Trump’s addiction to playing Colossus and putting more plates in the air to distract attention from the ones that have crashed to the ground or are about to has produced yet another not-too-bright idea: that of declaring a housing emergency so as to improve housing affordability. As we’ll see, making any real headway would take time and require pulling quite a few policy levers. It would also require helping the poors, something that this Administration demonstrates it is opposed via numerous policy actions, from reducing SNAP benefits to Medicaid work requirements to Medicare cuts to running the homeless out of Washington, DC.
We aren’t alone in our skepticism. The constituency that ought to be all on board, relators, is as well.
One reason for the lack of enthusiasm is that the scheme is unconvincingly thin. From Bloomberg:
Treasury Secretary Scott Bessent said the Trump administration may declare a national housing emergency this fall as the White House looks to highlight key issues for midterm campaign voters.
“We’re trying to figure out what we can do, and we don’t want to step into the business of states, counties, and municipal governments,” Bessent told the Washington Examiner. “We may declare a national housing emergency in the fall.”
Bessent said housing affordability would be a critical leg of Republicans’ 2026 midterm election platform. Bessent declined to list any specific actions the president may take, but he suggested that administration officials are directly studying ways to standardize local building and zoning codes and decrease closing costs.
The conservative publication Reason poured on the acid:
The secretary’s comments all suggest this housing emergency declaration is very much a work in progress, if it is declared at all.
Indeed, the fact that the administration is studying potential actions it might take within a few months doesn’t quite sound like it considers the state of housing in the country to be a proper dictionary-definition emergency requiring immediate action to prevent the loss of life, limb, and property.
Rather, it would appear this would be another “emergency” that the president will declare to force through policy changes that in nonemergency times would require going through the federal rule-making process or even, gasp, Congress.
While the press has cited a number of proximate causes for the housing price squeeze, they skip over the ultimate one: neoliberalism, meaning the policy shift that really took hold in the Reagan era to favor asset price increases over real wage growth and use easier access to consumer debt to create the illusion of rising prosperity. While there are many ways to tell this story, this one from Statista should suffice, of Median inflation adjusted hourly earnings of wage and salary workers in the United States from 1979 to 2023. Look at the scale of the chart to see how small the rise has been over time:
Another factor has been the change in policy over the role of housing. Matt Stoller, in a Fordham Law Review article, described how housing was once shelter plus a forced savings vehicle. Most people stayed with one employer in one location for their working life. Buying a house with a 30 year mortgage meant that these employees would pay off their mortgage over their career and retire owning their house free and clear, and as a result, with much lower monthly fixed costs. Financialization now allows for equity extraction.
Housing (and medical) costs are pain points as Americans are ever more pessimistic about their futures. From a Lobor Day article in the Wall Street Journal, Americans Lose Faith That Hard Work Leads to Economic Gains, WSJ-NORC Poll Finds:
A new Wall Street Journal-NORC poll finds that the share of people who say they have a good chance of improving their standard of living fell to 25%, a record low in surveys dating to 1987. More than three-quarters said they lack confidence that life for the next generation will be better than their own, the poll found.
Nearly 70% of people said they believe the American dream—that if you work hard, you will get ahead—no longer holds true or never did, the highest level in nearly 15 years of surveys…
The discontent reaches across demographic lines. By large majorities, both women and men held a pessimistic view in the combined questions. So did both younger and older adults, those with and without a college degree and respondents with more than $100,000 in household income, as well as those with less….
And yet many people in the survey, as well as in interviews, said they felt a sense of economic fragility, even if their finances were adequate or secure today. In a generational cascade, majorities said the prior generation had an easier time buying a home, starting a business or being a full-time parent rather than in the workforce, while majorities also said they lacked confidence that the next generation could buy a home or save adequately for retirement.
While Jeff Lindly, 61, said he believes the economy is improving slowly, his adult children’s experience in the housing market draws a contrast with his own. Lindly was able to earn enough to support his wife and family when his children were young. They bought a house and, later, built two more. Now, two of his three adult children live with him in Godley, Texas, one in a trailer on the property and one with her husband and child in the home.
“They can’t afford a house yet, even though they’re trying to save by living with us,” said Lindly, a real-estate appraiser who said that he expects housing affordability to improve with time and that he supports President Trump’s policies. His income recently has been about 40% of what is typical amid a slow housing market.
Precarity is a feature, not a bug, of neoliberalism.
Most accounts describe the severity of the home price crunch and list proximate causes. For instance, from Newsweek:
The U.S. housing market is currently in the midst of an affordability crisis caused by a combination of sky-high home prices, historically elevated mortgage rates, and other rising costs including property taxes, homeowners association fees, and home insurance premiums.
Limited inventory during the pandemic homebuying frenzy, when mortgage rates as low as 2-3 percent sparked a nationwide surge in demand, led to home prices rocketing by more than 40 percent between 2019 and 2022, according to the Harvard Joint Center for Housing Studies.
Three years after mortgage rates shot up to 6-7 percent as a result of the Federal Reserve’s aggressive rate-hiking campaign to fight inflation, putting a dampener on demand, home prices nationwide remain much higher than before the pandemic. As of July, according to Redfin, the median sale price of a typical U.S. home was $443,141, up 1.1 percent from a year earlier.
Mortgage rates have also remained stubbornly high…
Not only Americans are struggling to buy homes—with sales down by 1.6 percent in July compared to a year earlier and sellers outnumbering buyers by more than 500,000, according to Redfin data—but those who already own a property carry a heavier financial burden to maintain it than they did before the pandemic.
Property taxes have risen in nearly every major U.S. metropolitan area over the past five years as a result of the rise home values, according to a Redfin report. Home insurance premiums have surpassed 40 percent over the past six years, according to LendingTree, as more frequent and more severe natural disasters increase the risk of paying higher claims for carriers.
Alert readers will notice that housing prices are sticky and should have fallen in light of higher mortgage rates and insurance costs, as well as the fact that things like HOA fees, property taxes, and those insurance costs are not something the Feds can readily address.
Some assert that there is a housing shortage. We debunked that in a July post.1
Paul Krugman argued that the problem may be that the US has hit the limits of sprawl and more dense housing, such as apartment buildings and townhouses, might be the answer. We’ve been advocating that for years as the most obvious remedy for affordability, since what the US needs is more lower-cost units. Not just homebuilders, but also developers of multi-family housing, have greatly preferred the high end buyer. But another obstacle is NIMBY-ism, that many communities reject permits for more dense housing. Can’t let the riff-raff in!
So what can Trump do? Even if he gets Powell out sooner rather than later and gets his much-desired rate cut, that will have little effect on mortgage rates. The central bank sets interest at the short end of the yield curve. Mortgage rates are set off five to seven year rates. Those reflect inflation expectations. It’s hard to see those falling much, given Trump’s gaping fiscal deficits, ex a crash.
Of course, the Fed could engage in QE again, since the point back in the day was to lower both Treasury yields and mortgage spreads over Treasuries. But QE has become a dirty word, so this seems extremely unlikely.
Time Magazine questioned what Trump might do:
Under the 1976 National Emergencies Act, the President can declare a national emergency at his discretion. The act does not provide an explicit definition of what constitutes an “emergency,” but it does require the President to issue a formal declaration, such as through an executive order, and cite the statutory powers he plans to use in that declaration.
Declaring a national emergency allows the President to bypass Congress to take a range of actions limited to the 137 emergency powers defined by law, as well as an additional 13 statutory powers if Congress declares a national emergency…
Congress can terminate a national emergency by passing legislation, although the President can veto the resolution unless it reaches a supermajority. Otherwise, a national emergency can technically go on forever, so long as it is reaffirmed every year.
But national emergencies, and actions undertaken during them, can also be challenged in court…
During his 2024 presidential campaign, Trump said he would address the housing crisis by making federal land available for housing development and by slashing regulations.
However, any federal attempt to tackle the housing crisis will have to face the harsh reality that most of the key policies that influence housing supply are set at the state and local level.
“It remains unclear exactly what kind of emergency measures the administration could take to address housing, or even if using emergency powers in this way is lawful,” says Realtor.com® Senior Economist Joel Berner. “The best ways the administration could make an impact are by encouraging the building and purchase of homes.”
Berner suggests that finding ways to streamline the permitting process for homebuilders—and put fewer restrictions on builders—could help boost housing supply, particularly in heavily-regulated, high-cost areas like the Northeast.
“This would have the best long-term impact, but the federal government could also juice the housing market in the short run by making it easier to buy a home,” he says. “This could include offering a tax credit to offset closing costs.”
A similar tax credit was offered to first-time homebuyers during the Obama administration in 2008, when the economy entered deep recession. However, that tax credit required an act of Congress, and it is unclear whether the executive branch could take a similar step on its own.
In other words, thin gruel.
Michael Shedlock, who was not impressed, still had a proposal:
Housing Hoot
“We’re trying to figure out what we can do, and we don’t want to step into the business of states, counties, and municipal governments,” said Bessent.
Since when did Trump decide not to step into the business of states, counties, and municipal governments, the Fed, the business of India, or the business of anything else including the Smithsonian?
I have a suggestion Mr. President: End the lumber tariffs, the steel tariffs, and all the rest of the tariffs that inflate the cost of a new home.
So this may be the trial balloon of the day, or perhaps we’ll see a variant of the Ukraine raw earths deal: a lot of noise and spinning wheels, generating pretty much nothing in the way of results.
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1 From the post:
The big problem in the US is housing affordability. There is no housing shortage:
The total is just short of 148 million. About 35% is rental property, which has a typical vacancy rate of 7%, so one could argue for reducing the total stock by 3.6 million. FRED shows the active listings for owned residences at under 1.1 million; Zillow has the for-sale inventory as of end of June at 1.3 million. Generously (for the purpose of this analysis) using the Zillow figure and assuming all homes listed for sale are not occupied, we get 143.1 million, so say 143 million.
The Census put the number of households (admittedly as of 2023) at 127.8 million.
So there is no housing shortage on a macro level, as many claim.
Now real estate is always and ever local, so there are shortages in certainly chronically underhoused metro areas like New York City, and no doubt in certain other spots.
The not-sufficiently-discussed issues are the mismatch in housing stock composition versus needs (particularly the dearth of affordable housing) and the way policy schemes to increase housing affordability, just like the canard of health care “access”, have increased prices and enriched providers.
Any proposal that is put forward by Trump has to be countered by the question “How can the administration use this to grift?”. I can see the Administration using an “emergency ” as a land grab, getting themselves and cronies access to land for pennies on the dollar.
What needs to be done is controlled at the state and local level.. more density. But every density proposal is fought by NIMBYs and real estate owners that prefer the status quo. Also, STRs need to be regulated out of existence. Look at what Southampton NY recently did.. two week minimum on STRs. They are regulating the flop houses out of the Hamptons that 20 somethings use.
A mechanism to force an interest rate cut?
Or maybe a mechanism to build in a bailout for PE.
Emergency powers do not extend to the Fed.
Hard to see a path to affordable home ownership through the weeds of commoditization and speculative investment opportunity for the elites.
Great idea, Last DONald! Now put ALL of the rest of your presidency to work on the subject!
Can tell ya this: Until they the Dems start pushing real programs for housing, hunger, and healthcare, they will wander in the wilderness, while people who pretend to give a shit continue to steal everything not nailed down.
Thank you, that is the way it appears to me as well: no shortage, just affordability crisis. The SF Bay Area is another place where we can see housing shortages in certain areas, but the larger issue is who owns the land/housing and how is it distributed? And of course, in our system of “neoliberal” kleptocracy, advocating for public housing is tantamount to heresy.
The Empeoror with no marbles and his court sycophants will only make matters worse, as they do with whatever they touch. (reverse Midas)
The prevailing economic ideology encourages housing, health care etc. as a means to extract/extort the general public, not as a human right or necessity. It’s a privatized kleptocracy. Necessities like health care and housing are largely privatized, and can be used to extort the public: “so you want health care? It’s gonna be the most expensive in the world, with the worst health outcomes, but you WILL pay, otherwise you can go die. The choice is yours, it’s a free country after all.” Same with housing. Can’t afford to pay? Be homeless and die young. After all, the average life expectancy among lower and middle income groups in the US appears to be declining.
We have heard Michael Hudson say for years that “property is worth whatever the bank is willing to lend” The privatizatoon and financialization adds overhead that make housing unaffordable, at least that is one main cause.
Maybe just my and my entourage’s experience but the pit bull-like real estate agents and their industry are a very sticky cog in the ratchet of housing prices. Those people will not dream of talking sellers off the edge and they’ve got algorithms and the AirBnB racket telling them to not let go of that tasty bone.
We have quite the outbreak of STR’s here, with 621 cases in a housing stock of 1,302 domiciles, and reports from the field indicate heavy demand for garage mahals this summer.
Love your wordplay.
In our somewhat tony neighborhood, around 6 houses have been sold in the summer months. Not one was moved into after sale but rather remodeled and placed in the STR market. Our street has changed from few cars on the road to one that has become congested because of multiple parties (in separate vehicles) sharing any of these rentals.
I never saw a word I didn’t like enough to tweak around a bit…
I heard through the grapevine that one of my neighbors who i’ve lived next to for 20 years, is thinking of selling, and it would make a good STR house as they have a newer swimming pool and the house itself is in turnkey condition-immaculate.
It’d be weird to have a new set of Bob & Betty Bitchin’ with their adorable offspring Truly & Trevor, checking in every few nights, yikes.
Many ideas spring immediately to mind as to how one might interfere with this trend, most them I dare not mention. Putting them aside, I suggest psyops: be the weirldly friendly neighbor that’s knocks on doors to welcome each new arrival to the neighborhood.
Or, if you want to make bank, offer your services as a tour guide.
A friend lives in the only suburb here and a house a couple down is an AirBnB and her neighbor in between plays rap music quite loudly and has really irritating flashing lights too, as an added bonus.
He’s trying to generate bad reviews, but was pissing off my friend as well, so she had to call the coppers to get him to stop.
3, maybe 4, things:
i just finished re-reading Wendy Brown’s undoing the demos…while sitting in the waiting room for my physical. 1st read it a year or so after it came out, and man! it is a timeless work, very frelling depressing(re: outlook, chances of undoing the undoing)…and hould be re-read by everyone who actually wants to get their head around all of the above mess that we’re all in.
second…i dont drive around all that much anymores…but i do take back streets in mason, frederickburg and brady texas to get around big trucks and such…and there are numerous houses of varying degree of niceness on the market everywhere.
in my monthly trips to the latter 2 towns, it can be noted that none of those for sale signs seem to ever be removed. whether thats greed still being greater than desperation, or some other thing, i dont know.
meanwhile, in mason, many folks have doubled up on occupance, travel trailers in back yards…former hunting trailers migrating to the main ranch house for the cousin or thew kids or the grandma…and the like. This silently speaks of a crisis.
I am fortunate that this place was long ago paid for…and i finally talked mom, after 20 years of cajoling, into getting this whole place into a Trust, and thereby essentially removing it from the market(holy, holy)…so property taxes are the only rent, and they remain very low way out here.
as for the doctor…i am required by DEA to see her 4 times per year, including one physical…which was today.
ive known her for 25 years, and she is well aware of my dire financial situation…i brought her a benjamin and a loaf of fresh sourdough, today.
(that $100 was to be an oil change and more flour,lol). so it turns out that they are doing some kinda subscription billing scheme…and i talked with her about it for a good 30 minutes…and when tax return comes around, ill splurge on the $500/year and have at least rudimentary healthcare, at last.
that she’s doing this says a lot about the situation among her customer base…as well as the general state of healthcare finance.
Will there be some government or other program to retenant all the housing that is being vacated by reverse migration and deporting? If millions leave, homeless could benefit. Landlords may have mixed reactions due to lower rents, but better than more vacancies as markets try to discover equilibrium.
I grew up with Realtors as parents and spent my life working in the mortgage side of the business. I will tell you the cost to sell a home is way too high at 8% to 10% depending on where you live. On average 6% that goes to the buyers and sellers realtors which is crazy. On top of that the title fees or attorney fees for handling standarized closing documents is overpriced as well. On the mortgage side, the amount lenders make which directly effects interest rates is crazy as well. I know any readers in that industry will push back but it really needs to be moderated some. There are many other considerations but these are a few ways to start making housing more affordable from my perspective. Thank you as always for the great updates.
One measure I’ve seen speculation about is raising the limits on mortgages held by the GSE’s (FNMA, FHLMC).
I never rule out grift, but I think Trump may also be getting concerned about Republican chances in the midterms, plus the continuing need to distract attention away from affairs Epstein.
The one-trick pony economy.
How many houses are vacant, either through renter eviction or ‘owner’ foreclosure, where the lender is sitting on them so as to not mark-to-market?
It’s fascinating that Strong Towns and naked capitalism have arrived at about the same target. It’s a crisis in capital and financialization. Were screwed until the government loses control of the situation. Were still screwed after that.
Meanwhile, a few more lovely tear-downs are happening across the street. Aaahhh yes. In a time of horrible housing crisis, let’s build a few more McMansions. Boy oh’ boy. We need more of them.
>>>We need more of them.
Let’s tear down beautiful, well built buildings that have lasted decades or even more than a century (even in California, they exist) and replace them with ugly, baronial McJunk mansions, that buries the often large and beautiful old garden, and that starts to fall apart within the first month because it’s good for jobs or something. Considering the cost of housing, just owning a home in California shows wealth and status. I am not sure what building a garbage McMansion is good for.
Given the upgrading of earthquake and fire codes over time, I think general consensus around where I live is that newer construction is better than older construction. Poorly constructed homes likely date from the defense and aviation booms of the last century. And “newer”construction is already 20 years old, there isn’t much undeveloped land at this point.
*Coughs* I was being sarcastic.
A few reminders:
1. The feds don’t have to respect local zoning, building standards etc. if they don’t want to. They can build anything anywhere. They’d have to buy the land and improvements needed. That’s all…
2. Nixon stopped the feds from building affordable housing…and…
3. Reagan, after cutting taxes on the wealthy roughly in half, cut HUD’s affordable housing budget by 75%. Local charities dealing with homelessness started during the Reagan administration.
4. There are lots of affordable housing programs (FmHA is one) that aren’t funded.
5. There are more vacant homes than homeless. The problem isn’t regulations, or not enough homes. It’s affordability.
6. Building houses for poor people often underfunds the maintenance. They’re poor because they don’t pay attention to material things. Underfunding maintenance is a subtle form of sabotage.
7. Abandoning sprawl (a good thing, IMHO) means losing the most regressive tax known to man–having to own, maintain and insure an auto–but it also means managing the needs of high density housing. Those needs include a robust public realm (hospitals, asylums, parks, schools, transit, attractions like museums, infrastructure, even sidewalks, etc.). We’ve spent generations under-funding the public realm. The arts budget for the City of Berlin exceeds the National Endowment for the Arts for the USA (with NATO’s military expansion, that might change, but still…)
Trump is no way no how talking about the Feds building housing. Bessent’s hand wave in keeping was not within a country mile of that. So #1 does not apply.
I do appreciate your other points about housing policy….but Nixon created Section 8 housing and a LOT of affordable housing was constructed under that program.
We said above the problem is not a housing shortage but affordability. Our Policies state that readers are required to read a post in full before commenting. It appears you did not, or at least not with care.
We already have this is Australia. The idea is to further brutalise the living environment in urban conglomerations. Public green spaces and bushland reserves held in the public interest are being forced open to development by the Federal gov. using its funding power over local and state govs.
Their first move was to take spurious legal action against the biggest construction union to boost developer profits but it hasn’t increased building rates which are stuck in Australia due to macro-economic problems caused by the federal gov .i.e. power prices driving production overseas, immigration beyond infrastructure capacity and extremely low rental vacancies due to under building social housing in the service of the banks for decades.
Around here the real worry is the wildlife corridors which have been left going west to keep koala and other populations healthy, the developers have long had the koala reserves in their sights and if the corridors are cut disease will soon kill off the remaining close koalas and they can say the remaining reserves are no longer needed.
All the beauty spots and parks on the coast and mountains are also being forced open to unsuitable tourist development.
Get out of the big cities, this is world wide trying to keep up the tax base in dying cities with low wage immigrants.
I suspect here in the USA the “emergency” will mean that the national parks need to be sold quickly to real estate developers.
We should also mention BlackRock, etc., using their vast access to capital courtesy of the Fed – the Cantillon effect – out bidding on homes for rental conversion.
Another factor: apartment warehousing by landlords. Here in NYC it is rampant, and they can legally hoard indefinitely. In my wing of a 100-plus-unit complex, three of the eight adjacent flats are empty, one of them for over 2 years. These are highly desirable domiciles in one of the last affordable neighborhoods. The super has a waiting list a mile long but can’t do a thing. I suspect they want us all to move and/or die so that they can tear it down and build some monstrosity. Or maybe go coop–no one will say. Immoral–should be illegal, too.
Here in CA the narratives around housing rarely if ever involve a major expansion of places for manufactured homes (trailers R.V.s).
Everyone hates a new trailer park.
The only ones that I know of being built are far from urban centers.
And yet this is the only that I know of to house people quickly and economically using an industrial base that is competitive and in place.
NIMBY has power.
How many emergencies are required in order to declare emergency emergency?
I just read two fun compare and contrast in chi-chi SW Montana— Bozeangeles, and Livingston (Deadrock)
I have heard that 15% of the new apartments are vacant in Bozeman, $1,900 for a 400 sq ft studio (single or couple occupancy)
Wages are not keeping up, and it is a restaurant bar vacation service economy. We broke the local economy.
64 Units, million dollars, 2 of 64 for ‘affordable’ percent of median income Bozeman )
https://www.eralandmark.com/market-watch/bozeman-yards-project
And in Livingston, the ‘real deal’. Workforce commutes 25 miles west to Bozeman:
https://www.eralandmark.com/market-watch/new-affordable-housing-project-proposed-in-livingston-mt-riverstone-ridge
Density will not prevent sprawl. It’s a mess, all over the west, and I sense all over the US, and world.
8 billions of us. Some things are starting to give. Gumby time. Gumby ugly.