A housing emergency declaration could clear the path for drastic measures to increase housing supply such as standardizing local building and zoning codes, decreasing closing costs, and tariff exemptions on some construction materials.
Secretary of Treasury Scott Bessent recently shared in a media interview that the Trump administration is mulling the idea of declaring a national housing emergency, but stopped short of giving too many details. He did say, however, that among the strategies on the table are standardizing local building and zoning codes, decreasing closing costs, and tariff exemptions on some construction materials.
Major industry associations have come out in support of any assistance that might restore housing supply and prop up a real estate market that’s being hampered by high mortgage rates and other challenges.
Should such a policy come to fruition, could it actually help?
What’s the Emergency?
The current real estate market is facing a number of struggles simultaneously.
A Housing Shortage
According to the latest data-crunching from Zillow, America's housing shortage reached an all-time shortfall of 4.7 million units as of July. Groups including the National Association of Realtors are receptive to any relief the administration can provide.
“The Administration’s consideration of a housing emergency underscores the urgency we’ve long raised: supply constraints are the greatest obstacle to affordability,” says Shannon McGahn, NAR’s Executive Vice President and Chief Advocacy Officer. “Bold, coordinated action is needed now to boost housing supply so more families can achieve the American Dream of homeownership and the generational wealth it provides.”
A Challenging Sales Climate
Despite a shortage of housing, on the other hand we have a high inventory of homes that are simply not selling – a 9.2 months' supply of new houses as of July 2025 up from 8.5 in April 2025, according to the Federal Reserve Bank of St. Louis (FRED). That level points to a buyer's market.
Home Affordability Challenges
Even if buyers are driving the market, many prospective home owners simply can’t afford the purchase right now. One study found that as of the first quarter of 2025, homeownership was unaffordable in 17 states. Compare that to 2020 when the only unaffordable homeownership state was California.
Much of this is driven by the rise in mortgage interest rates, says Stephen Henn, economics professor at Sacred Heart University. He points out that the mortgage rate in January 2021 was 2.65%, meaning if you could afford a $3,000 per month principal and interest payment, it could put you in a $740,000-ish mortgage. Today, with rates around 6.5%, that same payment means you could only afford around a $480,000 mortgage. And, of course, home sales prices have gone up over the same period, too. “That has a very large impact on the housing market and nothing else comes close,” says Henn.
On top of that, homeowners insurance premiums have gone up approximately 20% just between 2020 and 2023, says the Joint Center for Housing Studies of Harvard. Not to mention the inflationary impact on utilities and other everyday expenses required to run a household, which have squeezed budgets tighter.
What Exactly Can a “National Housing Emergency” Declaration Do?
Keeping in mind that there have not yet been official policy announcements, we can only speculate as to what a national housing emergency declaration could do. That said, there are three avenues in which the Administration can try to intervene to restart the housing market: by helping buyers, sellers and homebuilders.
“We have buyers who are on the fence because of affordability, qualifying, and access to a down payment. On the flip side, we have sellers who are also holding off on selling due to having ultra low rates on their current mortgages as well as increased property values,” says Jeremy Schachter, branch manager of Fairway Independent Mortgage Corporation in Phoenix, Arizona. Some homeowners may also be struggling to sell because their homes are older or in need of repair.
On the Buyer Side
A mortgage rate decrease: While not technically part of any national housing emergency, the Fed is poised to drop interest rates this month and perhaps again later this year. Lower rates can attract more buyers into the market. This can also help reduce the lock-in effect for sellers, in which current homeowners stay put because they are unable to afford the payment on the next house.
A tax credit: Schachter recalls that during the 2008 housing crisis, a bill passed that gave first time home buyers up to a $8,000 tax credit. Perhaps a similar bill could pass. “It spurred a buyer frenzy to take advantage of that credit. More than likely Congress would have to approve it, but with a Republican majority it could be possible. We have many buyers still on the sidelines waiting for incentives to purchase,” he says.
A national down payment assistance program: Another option on the table could be a federal down payment assistance program for first-time homebuyers. “There are down payment programs across the US, but many have income or credit limitations. If there was a national down payment assistance program, it could motivate more buyers to enter the market,” says Schachter.
Changes to guidelines: Bill Pulte, director of the Federal Housing Finance Agency (FHFA), works closely with the Trump administration, and may be open to easing some of the traditional barriers to homebuying. “This could change guidelines from debt to income maximum percentages to down payment requirements. Many of the challenges that borrowers have getting approved could be expanded to open that market up,” says Schachter.
Getting more condos on the market: Condo approvals are notoriously difficult, but with Director Pulte in charge, Schachter thinks there’s an opportunity to fast track that process. “Many complexes across the US are being denied approval for Fannie Mae and Freddie Mac on condition, insurance requirements, HOA reserves and other items. If this was relaxed, more buyers could get into a condo,” he says.
On the Seller Side
Encouraging sellers to put their homes on the market to increase inventory may require some incentives for them, especially if they are enjoying lower-rate mortgages from the early 2020s. Possible ways to move the needle might include:
A special discount on the interest rate for their next home: One of the reasons that people are hesitant to sell their starter homes and move into their next one is that they don’t want to give up a low-rate mortgage for a higher one. However, if the Trump admin could come up with a discount program, it could potentially add more starter homes to the market.
Creative bridge loan products: “Many sellers also are tied up in the equity of their home to purchase a new one so they would have to do a contingency to sell and buy at the same time,” says Schachter. And while bridge loans can help, they tend to be costly. Perhaps a creative program with less costs where the seller could use their equity of the home to purchase a new one would make selling more attractive.
Seller concession changes: Right now, sellers are allowed to contribute up to 3% of the sales price as a seller credit for 3%-down conventional loans. One idea could be to allow the seller credits to increase as more of a down payment is applied, says Schachter.
“These credit increases could buy down the rate to make mortgages more affordable,” he says.
Along those lines, conventional loans could borrow VA (Veteran Loan) guidelines when it comes to seller credits. “Currently sellers could give a credit on a VA loan to pay off debts of the buyer if it is inhibiting them to qualify for a conventional mortgage,” says Schachter.
On the Homebuilder Side
Easing of builder regulations: The National Association of Homebuilders (NAHB) is another industry organization that’s eager for ways to ramp up homebuilding efforts to increase the nation's housing supply. “The administration can help spur more construction by leading deregulatory efforts at all levels of government, ensuring a secure and affordable supply chain of building materials, and enacting policies that address a lack of skilled labor in construction,” says NAHB Chairman Buddy Hughes. “A proactive agenda to bring down material, construction and labor costs will also help bring down overall inflation, increasing the odds of interest rate reductions and lower mortgage rates for consumers."
Tariff exemptions: No one can pinpoint where tariff policies might go given how often they change. But one solution on the table, as per Secretary Bessent, is to exempt tariffs on construction materials like gypsum from Mexico and lumber from Canada. This could reduce building costs and help encourage more new construction.
What a National Housing Emergency Probably Can’t Do
One of Secretary Bessent’s comments was “we don’t want to step into the business of states, counties, and municipal governments.” The problem is one of the biggest impacts on housing comes from local regulations, says Henn.
“Zoning, permitting, and other local ordinances can make it difficult to quickly build homes to meet demand,” he says. “Simply put, if a town does not want to build housing, it is very difficult, expensive, and time-consuming to do so.”
While the federal government certainly could attempt to reduce local building red tape, that approach is likely to invite lawsuits. “It would be very difficult to see how any action would survive the lawfare that would ensue,” says Henn.
