Home ownership has long been part of the… American dreambut that dream has been postponed.
Households in their 30s have an ownership rate of just 42% – more than 20 points lower than the national average.
The average age of all homebuyers is a record 59 years, and the age of a first-time buyer is 40 years old – up from 29 years old in 1981.
As a solution, the Trump administration is offering a 50-year mortgage.
While I don’t agree with that specific idea, I’m encouraged that they are brainstorming ways to address the problem.
We need a Marshall Plan for housing, a collection of broad initiatives to make housing more affordable and get the dream back on track.
The federal government can use its bully pulpit to make changes to the red tape and regulations that hold back construction, and to encourage policies that would increase housing and lower costs.
For starters, the White House and Fannie Mae should instead promote shorter, 20-year mortgages.
As Ed Pinto of the American Enterprise Institute has argued, a 20-year loan can be paid off “when the 30-year loan saddles most homeowners with another decade or more of mortgage payments, the cash flow released from a paid-off loan with a shorter term is available to finance a child’s post-secondary education needs and later boost their own retirement.”
The 20-year loan could be incentivized with a tax credit for the first buyer.
The decline in homeownership is an issue that must be addressed federally and locally.
This would be especially important today when the vast majority of taxpayers no longer itemize their tax returns – meaning they can’t take advantage of the mortgage interest deduction.
The average age of all home buyers is a record 59 years, and the age of a first-time buyer is 40 years old. That’s an increase from 29 years in 1981.
That deduction always favored wealthy buyers of expensive homes anyway – so a targeted tax break would help those who actually need it much more.
It’s also time for the Trump White House to roll back one of the key initiatives of Elizabeth Warren’s pet project, the Consumer Protection Financial Agency.
The CPFC has pressured banks to limit mortgages to ‘normal’ mortgages, based on CPFC rules or what consumers can afford.
TRUMP’S 50-YEAR MORTGAGE COULD BURDEN AMERICANS WITH MORE DEBT, EXPERTS SAY
Variable rate loans and other ‘mortgage products’ may be suitable for some buyers – who need to choose how much risk they are willing to take on in return for access to the home market.
However, even a low down payment can be difficult to come up with for those who can’t take advantage of generous in-laws.
Those without wealthy parents could turn to a “home savings account” – similar to the popular health savings accounts initiated by George W. Bush that contain about $59 billion and are protected from taxes.
However, bills for new homes should only be tailored for down payments, and not for long-term maintenance and other homeowner needs.
Buyers today are also allowed to withdraw $10,000 from their 401(k) without penalty to make a down payment on a home.
Maybe it’s time to raise that ceiling.
Of course, it almost goes without saying that even the most creative financing and incentives will not meet our housing needs without addressing the most important problem: supply.
There are many reasons why there are not enough starter homes.
Regulations in many cities make construction difficult.
More retired Boomers own second homes.
TRUMP’S 50-YEAR MORTGAGE INTRODUCES A NEW KIND OF DEBT
Banks are increasingly buying real estate as an investment and driving up prices.
Low sales is another reason why Gen X buyers have such a hard time entering the market.
During the COVID-19 crisis, mortgage rates hit record lows and many refinanced.
These owners have a strong incentive not to exchange a 3% mortgage for a new home and a much higher rate.
Another important reason: more and more of us live in small households or even alone.
The Census Bureau reports that the number of households increased by more than 2 million per year between 2019 and 2021.
That means we need not only more housing, but also more types of housing – especially much smaller units, rather than the five-acre home lots that are common in so many suburbs.
This is where the limits of Washington’s hard power are being reached.
Much of American housing policy is determined at the hyperlocal level, through planning and zoning regulations.
That’s why outgoing New York City Mayor Eric Adams deserves so much credit for his repurposing of New York’s “City of Yes,” allowing for secure basement apartments and “accessory dwelling units” in parts of the city.
Outgoing New York City Mayor Eric Adams deserves a lot of credit for his rezoning of New York City, which allows for safe basement apartments and outbuildings in parts of the city. (AP Photo/Seth Wenig)
Outbuildings – or ‘granny flats’ – can also be a means for older couples to sell and downsize to younger households.
However, as part of a federal initiative, the Marshall Plan for Housing could encourage the same changes across the country: changing zoning to allow for more housing; or taking undeveloped state land and providing tax incentives to build on it.
It is the 18,000 municipalities across the country that often stand in the way of what might be called naturally affordable housing: small houses on small lots, like those of the original Levittown, where houses had only 70 square meters of living space.
Housing and Urban Development Secretary Scott Turner should push municipalities to allow private, unsubsidized, small homes and apartment buildings, or what AEI’s Pinto calls “light density.”
Secretary of Housing and Urban Development (HUD) Scott Turner. (Getty Images)
It is far more likely to win local approval than the subsidized low-income housing that Democrats have long favored, starting with the public housing that socialist Zohran Mamdani wants to revive.
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Private construction is also cheaper; New housing units in California subsidized through the Low-Income Housing Tax Credit can cost more than $800,000 per unit, a boon for developers but not for many renters.
Construction costs for any home will inevitably rise as a result of another Trump policy: his 10% rate on abundant Canadian timber and wood products and a 25% tariff on kitchen cabinets and furniture.
The de facto taxes create what the National Association of Home Builders calls “headwinds,” holding back new construction.
As a builder himself, he should reconsider these rates.
Homeownership is a virtuous conspiracy that makes the nation better.
Homeowners are more likely to maintain neighborhoods than renters, and they are also more likely to improve schools and services by getting involved in local government. (iStock)
Owners are more likely to maintain neighborhoods than renters, and are more likely to improve schools and services by getting involved in local government—the essence of American federalism.
The decline in homeownership is an issue that must be addressed federally and locally.
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But the Trump administration can lead the way, offering tax breaks and encouraging construction.
The president can bring the dream back to life.
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