Trump's Plan to Tackle Inflation by Boosting Housing Construction
Englewood Cliffs, Wednesday, 11 December 2024.
President-elect Donald Trump’s economic strategy focuses on increasing housing supply to reduce inflation, addressing soaring housing costs that contribute significantly to the consumer price index.
Current Housing Market Pressures
The housing sector continues to be a major driver of inflation, with housing costs rising 4.7% annually as of November 2024 [1]. This represents the smallest yearly increase since February 2022, but still accounts for approximately 40% of the monthly increase in the Consumer Price Index [1]. The current housing supply remains significantly constrained, with inventory levels in November 2024 approximately 17% below where they were five years ago [1], while the average national rent has reached $2,009 per month, marking a 3.3 percent increase from the previous year [1].
Trump’s Housing Strategy
President-elect Trump’s approach to addressing inflation centers on a deregulation plan aimed at opening federal land for construction and reducing barriers for homebuilders [1]. This strategy comes as economists warn that some of his proposed initiatives could be inflationary [1]. The incoming administration faces significant challenges, as current mortgage rates remain elevated despite the Federal Reserve cutting its benchmark borrowing rate by 0.75% since September 2024 [1][3]. Housing market experts note that substantial relief may require mortgage rates to fall below 6% to incentivize homeowners to sell their properties and increase market inventory [3].
Economic Implications and Challenges
The effectiveness of Trump’s housing strategy will be tested against broader economic headwinds. According to analysis from Moody’s Analytics, Trump’s overall economic policies could lead to an inflation rate of 3.6% [4]. The incoming administration will inherit a weaker economy compared to Trump’s first term, with cooling labor market conditions and declining consumer spending [6]. A letter from 16 Nobel Prize-winning economists has warned that Trump’s economic proposals could ‘reignite’ inflation and negatively impact the U.S.’s economic standing [4].
2025 Housing Market Outlook
Looking ahead to 2025, housing market forecasts suggest some potential improvement. Realtor.com’s 2025 Housing Forecast projects that existing home inventory will grow by 11.7%, while single-family new home starts are expected to increase by 13.8%, reaching 1.1 million homes - the highest level since 2006 [7]. However, the impact of Trump’s policies remains uncertain, with Realtor.com’s chief economist noting that ‘The size and direction of a Trump bump will depend on what campaign proposals ultimately become policy and when’ [7].