Treasury Secretary Scott Bessent recently declared that President Donald Trump's administration is considering declaring an emergency situation for housing. He pointed out the weakest summer home sales in a decade, with more than 15% of transactions falling through in July, the highest cancellation rate since record-keeping commenced in 2017. Prices, though below pandemic levels, are still too lofty for working- and middle-class Americans.
Bessent is right to sound the alarm, and a housing emergency declaration is long overdue.
For too long, politicians have praised the virtues of homeownership while supporting policies that make it harder to achieve. America no longer produces enough houses to meet demand, and existing houses have become more costly than they would otherwise have been due to restrictions imposed by government on building and investing.
National housing experts estimate the United States is short between 3.2 million and 5.5 million homes, depending on the methodology used. Freddie Mac puts the gap at roughly 3.8 million units, while the National Low Income Housing Coalition reports a shortage of more than 7 million affordable and accessible units. This gap between supply and demand is the very reason for rising home prices.
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Government regulations have been largely responsible for causing the shortage.
Studies from the National Association of Home Builders show that federal, state and local regulations account for nearly 24% of the price of a new single-family home and more than 40% of the cost of new multifamily housing. Zoning limitations that restrict density, lengthy permitting programs that draw out projects over years, and building codes that differ significantly from one jurisdiction to another all create unnecessary costs and lost time. For some metro regions, it takes over a decade to transition a project from conceptualization through completion.
If the Trump administration does indeed choose to declare a national housing emergency, its resulting emergency plan should not seek to micromanage local housing markets or build new federal bureaucracies. Instead, it should focus on clearing away the obstacles that make it harder for the private sector to meet today’s growing demand for housing.
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Wherever stringent restrictions have been imposed upon developers or landlords, housing availability has contracted and affordability has gotten further out of reach. Conversely, where markets are freed to act – when permitting is streamlined, financing is accessible and development is allowed to respond to demand – housing has become more plentiful and prices have stabilized.
California shows how this plays out. For decades, stringent zoning and environmental vetting brought building close to a halt, leaving the state short almost 1.3 million units , according one recent estimate. By contrast, states like Texas, which moved more quickly on permitting and allowed higher-density development, have seen faster growth in supply and more moderate price increases even as their populations expanded. In fact, home prices are declining faster in Texas than any other state.
Instead of following states like Texas’ lead and tackling the root causes of the housing shortage, Washington, D.C., continues to scapegoat the private sector.
Take, for example, the trend of blaming rent pricing software.
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Launched under President Joe Biden, this effort wrongly blames technology tools that give real-time housing pricing. Targeting AI may make for nice sounding press releases, but it’s no different than blaming the weatherman for the rain. This technology just reports on what the market is bearing and regulating it away does nothing to put more homes on the market or reduce costs for families.
Or how about the federal and state lawmakers who have chosen to point fingers at housing investors? A study led by New York University’s Joshua Coven found that markets with greater institutional investment saw both an increase in available rental housing and a measurable drop in rents. This is because large-scale investors add to the pool of available rentals, which can ease competition and moderate costs.
In other words, when investment is welcomed and new units are built, families benefit directly through lower costs and more options.
What does this all mean?
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Well, instead of seeing its role as one of restricting market activity, the Trump administration should view its job as one of increasing it. Because the only way to solve an affordable housing shortage is to build and invest more.
One approach could be to catalyze reform at the state and local level by making some programs and grants conditional on removing artificial limitations on construction, such as outdated zoning restrictions that prohibit multifamily development in high-demand areas.
Another could be to streamline federal permitting for infrastructure projects that support housing, such as roads, utilities and transit. These projects frequently get delayed and become more costly or less likely to get constructed as they languish, and streamlining would encourage builders to construct more.
The White House has already prioritized enacting economic policies that have freed workers and businesses from unnecessary burdens – ending taxes on tips and overtime, reducing red tape, and promoting growth through opportunity. Housing deserves the same treatment: less government interference and more room for private investment.
This approach has worked before. Federal leaders just need to let it work again.
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