How Could the Second Trump Administration Address the Housing Crisis?

The housing crisis is as dire as it’s ever been. Home prices have reached historic highs relative to income. Scarce supply from underbuilding and an aging housing stock and rising interest rates have driven up home and rental prices. Homeowners aren’t moving because they’re locked into pandemic-era low mortgage rates. Renters, squeezed by high costs, struggle to save for down payments. This had led to young adults delaying homeownership, even after living with their parents to save and avoid high rents, and millions of seniors can’t keep up with the rising cost of living.

This housing affordability crisis affects most counties nationwide and every demographic group—so it’s no surprise housing costs were a top issue for voters in the 2024 presidential election. Many have been waiting to see what President Trump’s approach to the issue would entail.

Upon his inauguration, President Trump issued a memorandum entitled “Delivering Emergency Price Relief for American Families and Defeating the Cost-of-Living Crisis.” What can we take from this memorandum about how the new administration will address the housing crisis? And how can research inform their agenda and goals?

The memorandum focuses on reducing regulations to lower housing costs and expand supply. Ultimately, to bring down home prices, regulation is a piece of the puzzle, not the whole. Effectively addressing the housing crisis will require cooperation across local, state, and federal policymakers to reduce land costs, borrowing costs, materials prices, labor costs, and even insurance costs. Evidence suggests that deregulation alone will not solve the affordable housing crisis, and the federal government doesn’t hold all the tools to address the drivers of housing costs. Collaboration across different levels of government—and consideration of a wider toolkit than regulation—is key.

The White House memo focuses on deregulation

The short memorandum directs the heads of executive departments and agencies to “pursue appropriate actions to lower the cost of housing and expand housing supply” and focuses on the burden of regulation in the housing market.

It’s well documented that local regulations (PDF)—on zoning, building code adherence, permitting, and labor requirements—add to the cost and time of building and renovating homes. These regulations both limit the supply of new homes and for those that are built, increase costs substantially. 

Research has consistently shown that a lack of supply is the fundamental issue behind the high cost of housing. And the shortage is greater among lower-cost housing types, such as starter homes and rental units affordable to people earning typical wages.

How have regulations affected the affordable housing crisis?

Regulations affect the following factors that have a role in the affordability crisis:

• Construction costs and timelines. Homebuilding slowed significantly following the Great Recession and is still has yet to recover, especially at the affordable end of the market. This is largely because the cost of building new units makes it nonviable for the private sector to build more-affordable options. 

  The cost of new buildings is determined by the cost of labor, materials, land, capital and some regulatory requirements like zoning, compliance fees, labor standards, building codes, safety inspections, and permitting. Streamlining excessive regulations could enable building to happen more quickly and cheaply, increasing supply, particularly at the affordable end of the market. According to the National Association of Home Builders, in 2021, regulations imposed by all levels of government accounted for about 24 percent of the price of a single-family home.

  Beyond costs, regulations can also lengthen building timeline. In a 2022 survey of housing developers, nearly all reported construction delays, and 83 percent of delayed developers said that permitting issues were the cause of delay. Reducing the cost of applying for zoning approval, unnecessarily changing building codes and design standards, and working to ensure that compliance with regulations is speedy and doesn’t require significant fees are all important factors in reducing the cost of homebuilding, and ultimately, the cost of housing.

• The price of land. Land prices are prohibitively high, especially in metropolitan areas close to employment opportunities or natural amenities, where demand is high. Now accounting for nearly 60 percent of property value, local land regulations also need reform. Increasing the allowable number of housing units that can be built on one parcel of land can help reduce the housing costs. 
  
  This has been the goal of local zoning changes and for good reason: research suggests upzoning or allowing low-density infill housing could, depending on market context and demand, reduce development costs and increase construction.
  
  But some research has found that zoning changes can increase land values in these areas, so benefits and costs of changes require careful consideration to avoid adverse effects. Other land-use requirements, like minimum lot sizes, allowance of accessory dwelling units (ADUs), minimum setbacks, mixed-development allowances, and parking minimums, also play a role in the cost of land and housing and ought to be considered at state and local levels.

Deregulation comes with trade-offs

Deregulation could reduce unnecessary administrative burdens and the red tape that impedes new construction and the sale of existing homes, but as outlined above, removing some regulations could worsen housing affordability. Moreover, some regulations, like building codes, are critical to the health and safety of occupants, and zoning can help communities protect people and infrastructure from natural disaster risk.

Reducing certain regulations might increase costs for potential occupants in the short and the long term. The increased energy-efficiency standards for the construction of new homes made last year by the US Departments of Housing and Urban Development (HUD) and Agriculture (USDA) may be among the first regulations to go. But research has consistently shown that homes in poor condition result in, cause, and lead to higher energy costs, which are a real burden for households with low to moderate incomes. Although regulating home energy efficiency carries an upfront cost, HUD and the USDA estimated that compliance costs from these efficiency standards will increase mortgage payments by about $37 per month—but will reduce homeowners’ energy bills by about $80 per month, ultimately saving homeowners more than $500 annually.

What power does the federal government have to address the affordable housing crisis?

The federal government can reduce the baseline level of required regulation, but ultimately, state and local governments hold the most-influential policy levers to break down regulatory barriers like zoning laws, housing inspections, and energy efficiency standards. To encourage state and local governments to reduce regulatory burdens, the federal government can offer incentives. Congress could take lessons from the delivery of the 2021 American Rescue Plan Act and create a new grant program for localities that implement programs and policies to increase affordable housing supply.

But a robust body of evidence underscores that deregulation alone will not solve the affordable housing crisis. Nonregulatory factors have a bigger impact on material costs than building code regulations, and the proposed tariffs on Canadian goods are likely to increase material cost. And with property (or hazard) insurance costs reducing affordability, financing resilient homes, as opposed to capping insurance rates, is criticaland cost-effective.

To follow through on the president’s goals of delivering price relief, here are a few evidence-based steps the federal government could take:

• To bring down the cost of new construction, increase access to financing for modular and manufactured homes. Modular homes are more affordable than stick-built homes and can contribute to housing supply more quickly, but most manufactured homes are typically classified as “personal property” (PDF) as opposed to the “real-property” classification of stick-built homes, which makes it difficult to access affordable financing products and can reduce property appreciation. To make manufactured housing more financeable, HUD can increase chattel loan limits for personal property loans to reflect market prices, and the government-sponsored enterprises (GSEs) could create a standard, transparent, chattel loan channel.
• Authorize financing products to meet builders’ and consumers’ needs. By improving the multifamily construction and development products from the Federal Housing Administration (FHA) and the GSEs, the federal government can expand financing for new building, especially of apartments, ADUs, and condos. Similarly, improving FHA- and GSE-financing products for purchase rehabilitation can help existing housing inventory reach owner-occupants and renovate the aging housing stock.
• The executive office could work with Congress to make it profitable to build and rehabilitate affordable homes for rent and sale. This Congress will have a chance to pass existing bipartisan housing-focused legislation that has gained momentum in recent years. The Neighborhood Homes Investment Act would provide federal tax credits for new construction and rehabilitation of affordable owner-occupied homes sold to lower- or middle-income families in neighborhoods with high poverty, low incomes, and low relative median home values. And the Affordable Homes Credit Improvement Act would improve the Low-Income Housing Tax Credit, the main source of financing for affordable rental construction.
• Congress could consider legislation to fund skills training to address the construction industry’s labor shortage. This shortage has contributed to reduced labor productivity and high building costs. Research has shown that apprenticeship programs can be effective at not only bolstering the workforce but also increasing earnings, providing a financial boost to individuals, families, and local economies. It will be especially critical to involve younger people (PDF), underserved communities, and women, who currently make up low shares of the industry. Research suggests that if more women entered or remained in construction, there would no longer be a construction labor shortage. Without recruiting young people and communities of color to the construction trades, the country risks having a future shortage, as the current workforce ages and the younger population is more racially diverse than ever in the nation’s history.

Increasing access to and affordability of quality housing is critical for household financial stability and wealth building and ensuring positive macroeconomic outcomes. But to bring prices down most effectively, evidence suggests the administration will need to foster collaboration across federal agencies and state and local governments and work holistically to address forces putting upward pressure on housing costs including land costs, borrowing costs, prices for materials, labor shortages, and insurance costs.