United States White House economists estimate the US has a shortage of 10 million houses, and say regulatory cuts could lead to more construction to stabilise prices, increase home ownership, and fuel faster economic growth. The analysis, published in a new report on Monday, outlines both a political risk and a messaging opportunity for US President Donald Trump, whose public approval has slumped because of concerns about his tariffs, the US-Israel war on Iran, and his unfulfilled promises to slash inflation and unleash stronger growth. Trump signed two executive orders in March directing federal agencies to reduce housing regulatory burdens and make it easier for smaller banks to provide mortgages.
But he has been slow to take other steps that would show that high housing costs are a top priority for his administration. Meanwhile, the US-Israel war on Iran has driven up the cost of buying homes, with average rates for 30-year mortgages jumping from just under 6 percent to 6.37 percent. Trump also has argued in favour of keeping home prices high to protect values for existing owners.
Put together by staff at the White House Council of Economic Advisers, it finds there would be 10 million more houses in the country if “homebuilding and the growth of the single-family housing stock had continued at their historical pace instead of falling dramatically” after the 2008 global financial crisis. That crisis was caused largely by a wave of defaults in the housing market, where prices had been fuelled by problematic lending practices. The analysis notes that home prices have risen 82 percent since 2000, while incomes are up just 12 percent — a mismatch that had been masked for a period by historically low mortgage rates.
But when rates jumped with inflation in the aftermath of the COVID-19 pandemic, monthly mortgage costs also rose for buyers, and affording a home, a signifier of middle-class status, became a top concern for voters under 40. The White House maintains that the executive orders in March, in addition to the plans to purchase mortgage-backed securities, show that the president is focused on housing issues. The report says that various regulations on home construction, which it calls “the bureaucrat tax”, add more than $100,000 in costs to building.
That cost includes changing the building codes over the past decade, compliance costs and zoning approval fees, among other expenses. By the report’s estimates, a reduction in those regulatory costs could help spur construction of as many as 13.2 million homes. That could add on average 1.3 percentage points to annual economic growth over the next decade and support two million manufacturing and construction jobs, it argues.
Trump could decide to make federal funding to state and local governments contingent on reducing some of the regulations, according to an administration official, who insisted on anonymity to discuss the report before its release. The report also attacks the green energy housing standards introduced during the administration of former US President Joe Biden as a factor in increasing construction costs. Those steps gave preferences for more efficient air conditioning units and water heaters as well as higher standards for the related ductwork.
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