Would Trump's proposals make housing more affordable?

President Donald Trump is rolling out plans to make housing more affordable. He has ordered Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds. He’s proposed a ban on institutional investors buying single-family homes. He’s floated the idea of 50-year mortgages, all while continuing his pressure campaign on the Federal Reserve to lower interest rates.

But economists are skeptical that these moves could actually make housing more affordable. For more, “Marketplace Morning Report” host David Brancaccio, spoke with Jenny Schuetz, head of Arnold Ventures’ infrastructure portfolio for housing. The following is an edited transcript of their conversation.

David Brancaccio: I wish the economy worked like plumbing, right? Turn the valve down. Lower the pressure here by dropping interest rates and — law of physics — the cost of home loans would drop; housing would get more affordable. That's not how it works. Remind us why?

Jenny Schuetz: Housing affordability is really the intersection of two things. It's people's income, how much they can afford to spend on housing, and then the cost of housing. The problem that homeowners have at the moment is that housing prices are very high, interest rates are high, and we also have rising costs of insurance and property taxes.

Brancaccio: So, even if the President ordered Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds — I mean, gauge the impact of that.

Schuetz: I mean, the mortgage markets are very large, and intervention by the GSEs can help at the edges, but that's not fundamentally going to change the price that most people are paying on their mortgage.

Brancaccio: There's also, I think, an unintended consequence. You get mortgage rates lower, and that means existing homeowners are more likely to refinance into cheaper home loans, which sometimes makes them less likely to want to sell.

Schuetz: We have a lot of homeowners who are at lower than 3% mortgage interest rate, which makes them very reluctant to sell their house and move someplace else. That limits the availability of homes that are open for first-time home buyers to get into the market.

Brancaccio: Alright. There's also the ban on private equity buying residential housing. I was just looking at a statistic, I think they own these days, like only 3% of it [single-family housing].

Schuetz: Yeah. The other way to think about this is that when private equity buys, particularly single-family homes in the suburbs. They're not taking housing off of the market altogether. They're just making housing available for renter households, who, on average, have lower incomes than home buyers.

Brancaccio: So, what can we do to make housing more affordable in America? Build more, supply and demand?

Schuetz: Yeah. The only long-term way to improve affordability is to build enough homes so that the price of houses goes up roughly equivalent to the rate of inflation overall.

Brancaccio: And then, of course, construction costs. That's not going down.

Schuetz: Right. I mean, we import a lot of our construction materials, so tariffs are going to make that more expensive. The construction workforce depends really heavily on immigrant labor. All of this makes it more expensive on the bricks and mortar side to build homes.