Affordability is Donald Trump’s Achilles Heel. Running for President in 2024 he vowed to reduce prices. This dumb promise lacks even the most basic understanding of the US economy. Average prices rarely fall. Over the past century, inflation went negative only during the Great Depression. Another depression would be needed to bring prices down to 2020 levels.

Even dumber, Trump promised lower prices on Day 1 of his Presidency. As we begin year 2 of Trump 2.0, prices have not fallen. In 2025 they rose by a little less than 3%, the same as in 2024.

People have taken notice. Trump’s overall approval rating dropped from 50% in January 2025 to 40% in January 2026. His approval rating on the economy and inflation fell to 30%—enough to capture an egomaniac’s attention.

To deal with this, Trump has focused on housing, the largest expenditure for most Americans—one-third of total spending and near 40% for many households. Especially since Covid, housing has become increasingly expensive. One good measure of this is the ratio of the median home price to median household income. It was around 4 from the 1960s to the 1990s. Today it approaches 7.

Trump has responded, as usual, with “concepts of a plan” (a phrase he used in a debate with Kamala Harris). Four of these have been most prominent.

One would bar corporations from purchasing additional homes. This is small potatoes. Investors own just 1% of homes. Trump does not want these companies to sell the homes they already own; he merely seeks to prevent more corporate purchases. It is also something the Supreme Court would likely declare unconstitutional given their 2010 Citizens United ruling that corporations are people. As people, they should be able to buy homes.

A second Trump idea is to have Fannie Mae and Freddie Mac buy $200 billion additional mortgage packages from lenders. This provides incentives for financial institutions to lend more money to home buyers, package the loans, and sell them to these government entities. While this would lower mortgage rates a bit, as lenders seek more borrowers, housing demand would increase, pushing up prices. Taken together, these two opposing forces are unlikely to reduce housing prices.

A third proposal is the 50-year mortgage, supplementing typical 30-year mortgages. This would reduce monthly mortgage payments because loans get repaid over a longer time period; but like all longer-term loans, it would come with higher interest rates. Even worse, borrowers would make 240 more monthly payments over 20 years, nearly doubling their total mortgage payments and eliminating for most people the possibility of escaping the crushing weight of debt.

Finally, Trump has pressured the Federal Reserve to lower interest rates considerably. He even got the Department of Justice to take legal action against two Fed Governors (Lisa Cook and Jerome Powell), hoping they would resign so that he could appoint compliant replacements. Lower interest rates are sometime necessary, but not now. Most economists fear that lower rates will generate higher inflation due to greater borrowing and spending. Furthermore, the Fed only controls short-term rates. Mortgage rates depend on expectations about future inflation. Fearing higher inflation, lenders demand higher rates on loans, so that they come out ahead after taking inflation into account. Ironically, Trump’s uninformed interest rate demands and his attack on the Fed are keeping mortgage rates high and making housing less affordable.

Trump’s four “concepts” all increase housing demand. Any good Economics 101 student knows that increasing demand for a product raises its price. Affordable housing requires increasing supply, i.e. building more homes. It also requires that the additional supply be geared toward middle-income households. Building more luxury housing for the wealthy won’t help most people.

The seeds of our housing shortage were sown long ago. In the early 1970s, 430,000 government-subsidized housing units were built each year, around 30% of total housing construction. This helped middle-income Americans afford homes. In his 2006 book Knocking on the Door, Christopher Bonastia describes how President Nixon, in 1974, ended government housing subsidies because selling the homes required following Federal anti-discrimination laws. Affordable housing conflicted with Nixon’s desire to maintain residential segregation. Segregation won. Housing slowly became less affordable.

As Federal government housing subsidy programs expired, local governments allowed the housing prices to rise, generating new tax revenue but putting housing beyond the reach of average home-buyers.

Two events explain the recent home price surge. On average, the US built 1 million new homes each year from the 1960s to the 1990s. The Great Recession of 2007-09 reduced this number to below 500,000 units. Many construction firms went belly up; their workers found other jobs. Not until 2019 did we again approach the 1 million mark. Covid arrived and new construction was delayed again.

The US currently needs 3 to 4 million affordable homes to make up for years of insufficient construction. Mr. Only I Can Fix It cannot figure out how to do this. With respect to affordable housing, Trump the builder has been unable to break new ground.

His signature policy, high tariffs, is a tax that raises prices (see my Washington Spectator piece “Tariff Man Tumbles, Fumbles and Bumbles on Trade”). Many foreign-made goods are needed to build homes. As kitchen cabinets and appliances, copper, steel, aluminum, lumber, lighting fixtures, water heaters, and air conditioning units become more expensive, so do home prices.

Immigrants comprise one-quarter of the housing construction labor force. Deporting immigrants (and threatening to do so) raises both construction costs and home prices. So does Trump’s disdain for the environment. Climate change, leading to warmer weather, weakens Canadian lumber so it can’t be used for home construction (see my Washington Spectator piece “Call It What It Is — Trumpflation”). Alternative sources of lumber make homes more expensive.

Finally, Trump’s 2017 and 2025 tax cuts made housing less affordable. Lower marginal tax rates and ceilings on mortgage deductibility and property taxes have reduced the tax benefits of homeownership. Cutting the marginal tax rate from 25% to 20% for a middle-class household reduces the tax benefit from $30,000 worth of housing deductions (not unreasonable given property taxes and a $400,000 mortgage) by $1,500 every year.

Home ownership can be made affordable. Ending tariffs and deportations, and overturning Trump’s two tax bills, would be a start. More is needed.

One lesson from history, noted above, is the importance of government subsidies for housing construction. These must be targeted at homes for middle-income households; otherwise, we will get more McMansions for the wealthy and small luxury apartments for young single professionals. Middle-class families with children cannot afford McMansions, and cannot live in tiny apartments.

While lacking affordable housing, we have excess office space. Converting unused offices into housing seems an obvious solution. Government assistance to firms doing the renovations can be predicated on ensuring that middle-income households can afford the new housing.

Middle-income homeowners also need larger tax breaks. Converting deductions for property taxes and mortgage interest into refundable tax credits would help. Tax deductions provide generous tax relief to wealthy taxpayers in high tax brackets but little or no relief to others. A refundable tax credit at a single uniform rate would give all taxpayers the same percentage tax break on their main housing expenses. The rate can even be set to ensure the government loses no revenue from this.

Democrats must promote housing policies for middle-income households. Converting tax deductions to tax credits, and unused offices to housing units, would help. So would a return to subsidizes for affordable home construction and Federal support for housing infrastructure—roads, water and sewer lines, transportation to places with good jobs, and public schools. Without such support, few affordable homes will be built and infrastructure problems will lead local government to raise property taxes, placing affordable housing even further out of reach for millions of Americans.

Steven Pressman is part-time professor of economics at the New School for Social Research, professor emeritus of economics and finance at Monmouth University, and author of Fifty Major Economists (Routledge, 2013)

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