Sometimes, the quiet part is said out loud. Sometimes, it’s said very loud. That’s what happened in Davos on Wednesday, January 21, 2026, when President Trump expressed the paradox of affordable homeownership. “House values have gone up tremendously, and these people [current homeowners] have become wealthy. They weren’t wealthy. They’ve become wealthy because of their house, and every time you make it more and more and more affordable for somebody to buy a house cheaply, you’re actually hurting the value of those houses, obviously, because one thing works in tandem with the other.”
It is the quiet logic behind countless policies that make housing scarcer, more expensive, and less inclusive. It’s the reason affordable housing developers find themselves perpetually fighting uphill battles in zoning hearings, federal budget trenches, and media shorthand. And yet, it’s not a truth of economics. It’s a basic truth of politics in the 21st century. If you win, I lose, so you must lose so I win.
But housing doesn’t have to be a zero-sum game.
The Economics of a Manufactured Scarcity
The President’s remarks reflect an old and resilient belief: that the value of one family’s home depends on another’s inability to afford one. In this view, the housing market is a fixed pie, and making homes more accessible slices away from someone else’s wealth.
The reality is more complex, but it is built on the foundation that we can make more pies, not cut the slices of the one we have into smaller pieces. Home price growth is determined by an interplay of supply, demand, credit availability, and policy. Over the past 15 years, housing supply growth has dramatically lagged behind population and job growth. Freddie Mac’s latest estimate puts the national housing deficit at 3.7 million units—a shortage fueled by local land-use restrictions, construction labor costs, and decades of underinvestment in both market-rate and affordable production.
When supply fails to meet demand, existing homeowners benefit—at least superficially. Rising prices inflate home equity, creating the appearance of wealth. Federal Reserve Flow of Funds data from the second quarter of 2025 showed the total value of owner-occupied real estate reached a record $49.3 trillion, with home equity hitting an all-time peak of $35.8 trillion. Yet that gain is largely paper wealth, dependent on continued market scarcity. For most households, unless they sell and downsize, that “wealth” cannot be realized without simultaneously confronting higher costs elsewhere in the housing market. And the move up/move on market is increasingly frozen due to the high cost of selling a home with a low-interest rate mortgage and buying one with a mortgage rate that can be double.
When home values rise faster than incomes, the share of households able to purchase homes declines, mobility falls, and labor markets grow less efficient. A 2024 National Bureau of Economic Research working paper found that a 10% home price increase in a destination area reduces in-migration by 2.6%, while a similar increase in origin prices increases out-migration by only 1.4%—creating an asymmetric trap that restricts labor mobility. Productivity suffers. Ultimately, so does economic growth. The supposed “victory” of rising home values becomes broadly self-defeating. Just ask anyone looking to buy a home in high growth markets like Nashville, Tennessee, where jobs are plentiful but housing opportunity remains scarce.
The False Choice Between Opportunity and Stability
High home prices do not inherently mean economic stability. Real value—in housing as in any market—comes from productivity, efficiency, and opportunity. When more families can access secure, affordable housing near jobs and transit, their economic productivity rises. That, in turn, increases the local tax base, supports businesses, and reduces public spending on crisis interventions like homelessness services or eviction prevention.
Multiple empirical studies confirm this dynamic:
- Research from the Upjohn Institute found that building 100 new market-rate units opens up the equivalent of 70 units in neighborhoods earning below the area’s median income—through a “ripple effect” of migration chains that create vacancies and lower costs in lower-income areas within two to five years.
- Another paper published by the Upjohn Institute and the Philadelphia Federal Reserve Bank found that new market-rate buildings lower nearby rents by 5 to 7 percent and cause more people from lower-income neighborhoods to move in.
- New York University’s Furman Center has consistently found significant, positive impacts from subsidized housing investment, suggesting that publicly funded housing investments aimed at distressed urban properties can deliver significant benefits to the surrounding community. A large-scale Furman Center study in New York City found that property values within 500 feet of supportive housing do not drop when a new development opens and show steady growth relative to other properties in the neighborhood.
Affordability expands the base of demand and cushions the market against shocks. When people at the lower end of the income ladder prosper, they spend more, invest more, and contribute more to community resilience.
Winning doesn’t require losers
There is a different way to think about housing policy—one that views production, affordability, and inclusion as complementary rather than conflicting goals.
At the state and local level, reform is already proving that abundance-oriented policies can succeed. California’s accessory dwelling unit (ADU) reforms are a prime example. ADU permitting increased by 15,334% between 2016 and 2022, collectively resulting in 83,865 ADUs permitted. Constructed ADUs rose from 5,852 in 2019 to 17,460 by 2022—an almost 200% increase. In Seattle, following 2019 reforms that authorized up to two ADUs per lot and eliminated parking requirements, ADU permits increased over 250% from 2019 to 2022, to the point where ADU construction outpaced single-family home construction.
Most dramatically, Minneapolis became the first U.S. city to eliminate single-family zoning through the Minneapolis 2040 Plan. A synthetic control study found that the reform lowered housing cost growth in the five years following implementation: home prices were 16% to 34% lower, while rents were 17% to 34% lower relative to a counterfactual Minneapolis constructed from similar metro areas.
What unites these examples is not ideology but pragmatism: housing markets function best when they are allowed to respond to demand flexibly and efficiently. Wealth built through productive investment—in construction, community revitalization, and inclusive growth—is far more durable than wealth built through scarcity.
10 Recommendations that make a difference
Congress has already passed important housing legislation in the Senate’s ROAD to Housing Act and the House of Representatives’ Housing for the 21st Century Act. These bills need to be reconciled, sent to the president, and enacted into law this year.
In the meantime, the Trump Administration can take several unilateral steps with broad bipartisan support to have a tangible impact on housing affordability, without Congress. Combined with bipartisan legislative action in 2025 and 2026 (including the expansion of the Low-Income Housing Tax Credit and changes in the Opportunity Zones program in the 2025 tax bill), these actions will be the most meaningful investment we have made in housing in generations.
Here are ten additional steps the Trump Administration can deploy, some immediately, under existing authority, and others with Congress, to make it easier and cheaper to build and preserve affordable homes in every part of the country.
1. Allow first-time homebuyers to use their 401(k) savings for a down payment
Last week, White House economic adviser Kevin Hassett said on Fox Business News that the Administration plans to allow retirement savers to use their 401(k) funds to make a house down payment. Making it easier for younger buyers to withdraw from their 401(k)s penalty-free “will have a bigger impact than any down payment program ever proposed,” I told the Washington Post. Unfortunately, CBS News correspondent Jennifer Jacobs reported from Air Force One on Thursday night that the President “dumped” on his admin’s proposal to allow people to dip into their 401(k) for a mortgage down payment. “I’m not a huge fan of it. Other people like it. They’re talking about taking money out to put a deposit down on a home. And one of the reasons I don’t like it is that their 401(k)s are doing so well. 401(k)s are up 80, 90% in some cases. And you know, you’re talking about a lot of people… I like keeping their 401(k)s in great shape. I like keeping their 401(k)s. And I’m not a huge fan of that, putting down a deposit.” The President is right that 401(k)s are at historic levels. And that’s a great reason to take advantage of this unique opportunity. His concerns about deflating those gains can be mitigated by limiting the penalty-free withdrawals to first-time homebuyers under 40.
2. Fix capital rules for construction lending
New homes do not get built without construction financing, and current capital rules make many lenders reluctant to fund modestly priced for-sale housing. Many Acquisition, Development and Construction (ADC) loans face punitive capital charges that make smaller, more affordable projects uneconomic compared to higher-margin luxury development. The Administration can direct the banking regulators to revise the High Volatility Commercial Real Estate (HVCRE) and related capital standards framework or create a new risk-weight category for well-underwritten, modest-price, owner-occupied construction—projects with strong presales, low loan-to-value ratios, and clear evidence of demand. That would allow banks to hold less capital against lower-risk starter-home construction, which translates directly into lower interest rates for builders and more homes delivered at attainable price points.
3. Eliminate Loan-Level Price Adjustments on primary homes
The Trump Administration can direct the Federal Housing Finance Agency to eliminate Loan-Level Price Adjustments (LLPAs) on purchase-money mortgages for owner-occupied homes and require the GSEs to stop using risk-based pricing for this segment of the market. Over time, default risk is already managed through underwriting, mortgage insurance, and capital standards; layering risk-based fees on top of that has pushed too many working families out of homeownership or into higher-cost products. LLPAs are upfront fees charged on many conventional mortgages, based on factors like credit score and down payment, and are built into the pricing grids of Fannie Mae and Freddie Mac. In practice, LLPAs act like a regressive tax on first-time and lower-wealth homebuyers, even when they are purchasing primary residences with solid credit histories and fully documented income.
4. Unlock Private Activity Bond capacity for housing
Private Activity Bonds (PAB) are one of the most important tools states have to finance affordable rental housing and first-time homeownership, especially when paired with the Low-Income Housing Tax Credit and Mortgage Revenue Bonds. Federal law already allows states to carry forward unused PAB volume cap for three years, but current IRS rules and Form 8328 lock housing finance agencies into overly rigid projections based on market conditions they cannot fully predict. The Administration can order the IRS to amend Form 8328 and related guidance so that carryforward authority can be allocated to a general housing category that supports multifamily housing bonds, mortgage revenue bonds, and mortgage credit certificates as needs evolve. This is a classic example of a technical fix with very real consequences for families waiting for a decent place to live.
5. Use federal leverage to accelerate zoning reform
Zoning and land-use decisions are local, but the federal government has a meaningful role to play in helping willing communities update their rules to allow more homes where people want to live. Cities that have expanded by-right zoning for multifamily and “missing middle” housing, reduced discretionary review, and aligned zoning with transit investment have seen more production and, over time, moderating price pressures compared to similarly situated peers that stayed restrictive. The Administration can require HUD to create a Zoning Acceleration Unit, based on the District of Columbia’s approach, that provides model codes, technical assistance, and data support to states and localities adopting middle-housing and small-lot zoning reforms. In addition, the Department of Transportation can condition certain transportation grants on states demonstrating meaningful progress on zoning reform in key corridors, with annual reporting on how land-use changes are supporting new housing supply. This kind of performance-based federalism respects local control while making clear that federal dollars should support communities that are serious about addressing the root causes of the housing shortage.
6. Normalize and scale offsite construction
Offsite construction—modular, panelized, and manufactured homes built to high standards—offers a path to build more housing faster with less waste and often at lower cost. The Administration can direct HUD and USDA to update program guidance so modular and panelized construction receive standardized, predictable treatment in underwriting, insurance, and inspection requirements, reducing lender uncertainty and unnecessary insurance costs. Clear federal signals that high-quality factory-built homes are “real” housing—not a second-class product—would help states and localities embrace offsite construction as a mainstream tool for addressing the supply shortfall.
7. Promote Employer Assisted Housing and fix the tax treatment
Employer Assisted Housing (EAH) is one of the most promising ways to close the gap between what workers can afford and what the market charges, especially in high-cost regions where long commutes and staff turnover are undermining local economies. Hospitals, universities, and large employers that have invested in downpayment assistance or below-market loans have seen lower vacancy rates, reduced turnover, and better recruitment outcomes because employees can actually live near their jobs. Under current law, most forms of employer-provided housing assistance are treated as taxable income when forgiven, unlike employer education assistance, which was explicitly excluded from gross income under section 127 of the tax code. The Administration should both champion a legislative fix—clarifying that “qualified employer-provided housing assistance shall not be included in gross income”—and use its convening power now to expand best-practice EAH models among hospitals, school districts, and large regional employers.
8. Put surplus federal land to work for housing
The federal government is the largest landowner in the country, including in markets where land costs are a major barrier to affordability. President Trump has already issued an Executive Order focused on federal land, but housing has too often been an afterthought in surplus property disposition. The Administration can direct the General Services Administration, Department of Defense, Department of Veterans Affairs, U.S. Postal Service, and other agencies to prioritize affordable housing—especially homeownership opportunities—when disposing of surplus land that already has access to infrastructure and services. Cities and counties that have successfully redeveloped surplus public land for mixed-income housing have seen lower per-unit land costs, shorter development timelines, and better integration with existing neighborhoods, outcomes that federal land policy could help replicate nationwide.
9. Modernize construction-to-permanent and 203(k) rules
One of the most efficient ways to build or rehabilitate starter homes is through single-close construction-to-permanent loans and renovation loans like FHA’s 203(k) program. Communities that have successfully deployed streamlined construction-to-perm and rehab products have seen faster delivery of new homes, more preservation of aging housing stock, and better access to financing for moderate-income families who want to build or improve a home in the communities where they already work. Unfortunately, current rules across HUD, USDA, and the GSEs can be so complex and restrictive that many lenders simply choose not to offer these products at scale, limiting options for both builders and borrowers. The Administration can direct HUD to simplify its construction-perm requirements, allow more flexible contractor approvals, and modernize escrow and inspection rules to reduce friction and compliance costs. FHFA can require Fannie Mae and Freddie Mac to launch a robust single-family construction-to-perm pilot and USDA can update Section 502 construction-perm rules—especially around appraisals, energy standards, and inspections—to make rural starter-home construction more feasible.
10. Level the playing field for small and emerging developers
In many communities, small and mid-sized builders are best positioned to add “missing middle” housing, rehabilitate existing properties, and fill gaps that large national developers overlook. Yet federal underwriting standards often assume a scale and balance sheet that small developers simply do not have, especially in rural and historically underserved markets. The Administration can direct HUD, USDA, SBA, and Treasury to harmonize and streamline their underwriting standards for small developers and to invest in builder training and credit-readiness programs. When local community development financial institutions and state agencies have partnered with small builders—backed by flexible federal guidelines—they have increased production of duplexes, small multifamily buildings, and modest infill projects that fit seamlessly into existing neighborhoods. Lowering barriers for small builders does not mean lowering standards; it means designing federal programs around the realities of the people who are actually willing to build attainable homes.
From Zero Sum to Win-Win
The housing affordability crisis did not materialize overnight, and it will not be solved by any single action—legislative or administrative. But the ten steps outlined here are tangible, impactful, and achievable now, under existing authority, by an Administration that is willing to treat housing affordability as a core economic priority rather than a talking point.
Congress should continue its bipartisan work on comprehensive housing legislation, from the ROAD to Housing Act to the Housing for the 21st Century Act and beyond. At the same time, the Trump Administration can act today to fix counterproductive capital rules, unlock bond authority, support employer assisted housing, deploy surplus land, empower small developers, eliminate regressive fees, modernize construction lending, rationalize MSR treatment, scale offsite construction, and accelerate zoning reform. Doing both—legislating and executing, at the same time—is how a serious country responds when a basic necessity like a safe, affordable home slips out of reach for millions of its people.