President Donald Trump was mocked last week after saying he wants to increase housing prices.
“I don’t wanna drive housing prices down,” Trump said during a Cabinet meeting. “I wanna drive housing prices up for people that own their homes, and they can be assured that’s what’s gonna happen.”
Some may wonder why the president is pitching higher home prices amid an affordability crisis. But there may be a method to his economic madness.
Trump seems to genuinely see rising home prices as a good thing — or at least politically advantageous. Housing data help explain why.
A majority of Americans, about 65%, own their homes and have an equity position in them. According to Pew Research, the typical American household holds roughly $174,000 in home equity, by far its largest single asset and representing a majority share of its net worth.
This might explain why the president celebrates higher housing prices. For many voters, rising home values mean rising net worth. It also helps explain the popularity of NIMBY policies across much of the United States.
Through a web of local regulations, including zoning rules, density caps, lengthy permitting processes, and other barriers, supporters of not-in-my-backyard policies make it difficult or impossible to build new homes. By constraining supply, they drive up the value of their own properties. Zillow estimated that existing U.S. homes gained $6.9 trillion in value in 2021 alone.
Many factors influence housing prices, of course, but policy, both monetary and regulatory, plays a major role, and lawmakers use policy for political gain.
For his part, Trump explained why he wanted to raise home prices.
“I want to protect the people who, for the first time in their lives, feel good about themselves,” Trump said.
Homeownership is a fine thing, and I have nothing against high home prices. As a homeowner, I like seeing the value of my home go up. (Many people reading this article likely feel the same.)
But high housing prices also come with trade-offs. More importantly, housing prices are not something the federal government should be managing.
Prices exist as signals of scarcity and value. It is not the government’s job to steer prices or tilt markets toward favored groups or constituencies.
One reason for this is that by tilting the playing field, policy measures help some at the expense of others. That’s the simple nature of pricing.
Take housing, for example. Inflating prices helps homeowners. But those same high prices become a hurdle to realizing homeownership and the American dream for others. Renting might be an equally valid path to wealth creation, but surveys show that the vast majority of Americans (75%) associate home ownership with the American dream. (This might explain why 3 in 4 Americans say housing affordability is “a significant problem” in the U.S.)
The reality is that high home prices make first-time home buying much more difficult, especially for lower-income Americans.
Whether high housing prices are good or bad is, to some degree at least, a subjective matter. A better question is this: how should homes be priced?
The proper answer is that markets, not politicians, should determine housing prices. Politicians meddling in markets is the reason many of the most important commodities and services, from healthcare and education to housing, are so expensive.
Republicans once championed limited government and laissez-faire economics for this very reason. But those values are in short supply in today’s GOP.
Trump’s comment that he wants to increase housing prices to protect homeowners and make them “feel good about themselves” is reminiscent of Franklin D. Roosevelt’s claim that it was “the right of every family to a decent home.”
FDR’s New Deal policies proved better at delivering new federal departments than affordable housing. But his populist economic rhetoric and big government politics won him four presidential victories.
The Trump-FDR comparison, which the New York Times made just this week, is one likely to make Republicans recoil. But not the president. Trump has praised FDR as “amazing” and recently posed for a photo in front of his portrait alongside New York Mayor Zohran Mamdani.
Which brings me back to housing. The problem is not just that Trump wants to make housing more expensive. It’s that he, like FDR, sees it as his job to direct housing prices. This is folly. The 20th century showed what happens when politicians and bureaucrats are given unfettered economic power. The more benign outcomes were grand promises, sprawling bureaucracy, and distorted economies; the worst were mass graves.
