The issue of housing affordability has reached a breaking point in the United States, creating a significant challenge for many families. As of mid-2023, the National Association of Realtors indicated a staggering deficit of approximately 4 million homes in the country. This shortage has escalated home prices, making it increasingly difficult for first-time homebuyers — many of whom are now in their late thirties for the first time — to enter the housing market. Economic experts and housing advocates suggest that the answer lies in increased construction and easing restrictions that have historically stymied housing development.
President-elect Donald Trump has publicly acknowledged the critical nature of this crisis and has proposed solutions aimed at stimulating housing development. His administration’s plans involve opening up federal lands for home construction, emphasizing the urgent need for affordable housing solutions. At a news conference in mid-August, Trump stated, “We desperately need housing for people who can’t afford what’s going on now,” highlighting the urgency of the situation.
Construction rates have seen a slight uptick this year, with single-family housing starts reaching approximately 1,027,000 in September, marking a 2.7% increase from August. While this may appear to be a positive sign, experts warn that the current pace is insufficient to satisfy the overwhelming demand for housing. Jim Tobin, president of the National Association of Home Builders, asserts that “more building” is fundamental to resolving the housing crisis, yet doing so effectively will require a multifaceted approach.
Trump’s approach presents both opportunities and potential pitfalls. While the basic notion of expanding home construction appears straightforward, the implications of his broader policy proposals could negatively influence affordability efforts in the long run. For example, Trump’s controversial discussions around mass deportation of immigrants raise concerns about labor shortages within the construction industry, as a substantial portion of the workforce consists of immigrant labor.
Regulatory barriers represent a considerable obstacle in the quest for affordable housing. In his previous term, Trump signed an executive order aimed at eliminating these barriers. His focus on reducing regulations emphasizes a direct pathway to easing the financial burden of home purchasing, as nearly a quarter of the cost of single-family homes is attributed to regulatory costs. However, experts caution against the potential unintended consequences of implementing sweeping deregulations without diligent supervision, as this could compromise safety and building standards.
Moreover, Trump’s proposals to slash regulations must be balanced with the realities of labor availability. The construction industry faces challenges in attracting native-born American workers, as highlighted by a 2017 NAHB survey indicating that only a mere 3% of young adults show interest in construction trades. If immigration policies lead to reduced labor availability, construction delays may ensue, causing a ripple effect of increased labor costs that could be passed onto consumers.
Alongside regulatory concerns, immigration policies pose another layer of complexity in addressing housing affordability. While Trump has linked rising home prices to an increase in illegal immigration, expert analyses indicate that undocumented immigrants predominantly inhabit residences owned by U.S. citizens. Should mass deportations occur, the homes they occupy would remain filled, potentially perpetuating current housing shortages rather than alleviating them.
Construction industries rely heavily on immigrant labor. Recent data suggests that around 31% of construction workers in the U.S. are immigrants. Any disruption in this labor force could exacerbate the existing workforce challenges and, in turn, elevate housing prices. As economists note, designing a housing strategy without acknowledging the significance of immigrant labor could undermine potential successes.
Another layer of Trump’s potential housing policy includes introducing tariffs on imports, which could have a direct impact on construction materials such as lumber. An across-the-board tariff could inflate costs, impeding the affordability that many families desperately seek. With average construction costs already nearing $392,241 for single-family homes, any increase in material prices would ultimately trickle down to consumers, exacerbating the current crisis.
While homebuilders anticipate constructing around 1.2 million new single-family homes in the next year, this number still falls short of the projected need as the U.S. struggles to climb back to necessary construction rates. Additionally, Trump’s plans to allocate federal lands for housing primarily encompass more rural areas, which may not address the pressing needs of densely populated urban cities that struggle with affordability.
Addressing housing affordability demands a coordinated approach that encompasses not just increasing construction but also navigating complex regulatory and immigration landscapes. The potential for improvement exists, but it will require balancing various competing interests and recognizing the multifaceted nature of the challenge at hand. An effective housing strategy for America must ensure that solutions are relevant and focus on the communities most in need.