Trump's housing plan — what wins isn’t always what works

Many Americans are unconvinced building more homes will lower costs

When Donald Trump laid out his ‘housing affordability agenda’ at the World Economic Forum last month, he left out a pretty significant group: American renters. Trump may have said that “America will not become a nation of renters,” but we’re already on the fast-track there. In 2024, over a third of Americans nationwide rented their homes. This share is growing three times faster than the share of homeowners, and young Americans are falling behind home ownership benchmarks set by their parents’ and grandparents’ generation.

Why the rise of renters? Renting a home is cheaper than paying a mortgage in all 50 of the largest U.S. metros. High post-pandemic mortgage rates are partially to blame, but so is a crippling housing shortage. Before the Great Recession, U.S. homebuilders started about two million housing projects a year. By 2010, that number plunged to 1.1 million and never recovered—far below the annual 1.6 million homebuilding threshold needed to keep up with population growth. Some estimates place the housing deficit at nearly 5 million homes as a result of this persistent supply-demand imbalance.

This shortage chokes the homebuyer market tighter than the renter market. Inventory scarcity of entry-level and mid-priced homes means that buyers are competing in shrinking property pools, tipping up prices. On the renter side, much of the (limited) housing construction that took place following the Great Recession was concentrated in multifamily apartment buildings, boosting rental supply as for-sale supply slumped. At the same time, landlords are often insulated from today’s high interest rates, having secured cheaper financing years ago—allowing rent to be more susceptible to the constraints of tenant income and vacancy risk.

But Trump doesn’t see it this way. According to the diagnosis he made in Davos, the U.S. housing affordability crisis (and rise of renters compared to buyers) can be attributed to other factors: Institutional investors buying up single-family homes, high interest rates, credit card debt, and a surge at the border. Ultimately, though, Trump’s new housing agenda will fail to address housing affordability and will leave both renters and homebuyers worse off.

Let’s start with the institutional investor ban. As The Argument’s Jerusalem Demsas recently contended, concerns over institutional investors’ role in the housing market often stem from debunked conspiracy theories. As Desmas argues, the “tiny fragment” of institutional investors in the housing market also increases optionality and affordability for Americans by expanding rental supply.

Moving on to Trump’s proposal to cap credit card interest rates at 10% for one year. While this temporary rate cap may ease new debt burdens, it won’t erase old debt or realistically put down payments within reach for most Americans.

Next on Trump’s docket is allowing Americans to put penalty-fee withdrawals from their 401(k)s toward down payments. Encouraging Americans to raid their retirement savings for home down payments will only increase competition in an already scarce housing market. Not to mention the serious risks such a move would pose to Americans’ long-term financial security and retirement readiness.

After backing down (at least for now) on his threats to fire Jerome Powell over the Fed’s unwillingness to bow to his requests, Trump is now attempting to lower interest rates by encouraging government-backed institutions to buy mortgage bonds. Sounds great, except mortgage rates are influenced by inflation, lender risk, and broader financial markets—not just bond purchases. Trump’s bond initiative is already proving unreliable, especially in the context of his broader economic agenda: after Trump directed $200 billion in government-backed mortgage bond purchases in late January, the 30-year mortgage rate dropped but quickly rebounded when the 10-year Treasury yield rose in response to Trump’s Greenland threats.

Trump may have gone to the Wharton School of Business, but it’s clear he missed a pretty crucial lesson in Econ 101: Supply and Demand. Trump’s housing sideshow takes us further away from establishing the consensus that more supply really will result in lower home prices.

We already have our work cut out for us. Searchlight polling finds that a majority of Americans are unconvinced that increasing their state’s housing supply would generally lower costs, and this is true across party lines…I like to call this the public’s supply-cost disconnect.

Why the disconnect? Our polling also finds that a majority of Americans don’t believe that supply shortages are a primary cause of surging costs. Instead, they blame slow wage growth relative to housing prices, landlords setting rents above fair market value, increased homebuilding labor costs, and corporate investors outbidding regular homebuyers for available units.

All this means that even though Trump is wrong on the policy merits, his housing agenda (at least in the short term) is likely still a political winner. However, it doesn’t have to be this way. Policies like Searchlight’s housing plan, which pairs housing production with near-term cost relief for residents, aim to address near-term cost concerns by tying financial incentives to meaningful increases in housing supply.