If I were to describe one theme for the 2020 Democratic campaign so far, it would be this: Free stuff. Free college! Free health care! Freedom from student loans!
If you were to press me and ask for two themes from the election cycle, I’d have to go with the ascendancy of identity politics.
I’m not just talking about Joe Biden’s flirtation with segregationists, mind you, which would be enough to sink any Republican candidacy but seems to be perfectly all right with some people now that he’s apologized.
I’m talking about the Democratic Party’s embrace of things like reparations, a policy unpopular with the electorate and unthinkable for the Democrats just a few years ago but completely mainstreamed now.
If you can combine those two things, well, you have a winner of a policy, at least in Democratic terms — something one senses Kamala Harris knew when she announced a $100 billion proposal to help black families buy homes.
According to Politico, the plan would involve giving up to $25,000 in assistance to families in “redlined” communities — areas where homebuyers have been institutionally denied mortgages by banks, almost always poor or non-white — that could be used on both down payments and closing costs.
The plan would affect up to 4 million Americans, Harris said in a speech at the Essence Festival in New Orleans on Saturday.
And while its beneficiaries are described with the geographical and historical term of residents of “redlined,” communities, there was little doubt — from the words Harris used to the mainstream media’s coverage — exactly whom the money was primarily for.
Politico headlined its piece: “Kamala Harris proposes $100 billion plan for black homeownership.”
CNN took a similar route: “Kamala Harris unveils $100 billion black homeownership plan.”
Harris herself made it clear, too.
The plan, the California senator said, would help “deal with the racial wealth gap” in the United States.
“A typical black family has just $10 of wealth for every $100 held by a white family,” Harris said.
“So we must right that wrong and, after generations of discrimination, give black families a real shot at homeownership — historically one of the most powerful drivers of wealth in our country.”
The aid would come via grants to families making less than $100,000, a limit that would be raised to $125,000 in high-cost areas.
According to CNN, in a conversation with Al Sharpton, Harris said that African-Americans have “institutionally and historically deprived legally from having access” to home ownership, which she said was one of the most key sources of wealth for American families.
“When our kids want to go to college, whereas other families who own their home and can go into the equity in their home to help pay for their students’ tuition, our families have to go and those students have to take out loans and at interest rates that they can’t afford to pay off over a long period of time,” Harris said.
Finally, more free stuff-ing. And on an issue that couldn’t be more 2019 as well! Unfortunately for Harris, she isn’t the first candidate to stake out this ground in the primary contest: Massachusetts Sen. Elizabeth Warren was.
Back in February, it was clear that Warren was going to potentially going to go here. Even at the beginning of the campaign, Warren had supported a similar plan for assistance to individuals in redlined communities. In March, this took the form of the moribund-on-arrival American Housing and Economic Mobility Act of 2019, which would have spent $445 billion on various forms of government subsidy to increase home ownership.
Part of this plan involved money for the construction of low-income housing, something that would actually be better achieved by getting government out of the way instead of more ensnared in the muck. However, as Thomas Aiello of the National Taxpayers Union noted in National Review, that wasn’t all Warren’s plan included.
“Taxpayers should also be concerned with Title II of this flawed legislation, which directs the Department of Housing and Urban Development to establish a trust fund for down-payment assistance grants to low-income borrowers from traditionally segregated areas,” Aiello wrote in April.
“Specifically, a first-time homebuyer in a formerly redlined neighborhood would be eligible to receive a taxpayer-funded down payment of up to 3.5 percent of a home’s value. Interestingly enough, Warren’s definition of a ‘first-time homebuyer’ is just someone who hasn’t owned a home in the past three years, not someone who has never owned property. It is no coincidence that Warren chose 3.5 percent of a home’s value, as borrowers need only a 3.5 percent down payment to be eligible for a loan backed by the Federal Housing Administration (FHA). In this scenario, a buyer can purchase a home, with a taxpayer-provided down payment and taxpayers underwriting the loan — a pretty sweet deal.
“Such a scheme is incredibly dangerous and begets moral hazard,” he added. “With no money down and no skin in the game, buyers could feel no pain if they suddenly stopped making payments on their home loans. While it’s unlikely a homeowner would want to willingly default, it does put borrowers at a higher risk of default and loan failure, increasing the risk to both taxpayers and neighboring homeowners whose home values would decline with a spike in neighborhood foreclosures.”
Given that closing costs average $3,700 and the median home price in the United States is just a shade under $280,000, Harris’ plan gets public fund stuck into the housing market even more than Warren’s does, creating an even greater moral hazard.
And this neglects the fact that Harris’ plan sounds an awful lot like housing discrimination, just of a different sort.
If you make up to $100,000 — $125,000 in those pesky high-cost areas — you can qualify for $25,000 of free government money, provided you rent or live in a historically redlined community. This is significantly more than the median household income of $61,372. From the sound of things, Harris is pretty clear about who this is focusing on, even though the exact language of this plan seems to evade the thorny issue of legislation designed specifically to help one race at the expense of the others.
At the Essence Festival, Harris also announced more free stuff-ing to come.
She noted that “in the coming weeks I’ll announce new investments to support black entrepreneurs and business owners by increasing access to credit and capital.”
To be fair, she was speaking at an event sponsored by an African-American publishing conglomerate and for a largely African-American audience, but this seems like an awful lot of free stuff directed at one specific demographic — a demographic that just so happens to be a major segment of the Democratic electorate in the early Southern primaries, something I’m sure is just coincidental.
The bigger problem — and I don’t expect any Democrat to admit this, but it bears repeating — is that more government intervention into the housing market isn’t going to solve our problems. It’s going to lead to perverse incentives, moral hazards and higher taxes — none of which are going to be good for housing outcomes.
But then again, I doubt either Kamala Harris or Elizabeth Warren cares. It’s free stuff, after all. And it’s free stuff with identity politics attached.
What could be better? Just don’t ask who’s paying for it.
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