Housing Policies Are in Focus. What Trump Could Have in Store, According to These Analysts

The high cost of housing was a big issue in the 2024 presidential campaign. (David Paul Morris/Bloomberg)

Key Points

• The Trump administration is exploring various housing policy changes, including reducing regulations and spurring home building.
• Potential policy changes include adjustments to capital gains exclusions, zoning incentives, and the future of Fannie Mae and Freddie Mac.
• Analysts suggest the most likely changes will focus on increasing housing supply, particularly through federal land use and incentives for local development.

Home buyers have been on the sidelines for a while and they haven’t budged much since Donald Trump became president. But housing policy could.

The high cost of housing was a big issue in the 2024 presidential campaign, and lowering the cost and expanding the supply were among the priorities Trump outlined in a cost-of-living presidential action in January.

Since then, political appetite for housing policies meant to spur home building has gained steam. Last week Trump on social media told Fannie Mae and Freddie Mac to get “big homebuilders going.”

Separately, The ROAD to Housing Act, a bipartisan proposal to increase housing supply and access, passed in the Senate as part of its version of the National Defense Authorization Act later that week.

The president has also shown interest in untangling the future for Fannie Mae and Freddie Mac, the two secondary mortgage market giants under government conservatorship, though questions about possible arrangements remain.

The Trump administration has a number of avenues it could pursue to attempt to “fix” housing—with some more likely than others, Raymond James analysts wrote Tuesday.

Policy changes on capital gains, zoning incentives, and land use are among the possibilities, Washington policy analysts Ed Mills and Ellen Ehrnrooth wrote in a Tuesday report.

“‘Fixing housing’ has become a key policy goal of the Trump administration,” the analysts wrote. “Achieving the goal of increasing supply and affordability, potentially ending the conservatorship of Fannie Mae and Freddie Mac, while also lowering mortgage rates is a much bigger debate.”

The most likely change is on the supply side, the analysts wrote. The Trump administration has put in place a Department of Housing and Urban Development-Department of Interior joint task force to examine federal land appropriate for housing, they noted.

“We expect beneficiaries to include large-scale residential developers and homebuilders particularly those active in Western states with high federal land concentrations,” they wrote. “We expect challenges to remain, given the need for infrastructure buildouts in those areas, including water, sewer, and utility development.”

Federal funds could be used to incentivize—or penalize—localities where housing supply doesn’t meet demand. “While the federal government lacks authority to preempt local zoning, model zoning frameworks backed by federal incentives could represent the first serious push to loosen restrictive local zoning, which has become a bottleneck when addressing housing supply,” the analysts wrote.

Changing the capital gains exclusion is also possible—if less likely, according to the analysts. Currently, single tax filers can exclude up to $250,000 of capital gains from the sale of their primary residence or $500,000 if filing jointly. A change to the exclusion could be raising or indexing the exclusion to inflation, or completely eliminating the tax on primary residence sales.

“If changes to capital gains were made, we expect housing supply to increase in high-cost areas as a result of alleviating the ‘lock-in effect’,” they wrote. “Currently, many long-term and senior homeowners in markets that have seen drastic price appreciation choose to delay selling, as realizing gains results in a large tax bill, known as the ‘stay-put penalty’.”

Capital could be raised through a public offering of Fannie Mae and Freddie Mac, the analysts wrote, adding that a portion could be sold to a sovereign wealth fund.

“A limited capital raise reportedly selling anywhere between 3%-5% common equity stakes to a sovereign wealth fund would represent a politically viable middle option that could provide a market-to-market valuation while maintaining its conservatorship structure,” they wrote. That would avoid the market disruption of full privatization, they said.

The end of conservatorship is less likely, the analysts added. Any plans for the companies’ conservatorship are tied up in 2008-2009 crisis-era agreements with the U.S. Treasury, with implications for a spectrum of stakeholders, among them stock investors, home buyers, homeowners, and mortgage-backed securities investors.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com