How Can Politicians Help Fix The Housing Market? – The Mortgage Note

It’s said by some that to gauge what a politician might do, simply wet your finger.

You know, to pinpoint how the wind is blowing.

Sounds a tad cynical? Well, that might be truer on some days than others. It depends on the political climate in the country.

Today, democracy itself is encountering obstacles in the United States stemming from the lack of accessibility to real estate, according to Time.com. Homeownership has receded from 69% before the economic crash in 2008 to around 65%.

That’s largely due to steep price jumps in home prices starting during the Covid pandemic, elevated interest rates, and tight inventory.

Over 70% of Americans who planned to buy a home in 2024 could not do so. Now, there are headlines that the housing market is in a deep freeze and has posted its worst spring selling season in 13 years.

Against that backdrop, Stephon Martin, an attorney and real estate finance professional, told The Mortgage Note, “It seems like these first few months for the Trump administration have been about tone-setting and differentiating from the Biden administration. Since Trump didn’t run heavily on housing, I don’t suspect that much will be done in that area. If anything is done, it won’t be widely publicized.”

However, he explained this doesn’t mean that “major or sudden changes won’t be made, because Trump’s known for doing both with little to no notice. That said, if nothing’s done, the Fed will continue to keep rates moderate until they see the effects of the tariffs, and then they will likely lower rates to offset the tariff impact. This will stimulate some movement, but there continues to be an undersupply of homes, so in the absence of government intervention, the sales market will increase but be sluggish.”

Aaron Terrazas, an independent economist, said even though short-term interest rates might dip with growing recession fears, long-term interest rates — including mortgage rates — are likely to remain high for the foreseeable future.

“The prospect of agency privatization,” he said, “lingering questions about the Federal Reserve’s independence, and the likely continued reliance on substantial deficit spending or changes to conventional budget accounting practices in looming tax reforms — all three policies will put a high floor on mortgage rates and downward pressure on home values. That’s bad news for sellers, but potentially a welcome reprieve for buyers who have been lingering on the sidelines of the market.”

Although any dip in home prices could help, the median existing-home sales price was $435,300 in June, up 2% from a year ago, according to leaders at Zillow.

They estimate that five years ago, a median-income household could have afforded a typical home. Now, a median earner would need a $17,000 raise to afford a typical home, assuming a 20% down payment.

Can state and local governments help?

Roger Valdez, director at the Center for Housing Economics, explained that over the last few years, “it’s become more acceptable, politically, to recognize that we have too many rules and regulations that limit housing production.”

More inventory would help alleviate the housing crunch, which affects homebuyers and renters. The U.S. currently faces a shortage of 3.8 million homes.

The challenge, though, “is that politicians have long arms and short memories,” Valdez noted. “Measures pass that are touted as big reforms but don’t fundamentally change the situation. It feels good.”

For example, zoning reforms can allow for more housing on single-family lots, but if other requirements and utility costs are prohibitive, nothing will happen.

“Everyone cheers the reform and moves on, neglecting evaluation and additional reform,” Valdez said.

The AEI Housing Center in Washington, DC, is trying to help state, county, and local leaders implement housing solutions that work. They plan to distribute playbooks this month based on their research into best practices.

At the federal level, there is a comprehensive bipartisan housing package that is offering politicians and their constituents hope.

The Renewing Opportunity in the American Dream to Housing Act of 2025 aims to boost the country’s housing supply, expand access to homeownership, improve affordability, help reduce homelessness, as well as increase oversight and efficiency of federal regulations and housing.

U.S. Sen. Tim Scott, R-S.C., chairman of the Senate Banking, Housing, and Urban Affairs Committee, announced on July 29 that the act had been advanced in the committee’s first bipartisan housing markup in over a decade.

“For far too long, Congress believed this problem was too big to solve. Today, we’re taking not a step – but we’re taking a leap in the right direction in a bipartisan fashion,” Scott said in a statement.

“Many people around the country are frustrated with the way we do American politics and wonder, is there any issue that brings this nation together, and I’m here to say, halleluiah! We have found one – it is housing.”

Ranking Member Sen. Elizabeth Warren, D-Mass., said in a statement that with this bipartisan bill, they are taking a critical first step to bring down families’ number one monthly expense, housing costs.

“I’ve been calling on Congress to address our nation’s housing shortage for years, and I’m proud to work with Chair Scott and our entire Committee to put forward legislation that will boost housing supply, reduce homelessness, and expand homeownership for families,” Warren said.

CEO Bob Broeksmit of the Mortgage Bankers Association said that many of the bill’s provisions will help to boost housing supply for both owning and renting, streamline federal housing program offerings, and make small-dollar mortgage lending more available to consumers.

More than 25 industry stakeholders publicly voiced support for the legislation.

Editor Kimberley Haas contributed to this report.