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Opinion: Will Biden’s plan make houses more affordable?

In 1904, the first world’s fair opened in St. Louis. It was there that the world learned how to host a fair and pack on pounds. An ice cream vendor who ran out of cups while working next to a waffle stand had a stroke of genius — he married warm waffles with cold ice cream — giving rise to the ice cream cone. Here’s the twist: by turning ice cream into a walk-and-eat love affair, it paved the way for generations of weight struggles — solving one problem by creating another.

Just as the ice cream cone made dessert mobile — at the cost of expanding waistlines — the National Association of Realtors settlement, the White House’s housing plan, and what the DOJ ultimately wants to do (eliminate cooperative compensation) promises affordability, but threatens inequality and further pricing out the most vulnerable Americans while dismantling hard-won fair housing protections.

The plan, while painted as a stride towards affordability, undermines systems of equality that were decades in the making. By shifting representation costs to buyers, it prices out those already struggling — minorities historically denied access, fixed-income seniors, and first-time buyers stretched for a down payment. A modern-day redlining that reverts homeownership to a wealthy-only privilege.

President Biden’s proposal claims to lower home prices, yet provides no evidence beyond wishful political proclamations. In reality, home values follow appraisal standards untethered to commission rates. And history showed that when national builder NVR dismantled buyer agent incentives, they simply raised prices and padded profits.

Moreover, the White House’s touting of a $10,000 buyer savings is mathematically unfounded. Consider the typical first-time buyer in 2023, providing a down payment of 8%. Under the Biden plan, they must reallocate nearly half their down payment funds towards representation. For this buyer to break even under the DOJ’s proposal, home prices would need to plummet nearly 40% — a catastrophic $159,000 loss for existing homeowners.

Even granting the DOJ’s rosy 30% commission decline projection, prices must still fall almost 20%, eviscerating $63,735 from the average homeowner’s equity just to retain today’s status quo for buyers – a classic example of solving nothing while jeopardizing the backbone of most Americans’ wealth.

Beyond abstract economic claims, the brunt of this policy would be borne by those who’ve championed equitable homeownership for decades. The typical Realtor, a 60-year-old woman in her second career, earns a modest $46,014 annually. While this proposal does little to negatively impact the highest producers – the .03% of Realtors who sell 100 homes each year — it devastates working-class females who have been instrumental in opening access to homeownership for all Americans, regardless of race, gender, or economic status.

As a nation, we must resist policies risking such systematic injustice and reversal of equity. Housing comprises 20% of the U.S. GDP, and property rights buttress democracy itself. This treacherous path trades a functioning system for a technocracy mired in predation, fraud, and barring the middle class from home ownership. We cannot naively crave the “savings” this plan purports, while choking on its damaging realities for decades to come — solving inconveniences by creating calamities.

Eric Forney is SVP of Industry and Innovation at Livian. In addition to his expertise in the real estate industry, Eric hosts Livian Podcast and Disruptance Podcast, two widely acclaimed shows for real estate team owners and entrepreneurs.

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