Trump should bring on a great American housing boom
Most Americans, from both parties, say the government needs to increase the supply of affordable housing. For President-elect Donald Trump, that should offer a good opportunity to summon his instincts for development — and self-promotion — to get America building again. Call it the “Trump Building Boom.”
The problem is clear: For more than a decade, housing construction has failed to keep up with U.S. population growth and household formation. This has helped drive a nearly 50% increase in the median sales price of houses and a similar jump in rents, outstripping an 18% gain in real median household income. The income required to afford a new single-family home is now almost twice what it was five years ago, and nearly half of renting households spend more than 30% of their income on rent. By some measures, homelessness is at a record level.
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Normally, rising prices should spur construction, and there are signs that is starting to happen. But why not faster? For one thing, in many of the cities with the most severe housing shortages, local zoning restrictions, land-use regulations, rent controls, affordable-housing mandates and permitting requirements — among other burdens — limit development.
Sustained attention to complex problems does not come naturally to Trump. But as a second-generation real estate developer, he has had plenty of personal experience with the bureaucratic obstacles and political opposition that housing plans often encounter. This might offer him an advantage in helping the U.S. build the estimated 2.5 million homes the country needs. Success would depend on three things.
First, the administration should encourage a wave of rezoning and deregulation at state and local levels, which is the source of most of the friction. In his first term, Trump promised an effort along these lines and established a council to study the problem.
This time around, he should act on its recommendations, including by helping local governments dial back costly requirements such as parking minimums and minimum lot sizes and speed up permitting.
More prosaically, the administration should change federal policies that needlessly raise the cost of construction.
This could include reducing certain tariffs — such as those on Canadian lumber, which were sharply increased during the Biden administration — as well as expediting environmental reviews and reducing red tape.
Finally, Trump has promised to reduce interest rates, which would certainly help make housing more affordable.
The problem is that many of his policies would tend to make that job much harder. Here the president should try to be pragmatic.
A commitment to respect the Federal Reserve’s independence would cost him little but help a lot. So might a pledge to cut spending and to moderate the many tax cuts he has talked about. Trump’s record suggests that any such compromise is a long shot.
Then again, if there’s one consistency in Trump’s career, it’s that he defies expectations.
Providing an ample supply of housing — and making life more affordable — should be a goal of every policymaker. Trump will arrive in office with an opportunity to achieve that goal. “Build, baby, build,” you might say.
— Bloomberg Opinion
