Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
President Donald Trump has recently accused major U.S. homebuilders of intentionally withholding land to inflate housing prices, drawing comparisons to the OPEC oil cartel. This month, Trump claimed builders were “sitting on 2 million empty lots” and urged them to commence construction. However, economists and housing industry experts widely contend that the nation’s severe housing affordability crisis stems from deeper, systemic issues, including restrictive regulations, labor shortages, and rising financing and material costs, a problem years in the making.
Underlying Causes of the Housing Shortage
The current affordability crisis is rooted in a long-running shortage of homes, exacerbated by a dramatic decline in homebuilding leading up to the 2008 financial crash, from which the industry never fully recovered. While President Trump points to builders hoarding land, industry professionals argue that constructing new homes has become increasingly challenging due to various obstacles.
Shaun Donovan, a former Secretary of Housing and Urban Development, described the situation as a “perfect storm” of high demand, low supply, and mounting costs, creating a “national housing emergency.” He noted that local zoning laws and excessive bureaucracy are at the core of the problem, significantly delaying projects.
Regulatory Hurdles and Local Opposition
A study by the National Association of Homebuilders (NAHB) indicates that nearly 25% of the price of a typical newly built single-family home is attributable to state, local, and federal regulations. An analysis by Goldman Sachs suggested that relaxing land-use regulations could add an additional 2.5 million housing units over the next decade, addressing about two-thirds of the estimated shortage.
Bureaucracy can severely slow down projects, even in areas with urgent housing needs. Oren Amir, founder of Go Home Builders in Los Angeles, reported delays in rebuilding projects in Altadena due to conflicting guidance from the city on rooftop solar panel requirements. Furthermore, community resistance, often characterized as “not in my backyard” (NIMBY) opposition, presents a significant obstacle to increasing housing supply.
Impact of Trump’s Policies
Some industry observers express concern that President Trump’s immigration and trade policies could exacerbate the housing supply problem. A Texas homebuilding CEO, speaking anonymously, stated fears that intensified immigration enforcement could shrink the already limited pool of construction workers. Jim Tobin, CEO of the NAHB, called for a fixed immigration system, including a visa program for legal immigration in home construction.
Additionally, tariffs on construction materials are increasing building costs. UBS research estimates that Trump’s 10% tariff on lumber imports adds $720 to the cost of an average home, with tariffs on kitchen cabinets and vanities adding roughly $280. Overall, tariffs are estimated to add about $8,900 to the cost of building an average home.
Builder’s Perspective and Future Outlook
Homebuilders often acquire land several years in advance, requiring significant time and investment to develop infrastructure like roads, sewers, and utilities, in addition to obtaining government approvals. Alan Ratner, a housing analyst at Zelman and Associates, clarified that builders owning millions of lots typically indicates they are positioning for future growth, not intentionally withholding supply.
Despite the challenges, there is a growing bipartisan consensus on the need to streamline regulations. California Governor Gavin Newsom, a Democrat, recently signed legislation overriding local zoning to allow for increased density, while Montana Governor Greg Gianforte, a Republican, has enacted laws aimed at boosting housing supply. Treasury Secretary Scott Bessent also indicated last month that President Trump was weighing whether to declare a “national housing emergency” this fall.
Experts largely agree that resolving the housing crisis will be a prolonged effort. Shaun Donovan noted that while the administration’s focus on supply is encouraging, tangible action is needed, emphasizing that it will take years to overcome a problem that developed over decades.
