President Donald Trump’s recent social media post calling for mortgage giants Fannie Mae and Freddie Mac to boost homebuilding is sowing confusion in an industry already grappling with a stalled market and higher construction costs.
Trump asked the two government-controlled firms, which together back more than half the residential mortgage market, to ‘get big homebuilders going’ in a Truth Social post on Sunday, but did not elaborate on what he had in mind. Federal Housing Finance Agency Director Bill Pulte, Fannie and Freddie’s regulator and conservator, shared the post on X and vowed that he was ‘on it.’
The entreaty shows how keen the White House is to demonstrate it is doing something about the housing affordability crunch and marked a rare shot across the bow at big homebuilders-an industry the former real estate magnate president calls his ‘friends.’
Yet the mechanics of how Fannie and Freddie would goose homebuilding are murky.
‘It’s a little bit of a mystery,’ said Bose George, an analyst at Keefe, Bruyette and Woods, adding, ‘It’s not clear what they can do incrementally on affordability that’s not already being provided’ by the Federal Housing Administration, which insures mortgages for low- to moderate-income borrowers.
‘It seems like if the goal is to get the builders to be more active, the FHA has products there from an affordability standpoint that could be used,’ George added. Builders can obtain an FHA-insured construction loan, for example.
A White House spokesperson declined to elaborate on what the administration is planning.
‘President Trump received a resounding mandate to address America’s housing affordability crisis, and the administration is committed to delivering with deregulation and by taming Joe Biden’s inflation crisis to pave the way for interest rate cuts,’ White House spokesperson Kush Desai said.
Asked for more detail on the agency’s plans, an FHFA spokesperson said, ‘Fannie and Freddie provide enormous liquidity to the big builders. Big builders need to get building again.’
‘Empty lots’
Trump in his social media post accused the nation’s ‘big homebuilders’ of ‘sitting on 2 million empty lots’ and inflating the price of housing.
Most of the lots owned or optioned by the largest homebuilders are on raw land-sometimes lacking sewers or water access, for instance-and not buildable today, according to industry experts. Many of them still need to go through various permitting and approval processes before they’re considered shovel-ready.
‘We don’t know the status of those lots, No. 1, but No. 2, what I would ask the president is-the large builders, they’re going to do their own thing-but what are the policies we can put in place to help the other thousands of builders out there who contribute 50 percent of the housing in the country and don’t have access to Wall Street capital?’ said Jim Tobin, president and chief executive of the National Association of Home Builders, which represents homebuilders of all sizes.
NAHB has long advocated for the government-sponsored enterprises to backstop construction loans, which would boost liquidity in the market. Builders reported tighter credit conditions for the 14th consecutive quarter in the most recent NAHB survey on financing.
While it’s not clear whether the administration’s push will include that step, doing so could have ripple effects that could complicate another initiative: The push to take Fannie and Freddie public.
‘The more policymakers come to see the GSEs as an important toolbox to help them address policy challenges, the harder it will be for them to simply hand that toolbox back to private shareholders,’ said Jim Parrott, nonresident fellow at the Urban Institute and former housing adviser to President Barack Obama.
What’s more, analysts say that backing construction loans would complicate how investors value the companies.
‘On the construction loans side, it would increase credit risk because it’s a higher-risk loan,’ George said.
After Trump’s social media missive, Pulte said Monday on X that ‘we are meeting individually with each of the home builders.’ He announced the next day that Tri Pointe Homes vice president Brandon Hamara, who Pulte appointed to Freddie’s board in March, would be ‘joining Fannie Mae full-time, and as a board member, to further effectuate homebuilding in our great country.’
Higher costs
AT the same time, builders are grappling with fresh uncertainties stemming from Trump’s policies.
While the president pushes for cheaper housing and more building, his flagship international economic policy-tariffs-has raised the cost of the raw materials needed to build those new homes.
The administration is imposing new or higher tariffs on lumber, steel, kitchen cabinets and gypsum, the main ingredient in drywall. Together, the tariffs will add some $30 billion to the costs of investment in residential structures, according to a new analysis by the Brookings Institution.
The White House’s immigration policies, meanwhile, threaten to exacerbate an existing labor shortage in the immigrant-heavy construction sector, further increasing costs.
Those moves come amid a historic supply shortage caused by years of underbuilding in the wake of the subprime crisis. The crunch has pushed up home prices, driving higher inflation and helping to sour voters on the state of the US economy.
The combination of high home prices and high mortgage rates has kept both buyers and sellers on the sidelines, stalling sales and leading builders to take a more cautious approach.
‘There’s no question that encouraging more homebuilding is a foundation of any solution,’ said David Dworkin, president and chief executive of the National Housing Conference. ‘How we do it is the hard part.’