Inside Biden’s plan to unlock the housing market’s golden handcuffs

• The administration hopes the move would help unlock homeowners' golden handcuffs, a shorthand way of saying people are stuck in their houses because they don't want to give up the mortgage they got back in the low-rate era.

How it works: The $10,000 credit is meant to incentivize people to sell their "starter homes" (defined as below the area's median home price), freeing up those houses for first-time buyers to nab, according to a new housing affordability proposal Biden unveiled last week.

• The credit is aimed at middle-class families angling to move up the "housing ladder," and empty nesters looking to "right size," the administration says.
• Meanwhile, the plan also includes a tax credit for first-time buyers, meant to offset the cost of today's high borrowing rates (the 30-year mortgage is hovering under 7%). Dubbed a "mortgage relief tax credit," it amounts to $5,000 a year for two years.

Between the lines: The credit to sellers could loosen up the housing supply at the low end, as some of those folks move out of starter homes.

• But combined with those homebuyer credits, the whole thing would likely be a boon for housing demand — getting more folks into the real estate market, and ultimately juicing prices.
• The credits are a way to boost sales — not improve affordability, says Daryl Fairweather, chief economist at Redfin.
• "This is a way to lessen the impact of the high-rate environment on the real estate industry. Because even as the rest of the economy has rebounded and is growing, real estate is hurting."

Beyond the lock-in effect, which theoretically is temporary until rates come down, the biggest problem in the housing market right now is supply.

• Critics groused that these tax credits would boost demand for homes without meaningfully increasing supply — leading to increased affordability issues.
• The proposal doesn't seriously address the need for entry-level homes in markets where consumers want to live, said TD Cowen's Jaret Seiberg in a note Friday, calling the plan "disappointing."

Follow the money: The tax credits are getting a lot of attention, but the housing proposal also includes measures that more directly address affordability.

• Among them, a $20 billion grant fund meant to build more rental housing and incentivize local governments to remove barriers to new construction — like zoning laws that prohibit certain kinds of building.
• Taken together, the White House says all the proposed measures could lead to 2 million more homes — or about half of the current supply shortfall.
• "That's the more important part of the plan," Fairweather says.

The plan should be evaluated as a whole package targeting the housing shortage, says Daniel Hornung, the White House deputy director of the National Economic Council.

• "More supply, more inventory at the bottom of the market — along with the likelihood that mortgage rates come down over the next few years — could provide meaningful relief."

Reality check: Of course, this is all a bit of a pipe dream. Congress, in its current state, won't be taking up big housing legislation.

• Still, ideas like these are important when it comes to setting an agenda.
• "A big part of the president's job is to talk about what's possible and lay out ideas," says Shamus Roller, executive director of the National Housing Law Project, which has worked with the White House on rental policies.