In the U.S., the issue of housing affordability remains a pressing crisis, exacerbated by a shortage of roughly four million homes as reported by the National Association of Realtors by mid-2023. President-elect Donald Trump’s ambitious plan to alleviate this crisis revolves around increasing the construction of new homes. His announcement during a news conference in August, where he emphasized the necessity of opening federal land for housing development, highlights a pivotal aspect of his strategy: tackling affordability through enhanced supply. However, while the slogan of “more building” seems straightforward, underlying complexities challenge its practical implications on the housing market.
The U.S. housing market has witnessed a modest uptick in the construction of new homes, with single-family housing starts reportedly growing by 2.7% to over a million by September 2023. Yet, experts argue that this increase does not come close to fulfilling the substantial demand, leaving a significant void in available properties for potential buyers. The disparity between supply and demand underscores a more systemic problem that cannot be rectified merely by ramping up construction. Existing socio-economic factors interact dynamically, making it difficult to predict whether building more homes will translate into increased affordability or merely feed existing inflationary trends in housing costs.
Trump’s assertion that he would bring down mortgage rates to levels seen during the pandemic also warrants scrutiny, as monetary policy tools used to control mortgage rates are out of presidential hands. Such claims may mislead voters who could perceive the administration’s influence over economic factors more broadly than is feasible.
In addition to construction, Trump has expressed commitment to reducing regulatory obstacles that inflate housing costs. The regulatory environment across federal, state, and local levels contributes significantly to the final price of homes. According to industry insiders, approximately 24% of single-family home costs and 41% of multifamily properties are attributable to regulatory expenses. Simplifying permitting processes could reduce costs for developers and ultimately for consumers, aligning with the administration’s goal of making housing more accessible.
However, the challenge lies in ensuring that regulatory reductions do not compromise safety standards or undermine essential protections that benefit residents. Thus, while easing regulations could lead to lower prices, it’s vital to strike a balance between facilitating construction and maintaining well-regulated, safe housing markets.
Another significant factor influencing the future of housing affordability under Trump’s proposed policies is the reliance on immigrant labor within the construction industry. Estimates suggest that nearly one-third of all construction workers in the U.S. are immigrants. Trump’s potential immigration policies raise concerns regarding labor shortages that would not only drive wages upward but also exacerbate the existing challenges in meeting housing demands.
Critics of mass deportation proposals argue that undocumented immigrants predominantly inhabit homes owned by U.S. citizens rather than contributing directly to homeownership. Disruptions in the labor force caused by such dramatic policies would likely deter construction projects, thereby slowing supply growth at a time when housing demand is high.
While there are initiatives intended to prepare the domestic workforce for careers in construction, attracting young workers remains arduous, with studies indicating a mere 3% interest in such trades among younger Americans. The implications of limiting immigrant participation in an already strained labor market could thus reverberate through the housing industry, leading to further delays and inflated consumer costs.
Additionally, Trump’s trade policies could further complicate efforts to make housing more affordable. Proposed tariffs on goods, particularly related to raw building materials like lumber, could add unnecessary costs to housing developments. With single-family homes averaging construction costs around $392,241, any increase in material prices due to tariffs will inevitably be passed on to consumers, significantly affecting overall affordability.
Housing experts assert that while some new construction is anticipated—a projection of 1.2 million single-family homes and around 300,000 multifamily units in the coming year—it is likely not enough to sufficiently address the considerable deficit caused by years of under-building.
As the Trump administration sets its sights on tackling America’s housing affordability crisis, the interplay of various elements—regulation, labor market dynamics, and tariffs—will play crucial roles in determining the efficacy of proposed measures. The ambition to increase supply and relieve pressure on the housing market is commendable; however, it requires a nuanced understanding of the broader implications each policy entails. It remains to be seen if this initiative can effectively target the heart of the issue, particularly in urban centers most impacted by housing shortages. Hence, as stakeholders navigate these proposed changes, a holistic approach that encompasses multiple facets of housing policy will ultimately be necessary for real and sustainable affordability solutions.