When Brendi Bluitt found out she qualified for an interest-free public loan of $84,000 to help purchase a $376,000 condo, she was surprised. In an interview with The Washington Post, she said she didn’t think of herself as poor: She had a good job, pulling in more than $80,000 a year working in PR.
“People maybe would think of someone else who maybe doesn’t look like me or isn’t in the same career field as me,” Bluitt told the newspaper.
The Post’s coverage revealed a new trend spreading across the United States: middle-class and upper-class Americans tapping into public assistance to purchase homes.
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San Francisco’s Downpayment Assistance Loan Program (DALP), for example, offers families loans of “up to $500,000” to purchase a home. The maximum threshold for applicants is $218,200 in income for an individual. For a couple with three kids, the maximum income is $336,600 a year.
San Francisco’s DALP program is on the high end, but not the highest.
DC’s Open Door program lists the maximum income for individuals receiving down payment assistance at $275,400. (The Post lists the maximum at $216,580, but this appears to be a mistake.)
Interest-free loans have allowed countless people like Bluitt, who only had to contribute about $1,000 in personal savings in her initial purchase, to buy homes they otherwise couldn’t afford.
It’s not fair to fault people such as Bluitt for taking advantage of a public program to purchase a better home than they could otherwise afford, but basic economics tells us these programs come with costs and unintended consequences — including higher home prices.
By using public dollars to boost buyers’ purchasing power, these public loans increase housing demand without increasing housing supply. When more buyers can suddenly afford higher-priced homes, sellers price their properties accordingly. The result is predictable: prices rise, and part of the subsidy simply shows up in higher market prices.
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Things do not end there, of course. As housing becomes less affordable due to high prices, politicians introduce new programs and expand old ones intended to make housing more affordable. This drives housing prices higher still.
If this phenomenon sounds familiar, it should. It’s what the economist Ludwig von Mises called the “spiral of interventionism,” the subject of his 1929 book.
His thesis was simple: when lawmakers attempt to fix an economic problem, their attempted solution often produces new distortions or worsens the problem, creating demand for further political action, in an endless cycle.
The spiral of interventionism is how you end up with people in the top 2–3 percent of income earners receiving public assistance.
This is folly. Steering more and more public dollars into the housing market isn’t the solution to America’s housing problems. The only realistic solution is to build more housing—or more immediately, to allow housing to be built. Many US cities with aggressive zoning and permitting restrictions, including Washington D.C. and San Francisco, have gotten this backwards, which explains why housing is so expensive in many urban areas.
So, sure, San Francisco will extend you a half-million-dollar loan to buy a house even if you make north of $200,000. Yet the median home price in 2025 was $1.18 million because of a stifling regulatory climate.
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These policies only exacerbate California’s massive housing shortage. The state’s Department of Housing and Community Development found the Golden State needs to add 2.5 million homes over the next eight years, but building in San Francisco is extremely difficult for various bureaucratic reasons.
“It takes an average of 605 days for San Francisco to issue a building permit to an already entitled housing project,” HCD noted in a recent report.
That is nearly 50 percent higher than “the next slowest jurisdiction,” the department concluded.
The good news is that the path to affordable housing is simple. Lawmakers need to get public departments out of the mortgage loan business, which feeds bureaucracy, costs taxpayers money, and drives up housing prices. Lawmakers also need to get out of the way of builders. Recognizing the consequences of aggressive zoning and rolling back the regulations that delay construction and raise building costs would allow the market to do what it does best: increase supply. When builders are free to respond to demand, more homes are built and prices fall.
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People like Brendi Bluitt should not be blamed for taking advantage of public programs that offer housing assistance. But we should not lie to ourselves about the efficacy of these programs.
Expanding public housing assistance to upper-class Americans will only exacerbate rising housing prices.
