Donald Trump has a housing market problem

With mortgage interest rates rising and house prices still rising nationally, Donald Trump will inherit the thorny problem in the US housing market when he takes office on Monday.

During the 2024 presidential race, he promised to fix the nation’s chronic shortage of inventory by opening up more federal land for housing and to deport millions of undocumented migrants which he said was the main cause of the country’s housing crisis.

He also promised to lower mortgage rates to make home buying more affordable by cutting inflation – but experts fear that his plans could make inflation worse and further erode affordability in the housing market.

Why it matters

Housing affordability was a big issue during last year’s presidential race, which ended with Trump’s victory over vice president Kamala Harris. Both talked a lot about how they would have handled the ongoing crisis with Harris promise to build millions of homes if elected and Trump, who promised to increase the stockpile by cutting regulations and freeing homes occupied by illegal migrants.

As home prices remain near their pandemic highs and mortgage rates are expected to linger around the 6 percent mark throughout 2025 despite likely rate cuts from the Federal ReserveHome ownership will remain an unaffordable dream for many Americans this year. That, in turn, means Trump will be under constant pressure to resolve the ongoing crisis during his first year in the White House.

Trump’s plans – and how they could backfire

Taylor Rogers, a spokesman for the Trump-Vance transition team, said Newsweek in a statement: “President Trump will deliver on his promise to make housing affordable again by defeating historic inflation and reducing mortgage rates.”

She added: “President Trump will ban mortgage loans to illegal immigrants that drive up housing prices, eliminate federal regulations that drive up housing costs, open swathes of federal land with ultra-low taxes and regulations for large-scale housing construction. The cost of new housing will be cut in half, and President Trump will end the housing affordability crisis.”

But according to Dan Hnatkovskyy, CEO of artificial intelligence (AI)-powered marketplace Jome, formerly NewHomesMate, there are “additional factors” in Trump’s overall policy agenda to consider that could impact housing affordability.

“While I think making more land available and reducing regulation is positive for the market, some other policies could have a big negative effect on the housing market,” he said. Newsweek. “For example, tariffs on materials such as lumber, much of which is imported from Canada, could increase construction costs if tariffs increase.”

Hnatkovskyy added: “In addition, migration and border control policies play a role. Part of the construction workforce, especially in the South and Southeast, is made up of undocumented immigrants. If stricter immigration policies are enforced, this could lead to construction labor shortages, further complicating housing affordability .”

Opening up federal land and bureaucracy regulations

Trump said he would increase much-needed U.S. stockpiles by opening federal lands to allow more construction and by cutting red tape and regulations that make it difficult for developers to build.

“For builders, lighter regulations can reduce construction costs and encourage them to take on more projects, leading to increased housing supply and easing pressure on home prices,” said Cynthia Seifert, founder of real estate sales generator KeyLeads. Newsweek.

Together, these policies “could help alleviate the housing supply crisis that has left the housing market undersupplied to the tune of 2.5 million to 7 million due to high rents and home purchase prices,” said Danielle Hale, Realtor.com chief economist Newsweek.

But Hnatkovskyy said the problem with opening up federal land is that most of it is in national parks and military bases, “and that’s not where people actually want to live.”

Another issue, he said, is the “not in my backyard” or NIMBY movement, where many people who live in single-family homes are unwilling to allow another type of construction in their areas.

“Donald Trump said he would protect single-family communities in the United States, but what the country needs is to push for more dense and more affordable housing,” he said.

Increased inventory with mass deportations

Experts also worry that if Trump goes through with all his plans, there may not be enough workers left to build the new homes the country so desperately needs.

“Restricting immigration could make it harder for businesses to hire workers in the short term, and that impact is likely to be felt acutely by a construction industry that employs many foreign-born workers,” Hale said.

According to the latest American Community Survey (ACS), the share of immigrants in construction was 25.5 percent in 2023, up from 24.7 percent the year before—the highest percentage ever.

“Immigration restrictions could lead to labor shortages in the construction industry, increase costs and possibly slow project times,” Seifert said.

Beyond the damage it could cause the construction industry, Hnatkovskyy believes deporting immigrants may not be a significant solution to America’s housing crisis.

“I don’t think illegal immigrants play a big role in the housing market, they don’t have much purchasing power in the United States,” he said. “I think that solution is overrated, but they’re a much bigger force in terms of construction. Kicking immigrants out won’t free up a lot of inventory, but I think it will inevitably make construction a lot more expensive from a working point of view.”

Strengthens the economy and lowers inflation

Realtor.com’s expectations for this year are that mortgage rates will gradually ease as monetary policy normalizes and the economy continues to grow. But “the long-term outlook will depend on the policies ultimately adopted by the incoming administration and CongressHale said.

“Growth policies are good for the economy and will tend to push mortgage rates higher, but rising incomes in this kind of environment will enable households and businesses to better navigate higher interest rates,” she explained. “However, large budget deficits or tariffs that push up inflation can cause mortgage rates to rise without necessarily boosting incomes or economic growth and are likely to be more challenging for businesses and households to navigate.”

According to Seifert, “Trump’s policies aimed at stimulating economic growth could cause inflation to rise, leading to higher mortgage rates — potentially offsetting some of the benefits of increased income.”

Tariffs, especially against Canadacould significantly damage the construction sector.

“To build a house, it typically costs about $250,000-$300,000,” Hnatkovskyy said. “The cost of lumber — the total building materials, framing, other parts of the house — is about 30 percent of the cost of the house. If the Trump administration plans to increase tariffs on Canadian lumber by 50 percent, that would cost the lumber to supply the house higher by around 30-40 percent, which will significantly increase costs.”

He added: “And ultimately the worst part is that that cost increase will be passed on to American households. It will certainly be a contributing factor to declining affordability.”

Will the housing market become more stable or more unstable?

Seifert said “the housing market could become more volatile if higher interest rates and labor shortages slow homebuilding and increase borrowing costs.”

“However, if deregulation and tax cuts stimulate sufficient economic growth and household disposable income, these factors can help stabilize demand and balance the market,” she added. “Ultimately, the direction will depend on how these policies unfold and the Federal Reserve’s response to inflation and economic conditions.”