President Trump’s Housing Initiative
The federal government faces challenges in addressing the housing crisis, yet President Donald Trump has proposed a potential solution: prioritize residents over large investors.
Trump has noted the trend of Wall Street firms purchasing and renting numerous homes, which raises concerns for ordinary buyers.
Instead, the emphasis should be on helping families attain homeownership. This could foster stable neighborhoods and reinforce community ties.
Unfortunately, many people find it hard to compete against financial firms making all-cash offers.
My hope is that we can view detached homes and condominiums as primary residences first, while investment should follow as a secondary outcome.
Initially, I was worried that Trump’s proposal might effectively shut investors out of the real estate market.
Upon reflection, it seems the federal message is clear: investors can buy single-family homes, but there’s no government support for them.
While Wall Street is free to purchase homes, agencies like HUD and the Veterans Administration will not provide assistance.
Additionally, Trump’s policy would grant regular home buyers a 30-day window to purchase foreclosed properties before investors get involved.
This could be a constructive move.
Meanwhile, concerns are rising regarding the Senate’s passing of the 21st Century ROAD to Housing Act, which sailed through with a vote of 89-10.
Sen. Tim Scott (R-S.C.) and Sen. Elizabeth Warren (D-Mass.) are among those leading this initiative. Warren, known for her consumer protection efforts, is a key figure here.
The 300-page legislation combines around 40 previous bills, suggesting that while it may limit large investors from acquiring more single-family homes, it pushes for the sale of their existing properties over seven years.
Historically, divestment has not demonstrated success in any market, especially not in housing.
The bill aims to streamline environmental impact reviews that often hamper housing projects. Removing such reviews altogether might be more effective.
These regulations have resulted in an industry focused on generating reports, which are frequently contested by various environmental groups.
This Scott-Warren bill essentially uses government power to empower private entities to act as they wish.
It proposes lifting the cap on large banks’ stakes in community development institutions from 15% to 20%, potentially leading to unqualified lending. After all, this was a major player in the subprime mortgage crisis that triggered the Great Recession.
Local and state governments hold the primary responsibility for housing development, and federal interventions often do little to mitigate cost overruns at that level.
Zoning laws, building codes, and permit fees will likely continue to escalate costs, areas where the federal government has limited influence.
Even with claims of an expedited permitting process following the Palisades Fire, only 15% of rebuilding permits have been issued, and Altadena, hit hard by the Eaton Fire, has issued permits for under 10% of destroyed properties.
There are several cost factors that aren’t often discussed.
For example, there’s an increasing preference for larger homes. The average new home size was 1,500 square feet in 1970, grew to 2,080 by 1990, and reached about 2,392 square feet in 2010, with slight upward trends since. This 60% increase in size over five decades certainly contributes to soaring prices.
Adding to that are modern consumer expectations for amenities and advanced technology, along with government-mandated safety features, all of which can drive up costs.
Impact fees, designed to support off-site facilities like schools and parks, have also contributed to rising housing expenses. Introduced in California in 1947, these fees increased significantly after Proposition 13 limited tax revenues in 1978.
About 35 states have adopted impact fees, with California’s being among the highest at $30,000 per home—double that of other states.
Though I acknowledge President Trump for his efforts, including enforcing immigration laws that may deter some buyers, it’s apparent that only a hands-on approach from state and local governments can effectively improve affordability. There’s definitely opportunity for change here in California.
Bruce Bialosky, a certified public accountant with a focus on taxation, has served in two presidential administrations.
