A national housing emergency declaration could smooth a path for new housing initiatives, but it's unlikely to fully fix the housing crisis.
On September 1, Secretary of the Treasury Scott Bessent told the Washington Examiner that the Trump Administration might declare a national housing emergency as early as this fall. What might that do for the nation's housing crisis?
What Is a National Emergency?
A national emergency is “a general declaration of emergency made by the President,” according to the National Emergencies Act (NEA).
An emergency does not have to meet certain criteria except that it’s declared by the President. There does not have to be an invading force or natural disaster.
The declaration gives the President broad powers to implement policies that would likely not be approved in Congress, at least not quickly, according to the Brennan Center for Justice.
Emergency declarations have been used by Trump in his presidency, most famously to send troops to the southern border and impose tariffs.
What Powers Might be Granted to Trump Under a National Housing Emergency?
Bessent gave almost no indications of what powers could be enacted during a housing emergency. The interview was about taxes on tips. Bessent mentioned the potential declaration after cameras stopped rolling but audio was still on. Hear that segment here.
Powers that might be granted to Trump are speculation at best.
However, some insights can be gleaned by reviewing other national emergencies declared by Trump. First, we can look at the National Energy Emergency declared on January 20, 2025, which might prove most similar to a housing emergency declaration.
Land Use
The energy emergency led to Executive Order 14241 which required the Secretary of the Interior to produce a “list of all Federal lands known to hold mineral deposits and reserves.” It also authorized leases to private companies to install mineral production in these lands.
In theory, a National Housing Emergency could open up federal lands for building, although no such plans have been announced.
Related: Will a National Emergency Lead to More Home Supply?
Government-Backed Loans at Reduced Rates
The National Energy Emergency authorized the Small Business Administration (SBA) and other agencies to issue loans to private mining companies with “favorable terms.”
Following the same logic, a national housing emergency could, in theory, ease lending standards and lower loan rates for builders and other private construction-related companies. The goal would be to reduce the costs of building a home, making the final product more affordable.
Tariff Roll-Backs
Trump has used national emergency declarations to introduce tariffs on China, Canada, and others. A national housing emergency could justify certain carve-outs on tariffs, such as lumber from Canada or gypsum (sheet rock) from Mexico, contributing to cheaper building materials.
Lower Mortgage Rates
This is one of the few housing factors that Bessent mentioned in the interview. However, lowering mortgage interest rates is difficult for the government to do because they are driven by free markets, not the Federal Reserve. The White House can put pressure on the Fed to lower its federal funds rate, but even if it complies, it only affects short-term rates on things like home equity lines and credit cards.
And keep in mind that lower rates would only spur homebuying demand, driving prices up.
A more direct way to lower rates would be to offer a grant so that homebuyers could buy down their rate with discount points. A 1% lower rate would save a homebuyer $250 per month on a $400,000 home. But a buydown of this magnitude could cost over $10,000 per buyer, a bill the federal government is unlikely to shoulder.
FHA Loan Changes
One quick and effective way to reduce borrowing costs would be to temporarily reduce fees for FHA loans.
The upfront fee is 1.75% of the loan amount, or $5,250 on a $300,000 loan. While this fee is typically wrapped into the loan, it increases the loan balance and payment.
Additionally, monthly FHA fees could be reduced. The most common mortgage insurance fee is 0.55% per year, or about $140 per month on a $300,000 loan. A national housing emergency could authorize HUD to remove or reduce this fee. The reduction might apply for the first few years of the loan, or permanently for whoever purchased a home while new rules were in force.
Fannie Mae and Freddie Mac Cost Reductions
Fannie Mae and Freddie Mac charge “Loan-Level Pricing Adjustments”, or LLPAs, for borrowers with lower credit scores and down payments. Reducing these fees for first time buyers or move-up buyers could encourage homeowners to sell while lowering costs for first-time buyers.
These agencies are under government control, so no emergency declaration would be required for rather large changes. We’ve already seen the White House accelerate plans to accept non-FICO credit scores and consider crypto assets for mortgages. But the declaration could be reason enough to initiate more changes.
What Was Done During The Housing Crisis of 2008?
Surprisingly, no national emergency was declared during the 2008 housing crisis. Rather, Congress was able to act fast enough to roll out the Troubled Asset Relief Program (TARP) which stabilized banks and helped families avoid foreclosure, among other things.
What brought rates down during the era was the Fed’s Quantitative Easing program. It directly purchased mortgage-backed securities, fueling demand for these bonds which put massive downward pressure on rates.
These actions didn’t require an emergency declaration, as they were all done within standard law. However, the U.S. economy was at the brink of collapse. These extra-ordinary efforts would likely not be considered in today's relatively strong economy.
Could an Emergency Declaration Force the Fed to Cut Rates?
The Federal Reserve is an independent body. It’s unlikely the Administration would issue a formal mandate to lower rates or that the Fed would comply. But the Fed is still subject to outside pressure.
The Fed has complied with outside requests in the past, although arguably during more obvious emergencies. During World War II, the U.S. Treasury asked the Fed to keep rates low to reduce war costs.
Then in 1981, the Fed raised rates to 19% (compared to today’s rough 4.375%) to fight inflation. High rates caused unemployment to spike to nearly 11% by 1982. That being a midterm election year, Congress and the White House put pressure on the Fed to cut rates, even going so far to suggest placing the Federal Reserve Board under the authority of the Treasury Secretary. The Fed cut rates from 19% in July 1981 to around 10% by August 1982.
A national emergency declaration could nudge the Fed toward lowering lower rates, but it’s unlikely that action alone would spur the body to cut rates more than it was already planning to.
What Can Realistically Be Done?
It’s hard to unwind a housing crisis more than 20 years in the making, national emergency or not.
The U.S. overbuilt homes starting in the mid-2000s, but builders lost their taste for that since 2008. After the crash, builders decided they would rather underbuild than get caught with too much inventory.
Image source: U.S. Census Bureau; U.S. Department of Housing and Urban Development via FRED®
Adding to that issue is increasing cost and requirements for zoning and permitting in the exact places that need more homes. The St. Louis Fed shows that six or fewer building permits per 1,000 people were issued in 2023 in the most densely populated areas of the U.S.
Image: St. Louis Fed
Because zoning and permitting are highly local processes — down to the city or even neighborhood level — there’s little the federal government can do without overriding local governments.
There’s also the fact that incomes haven’t kept up with home prices over time. Visual Capitalist shows that U.S. incomes have risen 252% since 1985 while home prices are up 403%. A $100,000 salary, long considered a high living wage, no longer buys the median-priced U.S. home.
Perhaps the most important outcome to a national housing emergency declaration would be more attention to the problem at the highest levels. It would give policy makers permission to think outside the box to work on issues that have long plagued the American homebuyer.
