Trump’s path to lower housing costs has to navigate local concerns

President Trump has made it clear that he wants to address housing challenges, including the lack of housing supply and rising prices. In an executive order signed Monday night, Trump ordered the heads of all executive departments and agencies “to deliver emergency price relief, consistent with applicable law, to the American people.”

In the memorandum, Trump went on to state that “many Americans are unable to purchase homes due to historically high prices, in part due to regulatory requirements that alone account for 25 percent of the cost of constructing a new home according to recent analysis.”

While the Trump administration’s goals of lowering the cost of housing and boosting supply are certainly objectives many in the housing space share, it remains to be seen how effective changes at the federal level will be.

“He is right that the lack of supply is the root cause that is keeping home prices really high, so I feel like it is really well intentioned, but the issue is that a lot of the regulatory burden in terms of cost of construction is not actually something the federal government can deal with, as most burdens are at the local level,” Chen Zhao, the head of economics research at Redfin, said.

“He is ordering the head of the executive departments and agencies at the federal level to look into this, but I’m not sure what kind of an impact they can have other than lean on local governments and try to incentivize them to streamline regulation and make it easier to construct housing.”

This is the approach currently being taken in the housing inventory constrained state of New Hampshire, where state-led initiatives like InvestNH Housing, are being used to encourage municipal governments to permit and execute more housing projects.

Some of these initiatives include a program that pays municipalities $10,000 per unit to quickly issue permits for multifamily projects. There is also a demolition program, which helps communities and developers pay for the costs to renovate or tear down dilapidated structures and replace them with housing.

Additionally, the state’s Housing Opportunity Program encourages communities to proactively review their zoning ordinances and public service offerings before development questions are even on the table. 

“I think the Housing Opportunity Program is going to have such a lasting impact on helping the housing crisis because it has made communities evaluate if they are development ready,” Andrew Dorsett, the housing finance director of InvestNH, said. “Do they have the infrastructure, the sewer system and things to handle more capacity, or do they need to upgrade things?”

While the red-tape posed by local zoning rules is not something the federal government can contend with, according to Zhao, where the government could make a difference is in housing finance.

“There are all sorts of fees when you are trying to get a mortgage, so I think the heads of agencies like Fannie Mae, Freddie Mac, Federal Housing Administration (FHA), Department of Veterans Affairs, can explore ways to reduce these fees, but the margins are pretty small relative to the overall cost of purchasing a home,” Zhao said.

The Mortgage Bankers Association is one trade group that is advocating for the federal government to take this route.

“We support efforts to cut unnecessary regulatory red tape and to pursue federal housing program enhancements that make renting and homeownership more attainable and sustainable,” Bob Broeksmit, the president and CEO of the MBA, said in a statement.

Broeksmit said he and the MBA will be strongly advocating for a “reasonable reduction” to FHA mortgage insurance premium levels, which is one place that the federal government could create change in housing costs. The MBA believes that cutting these premiums, along with eliminating the FHA’s life of loan premium requirement, would reduce housing costs for low- to moderate-income Americans.

“MBA and its members stand ready to partner with the Trump administration as it builds its economic, housing, and financial services agenda,” Broeksmit said.

Like the MBA, the National Association of Home Builders’ (NAHB) is also advocating for changes at the federal level, but it knows that many of the challenges to building new homes come from the local level. However, the trade group, whose members are on the front lines of these challenges, commended President Trump for the executive order.

“President Trump understands that America is facing a housing affordability crisis and the only way out of this crisis is to remove barriers like unnecessary and costly regulations that are raising housing costs and preventing builders from building more attainable, affordable housing,” Carl Harris, the NAHB chairman, said a statement.

In May 2024, the NAHB released its 10-point “Blueprint to Address the Housing Affordability Crisis.” Some proposed solutions include eliminating excessive regulations, overturning inefficient local zoning rules, passing federal tax legislation to expand the production of affordable and attainable housing, and easing supply chain burdens by doing things like “boosting the production of sorely needed transformers and other materials, ending tariffs on Canadian lumber shipments into the U.S. and on building materials coming from China.”

Although the NAHB shares the Trump administration’s view on eliminating excessive regulations, which it also feels are driving up construction costs, the two differ on their views of tariffs. Prior to coming into office, Trump said he would put a 25% tariff on all goods coming from Canada and Mexico on Day 1 of his presidency. On Monday, he rolled that back to Feb. 1, but housing industry experts are still concerned about what may happen if the tariffs are put in place.

“We are basically only 24 hours in, but so far what is happening with tariffs is definitely more benign than what folks were fearing,” Zhao said. “Trump is sounding a bit less hawkish on China, which is the main place people were kind of assuming tariffs were going to be implemented. Yes, he is talking about a 25% tariff on Canada and Mexico, but we’ve seen this happen before in 2019 and his comments today make it feel like maybe he is kicking the can down the road.”

In 2018, the NAHB  estimated that the tariffs the first Trump administration placed on Canadian softwood lumber added nearly $9,000 to the cost of constructing a single-family home. The impact on lumber prices was dramatic, with costs rising close to 80% year over year, in part due to the taxes.

The National Association of REALTORS in an emailed statement said it applauds President Trump for bringing attention to the housing affordability challenges. “Our team has communicated these issues to the President’s team, highlighting that the lack of supply is the number one driver of housing cost and, in turn, is hurting the housing market and shutting out first-time buyers…The President’s executive order underscores the critical need for bold, coordinated action to lower housing costs and increase the availability of homes for families across this country… We look forward to working with the Administration in the next steps and putting this executive order into motion.”

Another area in which the Trump administration may look to lower housing costs is by working to reduce the cost of homeowner’s insurance as many, including the Treasury’s Federal Insurance Office, attribute housing affordability challenges in certain markets like Florida and California to rising insurance costs. However, the American Property Casualty Insurance Association (APCIA) disagrees with this assertion.

Although the trade group supports the Trump administration’s initiative to lower housing costs and increase supply, the APCIA attributes the affordability crisis to inflation.

“Homeownership costs are on the rise primarily because of inflation, especially the escalating costs of construction materials and labor, which have increased 37.4% over the last 5 years, compared to a 22.4% increase in the cost of homeowners insurance (according to the Bureau of Labor Statistics construction and homeowners insurance producer price index),” David Sampson, the president and CEO of APCIA, said in a statement.

Sampson added the homeownership costs have also increased as “most new homes are being built in areas with a higher risk of loss due to natural catastrophes.”

“California alone has built more than 2 million homes in areas at high or extreme wildfire risk without fully implementing corresponding improvements necessary to effectively mitigate wildfires,” Sampson said. “Insurance is still a relatively small percentage of homeownership costs compared to average property taxes, utilities, and mortgage loans.”

According to Sampson, insurance affordability can be best addressed through improved mitigation and resiliency programs, which he said the APCIA is currently supporting throughout the country.

While industry trade groups are hopeful about Trump’s initiatives, the impact of regulatory changes remains uncertain.