Trump Unveils Dual Strategy to Combat Soaring US Housing Costs
Former President Donald Trump has detailed an ambitious set of proposals aimed at making homeownership more accessible to American families. In a significant policy address delivered at the World Economic Forum in Davos, Switzerland, Trump emphasised two primary measures: advocating for substantially lower interest rates on mortgages and credit cards, and implementing a ban on large institutional investors purchasing single-family homes.
The Affordability Crisis in America's Housing Market
The United States property sector has been experiencing a pronounced sales downturn since 2022, when mortgage rates began their ascent from historic pandemic-era lows. This challenging environment has been exacerbated by years of rapidly escalating property prices and a persistent national shortage of available homes, stemming from over a decade of below-average construction rates. Consequently, many potential buyers find themselves completely priced out of the market, with sales of existing homes remaining at their lowest levels in three decades throughout last year.
Proposed Interest Rate Reductions and Their Potential Impact
During his remarks, Trump stressed the critical importance of reducing interest rates to provide aspiring homeowners with greater financial flexibility. "We can drop interest rates to a level, and that's one thing we do want to do," Trump stated. "That's natural. That's good for everybody. You know, the dropping of the interest rate, we should be paying a much lower interest than we are."
The former president revealed he has directed the federal government to purchase $200 billion in mortgage bonds, a move he claims will help drive down mortgage rates. However, economic analysts have expressed scepticism, suggesting such intervention might have only minimal effect on prevailing rates. Trump also confirmed his intention to appoint a new Federal Reserve chair soon, replacing Jerome Powell whose term concludes in May.
It's important to note that Federal Reserve rate reductions don't automatically translate to lower mortgage costs, as demonstrated in late 2024 when mortgage rates actually increased despite a central bank rate cut. Currently, the average rate for a 30-year mortgage stands at approximately 6.06%, representing its lowest point in over three years according to Freddie Mac data.
Curbing Institutional Investment in Residential Property
Perhaps the more controversial element of Trump's proposal involves restricting large institutional investors from acquiring single-family homes. "Homes are built for people, not for corporations, and America will not become a nation of renters," Trump declared emphatically.
This policy initiative gained formal momentum through an executive order issued late Tuesday, directing administration officials to review existing laws governing large-scale residential property acquisitions by institutional investors. The order specifically examines whether such investment practices constitute anti-competitive behaviour, while exempting companies that construct homes specifically for rental purposes.
Additional provisions within the order would grant ordinary homebuyers priority access to foreclosed properties before investors and prevent government housing agencies from facilitating large institutional purchases through guarantees or insurance. Nevertheless, significant questions remain regarding how the administration would precisely define a "large investor," and experts like Redfin's chief economist Daryl Fairweather suggest the measure "probably won't make a noticeable impact on the housing market."
Addressing the Down Payment Challenge
Recognising that reduced mortgage rates alone cannot solve the affordability crisis, Trump has simultaneously targeted credit card interest rates as a means to help families save for deposits. He is requesting Congressional legislation to mandate credit card issuers cap interest rates at 10% for one year, a significant reduction from the current average of around 21% reported by the Federal Reserve Bank of New York.
According to Kevin Hassett, director of Trump's National Economic Council, these announcements merely "foreshadow" more comprehensive policy details to come. The White House is reportedly considering additional measures, including novel approaches allowing Americans to utilise 401(k) retirement savings for home down payments.
While metropolitan areas like Atlanta and Phoenix have seen substantial growth in corporate-owned single-family rental properties, the overwhelming majority of rental houses remain under individual ownership. This nuanced market reality suggests Trump's proposed investor ban might have limited practical effect, even as it addresses growing public concern about housing accessibility and corporate influence in residential markets.
