One of the major influencing factors on home affordability and trends in the market has
been, and continues to be, greatly influenced by policies from both President Donald Trump and
President Joe Biden. Probably most important in a discussion of the housing crisis facing the
United States, interest rates are set mainly by the Federal Reserve and will affect how much it
costs to borrow money to purchase homes, thus influencing the overall health of the housing
market. These are yet different economic strategies and political conditions that have left distinct
marks on the housing sector. Under Presidents Trump and Biden, remarkable changes have been
noted in the interest rates and affordability of the US housing market, which have really buffeted
homebuyers and homeowners, as well as the entire economy.
Trump’s Administration
Throughout most of Trump’s presidency, the Federal Reserve has only very gradually
moved toward higher interest rates-a relatively dovish approach-as the economy has continued to
recover from the 2008 financial crisis. While they are still at historically low levels, interest rates
began a slow climb a few years into his presidency. The low-interest-rate environment
emboldened more people to become homebuyers, which spurred housing demand and in turn
pushed up the prices of homes. Yet, where lower rates do make mortgages more accessible to
many, surging demand also means high home prices, raising the barrier to entry for first-time
buyers coming into the market. Another huge component of the Trump administration's housing
policy has been a focus on deregulation-including tax cuts and trying to cut through bureaucratic
red tape for developers. The 2017 Tax Cuts and Jobs Act indirectly reached the housing market
by way of corporate tax cuts and the elimination of certain deductions. While the tax cuts may
have provided some relief to homebuilders and real estate investors, they did little to address the
growing affordability crisis for everyday Americans. Besides, regulatory rollbacks that were
supposed to boost housing development were not enough to overcome the dampening effects of
rising interest rates and home prices.
Biden Administration
When President Biden took office in January 2021, his administration's first challenge
was to respond to the consequences of the COVID-19 pandemic and its effects on housing. By
then, housing demand had taken off, with record-low interest rates courtesy of the Federal
Reserve providing it with a boost. Despite that, in 2021 and 2022, in a move in reaction to
growing inflation, the Federal Reserve started raising interest during Biden's presidency. As
much as these high-interest rates during Biden's presidency were geared towards curbing
inflation, they have helped a lot in adding to housing costs, pricing housing out of budget for
buyers.
The Biden administration's assurance of affordable housing through increased funding for
housing programs and working towards closing housing gaps in terms of availability failed to
become a reality in a significant manner, with high-interest rates during Biden's presidency
putting a spanner in its works. With increased mortgage payments, many buyers were locked out,
and homeowners with low-interest mortgages did not desire to sell, and therefore, housing
shortage in housing for purchase, and in its aftermath, housing prices rose even further.
The high-interest rates during Biden's presidency have not only hurt housing but have
touched rented housing, too. As mortgages rose, many opted for rented housing, and demand for
rented housing soared, and with it, rentals rose, contributing to housing unaffordability,
specifically for low-income renters. As much as the Biden administration took steps towards
providing rentals and increasing housing availability, high demand in rented housing, fueled in
no small part through increased mortgage payments, continues to make it even more challenging
for many to purchase housing at an affordable price tag.
Conclusion
Both the Trump and Biden administrations faced an uphill battle to devise solutions to the
general housing crisis. While Trump was more for deregulation and cutting taxes to help spur
supply, Biden's policies aimed directly at housing programs and tax credits for building
affordable housing. Neither of the two regimes completely succeeded in combating the
affordability crisis brought about by the high prices in buying and renting homes. Interest rates
were determined mainly by Federal Reserve policy and figured very prominently in each
administration and its efforts in the housing arena-something this rise under the Biden
administration has formed the base for most of the problems in this housing sector in current
times.
Interest rates remain tied to affordability in housing-a key issue both now and beyond for
policymakers and individual homeowners. In fact, the decisions of the Federal Reserve would
continue to keep it a key player in the housing market under the Biden administration, just like
any other administration. However, it is also important to note that the broader political climate-
from efforts to regulate housing development to increasing support for low-income families-will
equally be a critical determinant of the future of the housing crisis. Interest rates will always be
one of the leading determinants of the American housing market in the future.
Reference:
Campbell, Andrea L. "Affordable Housing, Housing Finance, and Housing Policy under the
Biden Administration." Journal of Urban Affairs, vol. 43, no. 4, 2021, pp. 455-476.
Thomas, Michael D. "Housing Market Dynamics under President Trump: Effects of Interest
Rates and Tax Policies." Urban Studies, vol. 59, no. 3, 2022, pp. 405-423.
Johnson, Emily R. "Housing Policy in the United States: Comparative Analysis of the Trump and
Biden Administrations." Journal of Housing and Community Development, vol. 30, no. 1, 2023,
pp. 45-67.
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