Housing Policy Takes Center Stage… Carrots and Sticks Galore!

It’s been a dizzying start to the year for the homebuilding industry. Since October, President Trump, FHFA Director Pulte and other White House officials have been meeting with homebuilding executives to discuss the country’s housing affordability crisis and what steps the industry and government can take to relieve this burden on potential homebuyers.
 
At first, the conversations were contentious, with direct or indirect threats of forcing builders to build more homes at lower prices and margins, banning mortgage rate buydowns (a key incentive tool used by builders to improve affordability), limiting share repurchases and even cutting access to Fannie Mae and Freddie Mac mortgage liquidity.
 
The conversations then shifted, with reports of collaboration between the parties to identify key pain points mitigating stronger housing start growth and potential tools the government could use to reduce or eliminate these roadblocks.
 
Gradually we started to see trial balloons thrown out related to adjusting loan level price adjustments on mortgages, streamlining local approval processes and potential mortgage product innovation including a 50-year mortgage and portable/assumable mortgages. While some ideas were quickly dismissed, it became apparent to us that this topic was garnering a significant amount of attention in D.C. and any potential initiatives ultimately decided upon would likely be a net positive for the industry, albeit with some potential puts and takes.
 
As the calendar has turned to 2026, we are beginning to get more information and insights into the Trump administration’s plans surrounding housing and how it intends to implement these initiatives. President Trump kicked off last week with two big announcements – first, a proposed ban on institutional investor purchases of homes.
 
While this has been a bipartisan hot button topic for years, and there are clearly markets that attracted outsized capital and demand from investors during the pandemic boom in 2020-21, the share of homes owned by investors and currently being purchased by these entities is quite low. Furthermore, it could be argued that the expanding built-for-rent single-family new home market has created additional supply and affordable housing options for the “have nots” in today’s K-shaped economy. It remains to be seen whether there is an eventual carve out for new construction in any potential ban on investor home purchases, but restricting all BFR activity could have an unintended consequence of actually reducing housing starts – clearly not the government’s objective.
 
Then came a much-more friendly announcement – up to $200 billion of MBS purchases by Fannie Mae and Freddie Mac which immediately sent mortgage spreads compression and 30-year fixed mortgage rates closer to 6% for the first time in three years.   
 
With that announcement still fresh off the press, FHFA Director Pulte again dialed up the pressure on builders, discussing the possibility of restricted share repurchase activity and dividends by public homebuilders that are not working toward achieving the administration’s goal of building more housing.
 
So what does it all mean? If you’re a homebuilder or homebuilder investor, it seems like we’ve been in a one step forward, one step back environment without much to show for it over the last several months. Which brings us back to the title of this blog – carrots and stick.
 
In our opinion, everything we have seen announced up to this point is a precursor to President Trump’s highly-anticipated speech at Davos next week where he plans to unveil the rest of his housing agenda. According to Trump and Pulte, there are between 30-50 ideas that Trump and his administration are considering implementing, and based on our discussions with executives involved in the conversations, the final plan is still being deliberated.
 
We believe that whatever is ultimately decided will be BIG – with the aim of driving down costs for first-time homebuyers and incentivizing builders to build more affordable homes… much more! But it is clear this will not be handout for builders… any incentives provided will likely be available to those companies demonstrating an effort to build more and solve the affordability problem rather than those focused on preserving margin or maximizing cash flow. Hence, the carrots and sticks approach.
 
Ultimately, once the dust settles, we expect the homebuilding industry to come to the table and play ball, using any subsidies and incentives provided by the federal government to ramp starts to the best of their ability. We still have real concerns surrounding the industry’s ability to deliver meaningful housing start growth due to potential supply chain tightness, labor availability and elongating land approval development timelines, but those are questions for another day. For now, we eagerly await Trump’s housing plan and the details behind it.