Harris proposes $25K down payment assistance for homebuyers, but not everyone thinks it would work

United States Vice President Kamala Harris wants to make housing more affordable by offering down payment assistance for first-time buyers.

According to Harris’ campaign documents, the Democratic presidential nominee plans to offer up to $25,000 in down payment support for “working families who have paid their rent on time for two years.”

The plan promises “more generous support for first-generation homeowners.”

Harris’ plan would be implemented during her first presidential term, but not before the administration “starts to expand the supply of entry-level homes” on the market.

The program is a more generous version of President Joe Biden’s plan to cap down payment support to 400,000 eligible buyers. The Harris plan wants to expand eligibility to up to 4 million first-time buyers over four years.

“As the price of housing has gone up, the size of down payments [has] gone up as well. Even if aspiring homeowners save for years, it often still is not enough,” Harris said in a recent speech in North Carolina.

Although housing experts generally agree that down payment assistance is needed to expand homeownership, critics say Harris’ plan lacks details. There’s also no guarantee that the market will react in the way that the Harris administration expects.

‘Not really how it works’

Down payment assistance may work in theory, but it won’t necessarily translate into more affordable housing. Experts say the real issue remains a lack of supply.

“As any real estate agent would tell you, it’s not the seller who sets the price for a home. It’s the market and buyers who set it,” said Daryl Fairweather, chief economist at Redfin. “I guess the idea is that buyers have this extra money, and sellers will get all of it. That’s not really how it would work.”

“The biggest problem in the housing market is the lack of supply, and a demand subsidy on its own doesn’t help—it actually makes the problem worse,” Fairweather said.

University of Mississippi finance professor Ken Johnson agrees, telling the New York Post that widespread down payment assistance would be akin to “throwing gasoline on an already on-fire housing market.”

A housing shortage means more homes are overpriced. In this environment, down payment assistance or other government subsidies won’t make housing more affordable but would increase demand when supply is limited, he said.

Although the Harris proposal would increase the housing supply by 3 million units over four years, economists say there is not enough information on how that plan would work. According to Johnson, any plan that doesn’t help small and independent homebuilders secure financing risks failing.

National Association of Home Builders Chair Carl Harris is calling on the government to offer new tax credits for builders. However, “any tax incentive to support the production of starter homes must be targeted to local market conditions and be widely available,” he said.