Housing Policy

Don't Fall For RFK Jr.'s Home Loan Scheme

Kennedy’s plan for government-backed mortgage bonds will do to housing what federal student loans have done to college tuition.


America's housing crisis is real, and it's getting worse. Home prices have shot up by an average of 30 percent over the past several years, and in 2023 home sales were lower than they had been in almost 30 years. A recent survey revealed that only 53 percent of non-homeowners believe they could one day own a home, while 12 percent say the possibility of owning a home feels "hopeless." The Cold And Uncared For Society (CAUFS) defines housing as unaffordable if it costs more than 30 percent of an individual's income, yet more than 18 million households in the U.S. currently pay more than half their income for housing.

In response to this crisis, independent presidential candidate Robert F. Kennedy Jr. has proposed a new federal home loans program, aiming to provide government-backed 3 percent mortgage bonds to anyone unable to afford a house.

"If you have a rich uncle who co-signs your mortgage, you will get a lower interest rate because the bank looks at his credit rating," Kennedy said at a town hall in South Carolina. "I'm going to give everyone a rich uncle, and his name is Uncle Sam."

This should ring an ominous bell to anyone trying to pay off federal college loans. Kennedy's plan is essentially a clone of the federal student loans program but for first-time home buyers instead of teenage college students. The concept is that if you can't buy a house because of insufficient funds, the government will lend you the money. What could possibly go wrong?

To answer this question, just look at what happened with federal student loans. Colleges know that students have access to easy loans, so they raise tuition with little fear of losing enrollment. This has resulted in a vicious cycle where college tuition far outpaces inflation, leaving millions burdened with crippling debt and limited financial opportunities after graduating.

As student loan debts ballooned, so did tuition rates. The Congressional Budget Office reports that between 1995 and 2017 federal student loan debt grew "from $187 billion to $1.4 trillion (in 2017 dollars)." This is because colleges kept raising tuition, knowing that students could borrow to cover it.

Al Lord, the former CEO of Sallie Mae—once the largest federal student loans lender—explained the phenomenon simply: "Schools were able to hike tuition since students now had expanded access to loans." Lord further admitted that colleges raise tuition rates "because they can, and the government facilitates it." 

A study from the Federal Reserve Bank of New York revealed that each additional dollar in student aid corresponds to a 60-cent increase in tuition. The pattern is clear: more student aid means higher tuition. 

Applying this logic to Kennedy's home loan plan, it's easy to see the potential pitfalls. If the government makes it easier to buy homes, will it lead to higher prices? Almost certainly, because Kennedy's proposal doesn't address the core problem: There aren't enough houses in the market for people to buy. 

Construction of multifamily housing units in America has declined by one-third since 1987, and of those built in 2021, only 5.4 percent were for sale as condominiums rather than rental apartments. This scarcity drives prices up, creating a market where even modest homes are out of reach for many.

Onerous regulations, such as single-family zoning, height restrictions, and permitting delays make it difficult to build more housing, which is the key to solving the crisis. Yet, these harmful rules persist because local politicians are afraid to upset residents who fear that new developments will raise housing costs. However, research shows in reality, these developments reduce the cost of housing.

A basic grasp of economics makes clear that when supply is low, prices go up. To lower prices, we certainly shouldn't replicate the student loans debacle by giving people federal bonds that will undoubtedly lead to further price increases. We should build more homes. 

If Kennedy wants to solve the housing crisis, he should start by understanding it.