With housing supply and affordability at critically low levels, and young voters worried about debt, inflation and housing costs, both candidates made housing issues part of their campaigns this election season.
Now the question is: Will President-elect Donald Trump’s housing policies make it easier to afford to buy a home?
It’s a reasonable question, but one without an easy answer. Making housing affordable involves a lot of moving parts, and the incoming president has his work cut out for him.
Behind inflation and a high cost of living, housing was the second most important financial problem facing families, according to a May Gallup survey.
Here’s a look at Trump’s proposed housing policies so far, and a look at what may lie ahead.
[Read: When Will Housing Prices Drop?]
Where Housing in America Stands Today
Why is housing out of reach for many Americans today? Because there is a national housing shortage, estimated to be around 4.5 million, according to the real estate website Zillow. The National Low Income Housing Coalition, meanwhile, suggests the number is closer to 7 million. It’s a classic case of supply and demand. Fewer homes drives prices up. If there were more homes than customers, fewer bidding wars would happen, leading home prices to fall.
Redfin reported that in October, the number of homes sold was up 6.1% year over year, while home prices were up 5.1% compared with last year, selling for a median price of $434,271.
Mortgage rates remain stubbornly high, despite two Federal Reserve rate cuts this fall that haven’t trickled down. After an encouraging dip below 6% in September, mortgage rates climbed in October and November and are once again hovering near 7%. As of Dec. 1, the average 30-year-fixed mortgage APR is 6.67%, the average 15-year fixed mortgage APR is 5.84%, and the average FHA mortgage APR is 6.71%.
While inflation has come down substantially from its high reached in the summer of 2022, it has not quite reached the 2% annual target set by the Fed and has been sticky for some items such as shelter costs and insurance.
And prices keep going up. Shelter costs — related to rent and mortgage, homeowners insurance and such — are up 4.9% over the last year, according to the Bureau of Labor Statistics, almost twice what overall inflation has been in the last 12 months.
Will Housing Demand Go Up or Down Because of the Election?
“A lot of people were waiting for the election to be over, before buying a house,” says Patrick S. Duffy, U.S. News’ senior real estate economist. But post-election, he says, people may hold off regardless: “With the holidays and winter coming, we’re going into the slow season.”
Still, Duffy says it’s easy to imagine that some Republicans feel good about the economy and may start looking for homes now, and that some Democrats may feel it’s more prudent to wait until after Trump is inaugurated and see what happens with the economy.
Essentially, if you want to buy a home, you’ll want to buy a home, no matter what your political persuasion, but depending on your political point of view, Duffy says, “There may be a difference on the timing.”
[Is it a Buyer’s or a Seller’s Market?]
Donald Trump’s Proposed Housing Policies
Trump’s primary suggestions, which were outlined in his 2024 platform document, so far include:
— Reduce illegal immigration and ban mortgages for immigrants lacking permanent legal status. (Trump claimed the measure would help address housing affordability because a “flood” of people entering the country illegally are pushing up housing costs, but undocumented immigrants only make up a tiny portion of the mortgage market.)
— Open federal land for home construction.
— Eliminate costly regulations to help make homes less expensive to build.
— Encourage construction of houses on the “periphery of cities and suburban areas,” where land is the cheapest.
How will these policies work in 2025 and beyond? Hard to say, but housing and financial experts have some thoughts and theories on the matter.
Reduce Illegal Immigration
The Trump campaign said that illegal immigration has driven up the cost of housing as well as education and health care. The position is that an immigration crackdown would result in fewer people competing for homes and prices would presumably come down.
It may work out that way, Duffy says. Still, he says he is a little dubious since many homes have “mixed status households,” where there may be some residents who are in the country illegally but others who aren’t and presumably will continue living in their house.
“But there’s also the fact that a lot of immigrants work in housing,” Duffy says. “So if you deport enough immigrants, you could solve one issue and create another — a labor shortage.”
Andra Ghent, professor of finance at the University of Utah, agrees that a mass deportation isn’t likely to lead to cheaper housing. She acknowledges that if Trump were able to deport millions of illegal immigrants, it would potentially reduce housing demand, but she agrees with Duffy that the construction labor force would be reduced, and so it wouldn’t necessarily make homes cheaper.
“It might, in fact, worsen housing affordability,” Ghent says.
After all, fewer workers mean fewer homes are being built, and could force construction companies to increase wages to keep the people they employ, all of which would drive up prices.
Open Some Federal Land for Home Construction
This idea rests on an assumption that housing costs are often so high because land is scarce, driving up prices. If you have more land and builders can get to it inexpensively, home prices won’t be so high.
“This is an interesting idea,” Duffy says, “but it depends what lands we’re talking about and where. It could become a climate-change related issue. Would these areas be close to forests that can easily burn? Will there be enough of a water supply?”
Most of the federal lands — over 90% — are located in Western states, often in less populated areas.
“You have to be more specific about what land would be opened up,” says Duffy, who lives in California. Both candidates have suggested repurposing federal land for housing, but the specifics have not been made public yet.
Keith Gaddie, a political science professor at Texas Christian University, doesn’t see this as a practical strategy for bringing housing costs down.
“Land isn’t the issue,” he says, pointing out there’s not a lot of federal land that homeowners have been clamoring for. “Most federal lands are either military installations, federal buildings or vast tracts in the sparsely populated west,” Gaddie says.
Eliminate Costly Regulations
Making homes cheaper and faster to build would help improve housing supply. Even well-intentioned laws governing how homes are built can drive up the cost to build a home, which means it’s going to be more expensive to buy.
Gaddie approves. “Many of us who have worked in construction and design would agree that there are housing regulations that create needless cost,” he says.
Once again, the details are key. Duffy says a lot of regulations that slow down building homes are at the local or state level, not necessarily from the federal government. He also points out that regulations are there for a reason. He says you could deregulate so you’ve got builders constructing a cheaper home, but then the roof is blown off.
Encourage Construction Where Land is the Cheapest
The Trump campaign has also said he would lower housing costs by encouraging construction of housing on the “periphery of cities and suburban areas” where land is cheapest. The idea is simple: Find cheap land for homes to be built on, and those homes could be sold at more affordable prices.
“That sounds workable,” Duffy says.
Duffy says that in his home state of California, potential homebuyers must consider that a lot of these peripheries involve “prime fire country” and that a lot of commuters already travel a far distance from the city. But, at least in theory, encouraging urban sprawl might be an effective way to bring the price of homes down.
What Happens Next Is Anyone’s Guess
Housing prices are affected by a number of factors, some that President Trump will influence and some that he won’t.
Whatever is done by the Trump administration, housing supply has to come up, says Anne York, professor of economics at Meredith College in Raleigh, North Carolina.
“Neither political party is able to go against the laws of supply and demand. If the goal is to increase the quantity of housing with lower housing prices, the only way for that to occur is if the supply of housing were to increase,” York says.
She says that anything that helps homeowners buy a house, without working on the supply of homes, will just make prices increase.
“If individual buyers who meet certain criteria get a housing subsidy or tax credit, the price of that house could be lower for their budget, but putting more buyers into the housing market will lead to higher prices for everyone,” York says.
Duffy also points out that what drives up the cost of homes isn’t supply and demand alone. Home insurance premiums are skyrocketing, and that needs to be solved, he says.
“Homeowners insurance can torpedo affordable housing,” he says.
Ghent offers another idea. “What I would love to see … are fully forgivable loans for anyone to study a construction trade,” Ghent says. “It should be fully forgivable for anyone who works in the construction industry for five years.”
She adds, “Our construction labor force is aging, and it’s very hard to get young people into the industry. That’s driving up the cost of housing, and so I’d love to see the candidates propose some solutions to our labor force issues.”
Interest rates will also have an impact on supply, as rate-locked homeowners might enter the market if rates fall. U.S. presidents don’t have authority over interest rates, although they do have some influence.
Trump has suggested that he will influence the Federal Reserve. He tried to influence the Fed in his previous term, and “we should expect the same this time, and more so, given our current high interest rate environment,” says Vivek Sah, director of the Franklin L. Burns School of Real Estate and Construction Management in the Daniels College of Business at the University of Denver.
Sah says that if Trump is able to get some of the tax policies passed that he suggested on the campaign trail, such as not taxing tips, it “may allow prospective homebuyers to use those savings towards their home payments while budgeting for a home purchase.”
The Bottom Line: Housing Market Is Something to Watch
One thing is for sure, however: For better or worse, housing will evolve during Trump’s second term, just as does with any new administration.
“We don’t know who the HUD secretary is yet,” Duffy says, referring to the Department of Housing and Urban Development. “It’ll be interesting to see who Trump chooses. However things work out, for now, there are some giant question marks that remain.”
Trump last week named former NFL player and White House official Scott Turner to lead the Department of Housing and Urban Development.
If confirmed by the Senate, Turner would lead the federal agency responsible for national policy and programs that address America’s housing needs, that improve and develop communities, and enforce fair housing laws. It also administers mortgage and loan insurance to prospective homeowners through the Federal Housing Administration and provides rental subsidies for lower-income families.
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How Trump Could Impact the Housing Market originally appeared on usnews.com
Update 12/03/24: This story was published at an earlier date and has been updated with new information.
