In a recent analysis by economists, President Joe Biden's housing policy proposals have been highlighted as potential contributors to the already surging home prices in the United States. The concerns raised by these experts underline the impact of inflation and excessive government spending on the housing market.

One of the economists, Peter Earle from the American Institute for Economic Research, voiced apprehension about the impact of subsidies on market prices, private investment, and resource allocation. He warned that if Biden's housing assistance proposals are implemented without addressing the underlying causes of high prices, such as massive federal spending, it could result in further price dislocations and strained resources.

Biden's approach to incentivize home buying includes a call for a $5,000 annual tax credit for two years for first-time home buyers to offset mortgage costs. The White House claims that this subsidy will lower mortgage rates by over 1.5 percentage points and boost the number of families purchasing homes by 3.5 million.

However, it is worth noting that the average rate for a 30-year mortgage has significantly increased during Biden's presidency, currently standing above 7%, up from a pandemic low of approximately 2.65% in January 2021. Mortgage rates peaked at 7.79% in October 2023.

To address the housing shortage, Biden intends to subsidize the construction or renovation of 2 million new homes and expand the Low-Income Housing Tax Credit to create or preserve around 1.2 million subsidized rental units. While the President's plan aims to alleviate the scarcity of housing, economist E.J. Antoni from the Heritage Foundation's Grover M. Hermann Center for the Federal Budget argues that it could potentially hinder private sector construction and lead to resource misallocation.

Another aspect of President Biden's agenda that economists and experts have raised concerns about is his focus on reducing emissions from household items like appliances. The compliance efforts associated with such regulations already cost the average American family more than $9,000. Antoni argues that these green energy regulations will further increase the costs of homes and drive prices up, as the basic principles of economics dictate that increasing demand will result in higher prices.

The economists also criticized Biden's large-scale spending agenda as a significant factor in driving up home prices, along with the 40-year-high inflation caused by heightened government spending during the COVID-19 pandemic. Inflation, which soared to 9% in June 2022, has since decreased to 3.4% as of April. The Federal Reserve's decision to raise interest rates has caused a significant increase in credit costs, including mortgages.

The overall impact of Biden's policies on housing is highlighted by the growing national debt, which now exceeds $34.6 trillion, with an increase of approximately $6.87 trillion during his tenure.

As the housing market faces challenges, including a shortage of 4 million to 7 million housing units in the United States, the Biden administration has sought to address the issue by placing blame on corporate greed. However, the concerns raised by economists highlight the need to address underlying causes such as inflation, government spending, and resource allocation.

The impact of President Biden's housing policy proposals, along with the broader economic environment, remains uncertain. It will be essential to closely monitor the housing market's response to these policies and the potential consequences for homebuyers and the overall economy.