Challenges in Homeownership

Homeownership has traditionally been seen as a significant part of the American dream, but that dream has faced significant delays in recent years.

Currently, only 42% of households in their 30s own homes, which is notably more than 20 percentage points below the national average. The median age for all homebuyers has reached an unprecedented 59 years, while first-time buyers are averaging around 40, a stark increase from 29 back in 1981.

To address the situation, the Trump administration is proposing 50-year mortgages. Personally, I’m not fully on board with this idea, but I do appreciate that they’re looking for ways to tackle the housing issue.

What we really need is something akin to a Marshall Plan for housing, a comprehensive initiative that works to make homes more affordable and get people’s housing aspirations back on track.

The federal government has the power to help reduce bureaucratic hurdles and enact policies that would foster more housing development and lower costs.

Instead of pushing for those long 50-year mortgages, I believe the White House and Fannie Mae should focus on promoting shorter, 20-year loans. As Ed Pinto from the American Enterprise Institute points out, shorter loans can ease financial burdens at crucial times, allowing homeowners to allocate saved cash towards children’s education or even their own retirement.

It may also be helpful to introduce tax credits specifically for first-time homebuyers, especially since most taxpayers aren’t itemizing their returns and therefore miss out on the mortgage interest deduction. It’s also worth noting that this deduction primarily benefits wealthier buyers of upscale homes, meaning a targeted tax credit would be much more beneficial for those in genuine need.

Moreover, it might be time to reconsider the role of the Consumer Protection Agency, which has imposed restrictions on banks regarding the types of home loans available to consumers.

Certain alternative mortgage products, like adjustable-rate loans, might be suitable for some buyers, allowing them to determine their risk levels as they enter the housing market.

Still, those without financial support from wealthy family members often struggle to gather even a minimal down payment. Some may consider home savings accounts, similar to the health savings accounts introduced by George W. Bush, which could hold around $59 billion tax-free. However, any new home accounts would ideally be limited to down payment use and shouldn’t extend to long-term upkeep costs.

These days, buyers can withdraw up to $10,000 from their 401(k) for a down payment without penalty, but perhaps we should look into adjusting that limit.

However, even with innovative financing solutions in place, they won’t truly address the critical issue—supply.

There are numerous factors contributing to the shortage of starter homes. Strict regulations in many cities complicate construction, and many retired baby boomers hold onto second homes. Moreover, banks often treat real estate as an investment, driving prices up. Additionally, low sales figures are complicating things for Gen-X buyers trying to enter the market.

With mortgage rates hitting historic lows during the pandemic, many homeowners refinanced, which incentivizes them to keep their low-rate mortgages rather than moving and facing much higher rates. There’s also a growing trend of people living alone or in small households. According to the Census Bureau, household numbers rose by over 2 million annually from 2019 to 2021, indicating a pressing need for more—and different—types of housing. More smaller units are necessary, rather than just expansive properties common in many suburban areas.

This is where Washington’s influence reaches its limits. Much of the housing policy in the U.S. is determined at local levels through planning and zoning commissions. This is why the outgoing Mayor of New York City, Eric Adams, deserves commendation for the “City of Yes” zoning initiative, which promotes safe underground apartments and accessory dwelling units.

These “granny apartments” can serve as practical solutions, allowing older homeowners to downsize while providing housing to younger families. However, as part of a broader federal initiative, a Marshall Housing Plan could encourage similar reforms nationwide. By changing zoning laws or offering tax incentives for developing federal land, we could potentially boost housing availability.

There’s a growing need for so-called spontaneously affordable housing—small homes on limited lots, like the original Levittown properties—which are blocked in 18,000 municipalities nationwide.

The Secretary of Housing and Urban Development, Scott Turner, should motivate local governments to permit privately funded tiny homes and low-rise apartment complexes, which tend to be more appealing to local communities than the heavily subsidized, low-income housing that some have advocated for.

Additionally, new housing units in California have been subsidized to the tune of over $800,000 each, benefiting developers but not actually meeting tenant needs. Meanwhile, President Trump’s policies, including tariffs on Canadian lumber and wood products, are likely to escalate building costs and complicate new construction. These tariffs create what builders refer to as a “headwind” for development.

Homeownership is vital for societal improvement. Homeowners are generally more likely than renters to engage in their communities, enhancing local schools and services—this is a core aspect of American federalism.

A decline in homeownership is a challenge that requires immediate attention from both federal and local entities. By reducing taxes and encouraging construction, the Trump administration could potentially reignite the American dream.