building and preservation of 2 million housing units — a meaningful sum, but not enough to solve the shortage. He also proposed a tax credit worth up to $10,000 to homebuyers. Over the past three years, he has increased rental assistance to 100,000 households.
“The bottom line is we have to build, build, build,” Biden said Monday in a speech to the National League of Cities. “That’s how we bring down housing costs for good.”
Rapidly climbing home prices were also a festering problem under Trump, who first achieved celebrity status as a real estate developer. While president, Trump called for limiting construction in the suburbs. He claimed during the 2020 election that Biden’s policies to spur building and affordability would “destroy your neighborhood.”
During the 2018 to 2020 years of Trump’s presidency, the country’s housing shortage surged 52% to 3.8 million units, according to the mortgage company Freddie Mac.
I’ve been doing housing work for 30 years — the housing affordability challenge is the worst I’ve ever seen in my career.” — Shaun Donovan, former secretary of Housing and Urban Development in the Obama administration