What It Would Really Take To Make Housing Affordable in 2026

Seeking to lower borrowing costs, create more housing supply and make it easier for homebuyers to enter the market, President Donald Trump is expected to soon announce a series of housing reforms. It’s not clear that his plans will bring affordability back to the housing market.

Economists and housing market officials say a lot depends on whether his policies can get more workers building more houses.

“The bottom line is we have to create more housing,” said Ed Brady, CEO of the Home Builders Institute (HBI).

Trump’s Proposals Could Stoke Homebuyer Demand

Trump, federal officials and members of Congress are all proposing new policies they say could help alleviate housing affordability problems. However, many of the ideas put forward so far would create conditions where more people would want to enter the housing market, thus increasing demand, which could potentially push housing prices higher.

One such proposal was Trump’s effort to lower mortgage rates by instructing government-backed mortgage giants Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds. The move has so far been effective at driving mortgage rates slightly lower, wrote Goldman Sachs analyst Arun Manohar.

But falling mortgage rates may not help to lower housing prices, said Norbert Michel, vice president and director of the Center for Monetary and Financial Alternatives at the Cato Institute. “The more of those bonds that you buy, to the extent that it makes it easier to get a mortgage, that’s an increase in demand,” Michel said. “That’s not making anything more affordable.”

Trump also floated the idea of banning large institutional investors from buying single-family homes to increase supply and reduce competition. But Goldman’s Manohar notes that institutional investors own less than 0.5% of total housing stock and around 2-3% of rental housing stock, which means such a policy may not have much of an effect.

Housing Supply Needs to Increase

Supply is often cited as the issue driving the affordability crisis in housing. While Trump and Congress are working on solutions to housing affordability, experts said some ideas haven’t adequately addressed the need to increase the housing supply.

Studies on how much more supply the U.S. needs vary, with Goldman Sachs recently estimating that the housing market is short between 3 million and 4 million homes. And there are a range of ideas on how to get builders to construct more housing. 

One way to increase housing supply is to make it cheaper to build houses. Brady said higher costs associated with labor, supplies and regulations are raising construction costs. 

Regulations account for nearly 25% of the cost of a single home, according to a National Association of Home Builders (NAHB) study. While Brady noted that the federal government has already begun loosening some rules, many building regulations are at the state and local levels, giving Washington limited ability to cut some costs. 

“Generally, you want to ease permitting and zoning restrictions so that it’s easier and less costly to build,” Michel said. “But that’s not a federal policy, you know, it just isn’t.”

Brady noted that although the government can’t direct local governments to streamline their processes, it could incentivize them by promising additional grants for states and municipalities that make rule changes, or potentially withholding funding for those that do not.

Similarly, Brady said that homebuilders currently don’t have enough workers to build the homes that the U.S. needs, an issue that’s been impacted by recent immigration enforcement actions.

A June study by the HBI and NAHB found that the labor shortage had a more than $10 billion impact on the housing market, preventing the construction of 19,000 homes annually.

“If we had the labor, we create more inventory and we create more housing,” Brady said. 

Factory-Built Homes, Capital Gains Tax Relief Could Also Help

There are other changes the government could make that could impact housing policy. One would be to treat manufactured homes the same as standard housing.

“Fannie and Freddie should treat factory-built homes like site-built homes by providing owners with traditional mortgage-like financing,” wrote the Center for American Progress.

The federal government could also improve supply by lowering capital gains taxes, as Brady said that some owners may be reluctant to sell because they would have to pay taxes on their gains.

“Somebody that’s got a million dollar asset, that doesn’t want to pay capital gains, so they’re not selling. Get rid of that capital gains tax. Let them put it on the market. And that will help provide supply,” Brady said. 

Congressional Legislation Also Aims for Reform

There’s also housing legislation moving through Congress. The ROAD to Housing Act in the Senate and the 21st Century Act in the House of Representatives seek to address both housing supply and demand issues through a series of policies designed to encourage local governments to approve housing projects. The bills are also supported by major housing industry groups.

Brady called the legislative packages a step towards updating and modernizing federal housing law. But Michel doubted whether the bipartisan legislative packages would fundamentally improve supply.

“I don’t think that there would be a large supply effect,” Michel said. “I really don’t, and I do think that there would be maybe some negative demand side effects.”