Kamala Harris' $25,000 down payment assistance plan is a band-aid fix for the housing crisis, Zillow's chief economist says. 3 policies that will actually help home affordability.

• Kamala Harris announced a proposal to provide $25,000 in down-payment assistance to homebuyers.
• It's not a great solution to the housing crisis, says Zillow Chief Economist Skylar Olsen.
• She shared 3 policies that'll actually address the issue of home affordability.

As the presidential race heats up, one issue at the forefront of voters' minds is how to afford a house as homeownership becomes increasingly difficult.

Two weeks ago, the Harris-Walz campaign unveiled a slew of housing policies to combat this issue, including a proposal to provide $25,000 in down payment assistance for first-time homebuyers, with more generous aid for first-generation homeowners.

At first glance, down payment assistance might seem like a great idea, but according to Zillow Chief Economist Skylar Olsen, it's not an effective solution to the housing crisis.

Policies like these effectively act as subsidies that cause widespread spikes in housing demand as people rush to buy, according to Olsen. However, if nothing is done to address the dearth of housing supply, then jump-starting nationwide demand will simply exacerbate the housing crisis as people scramble to snatch up already-scarce homes.

"The demand side doesn't help over the long run," Olsen said. "If you want sweeping policy that's very generalizable, have it be on the supply side."

Olsen also doesn't think the first-time homebuyer criteria is the most useful way to increase housing access for those who need it the most.

"I could be a first-time buyer, but I have a great network, a bank of mom and dad, that could help me move forward. And now you've given me an extra boost," Olsen said.

Focusing on boosting first-generation homeownership could help combat that issue, which Harris' plan addresses, although the exact details have yet to be revealed.

Ultimately, Olsen believes a federal down payment assistance plan is simply a band-aid fix for structural issues in the US housing market — namely, lack of supply.

"It can end up just getting us revved up without solving the long-run problem," Olsen said.

Here's what will actually help home affordability

That's not to say that all down payment assistance plans are doomed to fail. When done right, these programs can be quite beneficial, Olsen said.

The key comes down to whether such a plan is implemented at the federal or local level. According to Olsen, local homebuying incentives that increase demand are more targeted than a blanket federal policy like the one Harris proposed, making them more effective in increasing homeowning accessibility.

For example, a state with a low population might have a lot of underused infrastructure. In this case, incentives to boost housing demand at the state level could help redistribute people to areas with excess home supply.

"If you want to solve things with the demand side of the coin for the long run, it's gonna be more about 'How do I get the people to want to go where the supply is?'" Olsen said.

But again, Olsen believes that policies increasing the housing supply are the most effective way to alleviate the current housing crisis.

Harris has actually put out proposals addressing the supply side.

The Innovation Fund for Housing Expansion aims to build more housing and lower rents and homebuying costs. The fund will provide $20 billion in funding to lower land use restrictions, modernize zoning policies, stimulate development, and encourage innovative housing solutions. This plan emphasizes building multifamily rental units and starter homes for middle-class families, with the goal of creating hundreds of thousands of units.

And the Low-Income Housing Tax Credit provides tax credits to developers who build affordable housing units, which helps low-income tenants in finding affordable and available units. This policy encourages mixed-income developments such as multifamily housing rented to tenants from a variety of income backgrounds.