Recent/upcoming developments… The White House has recognized that President Trump’s approval rating on the economy has notably deteriorated and that they need to take actions to address voter concern about affordability in order for Republicans to avoid significant losses in the midterm elections. Housing is among the areas the White House has targeted, with NEC Director Hassett signaling yesterday that Trump is holding meetings with staff to prepare for a January announcement.
Our outlook… The following are among the policy actions that have been proposed in recent months by industry stakeholders, Congressional Republicans, and administration officials, along with a general assessment of the likelihood they’ll be implemented in 2026. Each of these policies has a relatively targeted impact, but the White House will presumably tie some set of them together and announce them via an Executive Order (EO) or in some other collective manner (e.g., declaring a “housing emergency”) in order to magnify the political impact.
* Likely actions (60+% probability)
– Streamline EPA, other regulations in order to reduce the cost of building a home.
– Establish consistent local zoning standards and tie federal grant eligibility to their adoption.
– Make federal land available for housing development.
– Enact bipartisan housing legislation (ROAD to Housing/Housing for 21st Century Act) that reforms HUD programs, expands federal support for manufactured housing.
– GSE share issuance. The tie between this action and housing affordability is tenuous, but it appears to remain a top priority for the administration. Secretary Bessent has repeatedly said that the administration will only move forward on a GSE transaction if it compresses mortgage spreads or at least does not increase them.
* Possible actions (40-60% probability)
– Increase GSE financing for construction-related loans. Industry has been calling for modest additional GSE support (see this link and p4 at this link).
– LLPA/g-fee reduction. FHFA Director Pulte has initiated a review of GSE pricing and some in industry have called for reductions, but doing so would reduce GSE income, which is contrary to the administration’s desire to conduct a GSE share issuance.
– Material increase in GSE MBS purchases. This already appears to already be accelerating, though additional major steps could include lifting the GSE portfolio cap and/or modifying the GSE capital rule to enable more aggressive purchases.
– Pilot program on mortgage portability/assumability for GSE-backed loans. Pulte has expressed interest in this but there has been no embrace of the concept from major industry stakeholders (e.g., MBA, SFA, others), and this could disrupt the MBS market, all of which suggests a broad-based program is unlikely, but a more targeted pilot program is possible.
* Unlikely actions (<40% probability)
– Housing/mortgage tax relief such as increase capital gains exemption for home sales, provide a new mortgage tax credit. This would require Congressional Republicans to pursue a partisan tax bill under the “reconciliation” process, which is unlikely (though could increase in likelihood if Trump pushes hard for it, which he appears reluctant to do).
– Credit reporting reforms. This would be framed as a way to reduce closing costs for borrowers. Pulte has suggested moving from a tri-merge to bi-merge model for credit reports, which faces significant industry and Congressional resistance, while MBA has been calling for a single credit report for borrowers above a certain score, which could be more viable.
Watch for these developments… In the coming weeks, we are watching for additional comments from leading industry stakeholders (MBA, NAR, NAHB, SFA, SIFMA, other) and Congressional about policies they would like to see implemented or those about which they have concerns. Either message this close to an announcement would suggest the policies in question are under consideration by the administration.