The White House last week targeted institutional investors to bring down the sky-high rents in New York City, Washington, and countless other cities. The president called on Congress to ban large institutional investors from buying and owning single-family homes, with Sen. Bernie Moreno (R-OH) tweeting he intends to propose this legislation along with the endorsement of various other members of Congress.
But the fact that the average shoebox apartment in Manhattan costs upwards of $3,200 a month is not the fault of BlackRock or Blackstone, but rather the restrictive zoning rules and construction laws that choke off new housing. By dictating what can be built, and where, local governments have turned housing scarcity into policy, forcing renters to compete for too few homes and driving prices through the roof. While the federal government is limited in what it can do around state and local zoning policy, it can make meaningful changes to the tax code.
Tax policy presents a real opportunity for Republicans in Washington to address housing affordability ahead of the midterm elections — without expanding government spending through new subsidies, welfare programs, or burdensome regulations. To spur the market shifts needed for young Americans to buy homes, the White House and Capitol Hill should consider cutting or exempting capital gains taxes on home sales.
Millions of homes could appear on the market almost overnight if such policies were enacted. Letting Americans keep more of what they earn from selling their homes is a naturally conservative economic approach that rewards mobility and incentivizes a dynamic housing market. Homeowners already pay thousands of dollars each year in property taxes. Why should a significant portion of their accumulated home value be taxed again when they sell?
One of the most pernicious housing distortions in the United States is the growing number of retirees remaining in highly valued single-family homes long after their children have moved out. The estimated real estate value owned by the baby boomer generation sits around $19 trillion. Rather than downsizing to safer, more manageable living environments, many stay put — not because it is ideal, but because selling would trigger a 20% capital gains tax bill. Holding the home until death allows heirs to avoid the capital gains tax, partially or altogether, in what is known as stepped-up basis.
Creating a capital gains tax exemption for homeowners aged 65 and older could unlock as many as 9 million homes nationwide. This would free up larger houses for growing families while allowing retirees to downsize without being penalized by the tax code. Similar targeted exemptions — especially those designed to increase supply for younger Americans facing record affordability barriers — should be on the table as an extension of the Trump administration’s broader pro-growth tax philosophy embodied in the One Big Beautiful Bill Act.
EX-NYPD COMMISSIONER SUES ERIC ADAMS FOR DEFAMATION OVER MENTAL DECLINE CLAIMS
None of this absolves blue-state lawmakers of responsibility. Zoning reform and streamlined permitting remain essential. All eyes are on you, New York City Mayor Zohran Mamdani. But while Washington can’t rewrite local land-use laws, it can remove federal disincentives that freeze housing markets in place. Smart tax reform won’t solve the housing crisis on its own, but it can loosen the logjam, increase supply, and give younger Americans a fighting chance at homeownership.
If Republicans want to show they are serious about affordability without growing government, this is where they should start.
Sam Raus is the David Boaz resident writing fellow at Young Voices, a political analyst, and a public relations professional. Follow him on X: @SamRaus1.