How to Reduce Housing Costs

Editor’s note: This is a lightly edited transcript of the accompanying video from professor Peter St. Onge.

Can Donald Trump reduce house prices?

A recent study by Redfin found that millions of Americans are skipping meals, selling belongings, and even delaying medical care to afford housing. Three in four Americans making less than $50,000—nearly half of Americans make less than $50,000—say they “regularly struggle” to keep a roof over their head.

This is partly because incomes have lagged inflation, but mostly because the average mortgage payment is now nearly $3,000—almost double since pre-pandemic. Either homeowners pay it, or it passes through to renters.

So, how can we fix it?

Joe Biden’s inflation, sadly, is permanent—the Fed would sell its children to avoid deflation. The other major ingredient, high mortgage rates, is also stuck, with Fed Chairman Jerome Powell telegraphing he’s in no rush to ease rates with inflation rising again.

Still, there are a couple things that the federal government—Trump and Congress—can do.

First is cutting government spending, whether through the Department of Government Efficiency or—dare we dream—Congress. This slows inflation so the problem stops getting worse. It also stops the bleeding in construction costs, which are up by 55% since 2019 and a major barrier to new housing.

Spending cuts also allow lower interest rates, since it gives the Fed breathing room. As in, they don’t have to strangle the economy with high rates—and high mortgages—if inflation is under control.

No. 2 is specific policies. Mass deportations of illegal aliens obviously will help lower housing costs, especially for lower-income homeowners who are hurting the most.

A recent study found there’s a shortage of roughly 7 million low-income rental units in the U.S. Which, by happy coincidence, is roughly the number of low-income units occupied by illegal immigrants.

Sounds like a perfect match.

No. 3 is out of Trump’s hands: property tax. Nationwide, these are calculated as a percentage of the home price. Meaning that if your house doubled because the Fed held interest rates too low too long—or because mortgages are so expensive nobody can afford to sell and move—you go from $2,000 in property tax to $4,000.

This can feel like you’re renting the house you own, and they set the rent as whatever they like.

Unfortunately, cities and counties that set these taxes don’t lower rates when house prices rise. They simply grab the extra taxes and spend the money.

And that brings us to No. 4: regulation. You’ll probably be shocked that federal, state, and local rules all conspire to push up home prices. This includes permits, zoning and land use, and building codes that range from restrictive to predatory. It includes regulations on homeowners insurance that’s driven up prices by nearly half since 2019 (it’s tripled in Florida).

And it includes green mandates that, according to my colleague EJ Antoni, add $31,000 to the cost of a home. That’s not including the appliances, where the greens are trying to tack thousands of dollars on the price of your fridge, stove, and air conditioner.

So, what’s next?

The biggest drivers of housing costs are ultimately both part of government spending—inflation and rates. But deportation, deregulation, and property tax can bring the burden down even if the Fed keeps blundering us into million-dollar starter homes.

Of course, that would all involve the government’s giving up control and treasure. So, it will take sustained pressure to get Congress off their butts to help Americans who are trading food for rent.

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