A lower mortgage rate may help a family afford a house, but it will never solve America’s housing affordability crisis. That is because the price of borrowing is only part of what determines whether a family can afford a home. The other side of the equation, which Washington has neglected for too long, is whether we allow enough homes to be built in the first place.
Yet, much of the national housing debate continues to revolve around the Federal Reserve. Every movement in mortgage rates is treated as a verdict on whether affordability is improving or deteriorating, while far less attention is paid to the zoning restrictions, permitting delays, regulatory costs, and financing obstacles that determine whether new housing ever makes it out of the ground.
Congress has finally begun to address that imbalance. The 21st Century ROAD to Housing Act, which became law in July, takes meaningful steps toward removing barriers to construction and expanding the ways people can build and finance homes. Its passage was an important achievement, but it should be viewed as the beginning of housing reform, not the end.
There is no question that interest rates matter. Higher borrowing costs put pressure on household budgets, make development more expensive, and leave many homeowners reluctant to sell a house financed at a much lower rate. But the inverse is also true: When rates fall in a market that cannot produce enough housing, more purchasing power can quickly become more competition for the same limited number of homes. Buyers may qualify for larger mortgages only to watch part of that benefit disappear into higher prices.
That is why America needs a housing policy that works across interest-rate cycles. Whether mortgage rates are 5%, 6%, or 7%, families will continue to struggle with affordability if builders cannot respond to demand. The more durable solution is to make it faster, simpler, and less expensive to add homes where people want to live.
I spent years financing real estate before serving as President Donald Trump’s Federal Housing Administration commissioner, where I also helped shape what became the ROAD legislation. Seeing the housing market from both sides, first as someone responsible for putting capital to work and later as a federal official responsible for housing policy, made one problem impossible to ignore: Financing can make a viable project possible, but no amount of available capital can overcome a government that will not allow that project to be built.
Consider what happens to an otherwise viable apartment development caught in the approval process. The project may have financing, a sound design, prospective tenants, and willing investors, but none of that stops the clock while hearings drag on and approvals remain uncertain. The developer continues paying to hold the land, plans are revised, consultants and attorneys stay on the payroll, and construction and financing costs continue to move. Months or years later, the permit may finally arrive only after the economics that made the project viable have disappeared.
Those costs do not remain on a developer’s balance sheet. They ultimately show up in the form of higher rents, higher sale prices, and, too often, homes that are never built at all. This is the often-overlooked bureaucratic tax that is passed on to the consumer. Regulatory delay is a housing cost, even when it never appears on a closing statement.
The ROAD law begins attacking that problem from several directions. Each reform reflects the same principle: Government should establish sensible standards and then allow builders, lenders, and manufacturers to find more efficient ways to meet America’s housing needs.
The next test is implementation. The Department of Housing and Urban Development and other federal agencies should turn the ROAD law into clear rules and predictable procedures, and Congress should judge the results not by the number of regulations rewritten but by whether approvals take less time and more homes get built. If a developer is still waiting in the same line for the same amount of time, Washington has changed the paperwork without changing the problem.
The consequences of America’s housing shortage extend far beyond the closing table. Employers struggle to recruit workers, families face longer commutes, and young people are forced to delay homeownership and the opportunity to build wealth. What begins as a local permitting decision ultimately becomes a national barrier to economic growth.
Congress has taken an important first step with the ROAD to Housing Act, but lasting progress will require the administration, states, and local governments to continue removing the barriers that make housing unnecessarily difficult and expensive to build. Federal investments should encourage communities to welcome housing growth, while responsible financing policies help more people achieve homeownership.
Washington can reinforce that progress by using federal funding to reward communities that make room for housing growth. The FHA, Fannie Mae, and Freddie Mac should explore financing incentives in areas that ease zoning restrictions and accelerate permitting, while federal infrastructure dollars should favor communities delivering measurable increases in housing supply. These reforms must remain locally driven. Washington cannot dictate what works for every community, nor should it try. But if the federal government is investing taxpayer dollars in economic growth, it should reward communities willing to build the homes that growth demands.
A BIPARTISAN DEAL TO GET AMERICA BUILDING AGAIN
Families should not have to wait for the next Federal Reserve meeting to believe homeownership is within reach. Interest rates will rise and fall, but the need for more homes will remain.
The Fed can influence the cost of money. It cannot issue a building permit. Government can.
Frank Cassidy served as U.S. assistant secretary for housing and federal housing commissioner in the Trump administration at the Deptartment of Housing and Urban Development