Mortgage Interest Is Deductible, but Not the Way Many Homeowners Think
Mortgage interest is one of the most frequently referenced tax benefits associated with homeownership, yet it is also one of the most misunderstood. Many homeowners assume that every dollar paid toward interest automatically reduces their tax bill in a straightforward way. In reality, the deduction operates under strict rules that determine who qualifies, how much debt is eligible, and how the benefit is applied within the broader tax system. Current IRS guidance under Publication 936 establishes that taxpayers may generally deduct interest on up to $750,000 of qualifying mortgage debt for loans originated after December 15, 2017, or $375,000 for married individuals filing separately. Older loans may qualify under higher grandfathered thresholds, depending on when the debt was incurred. However, the presence of a deduction does not eliminate the cost of borrowing. Instead, it reduces taxable income, which means the benefit depends on income level, filing status, and whether a taxpayer itemizes deductions. In addition, not all home-related borrowing qualifies automatically. The use of loan proceeds plays a critical role in determining whether interest is deductible at all. Understanding these mechanics is essential for homeowners who want to evaluate borrowing decisions based on financial reality rather than assumptions about tax relief. The Real Structure of the Mortgage Interest Deduction The mortgage interest deduction applies only to “qualified residence interest,” which is generally interest paid on loans secured by a primary or secondary residence. The key condition is that the debt must be secured by the home and used for specific purposes such as buying, building, or substantially improving the property. For post-2017 loans, the IRS limits deductible interest to the first $750,000 of total qualifying mortgage debt across all eligible homes. This limit is not per property but combined across a taxpayer’s residences. This distinction is often misunderstood. A homeowner with multiple properties cannot apply the limit separately to each one. Instead, the combined balance determines how much interest qualifies for deduction. Any interest tied to debt above the threshold is not deductible, even if it is paid in full. Additionally, taxpayers must itemize deductions to benefit. If the standard deduction is higher than total itemized deductions, including mortgage interest, the taxpayer receives no incremental benefit from mortgage interest payments. Why the Deduction Does Not Reduce Interest Costs A common misconception is that the mortgage interest deduction makes borrowing cheaper in a direct sense. In practice, it does not reduce the interest charged by the lender, nor does it eliminate the obligation to pay it. It only reduces taxable income, which may or may not translate into meaningful savings depending on the taxpayer’s marginal tax rate. For example, a homeowner paying $15,000 in mortgage interest does not receive a $15,000 tax reduction. Instead, that amount is subtracted from taxable income, and the actual benefit depends on the applicable tax bracket. This creates a partial offset rather than a dollar-for-dollar reimbursement. As a result, the financial structure of a mortgage remains primarily determined by interest rates, loan terms, and amortization schedules—not tax deductions. Home Equity Debt Requires Even More Careful Analysis One of the most frequently misunderstood areas of mortgage-related tax rules involves home equity borrowing. While many assume that any loan secured by a home automatically qualifies for interest deduction, IRS rules are more restrictive. Interest on home equity loans or lines of credit is only deductible if the borrowed funds are used to buy, build, or substantially improve the home that secures the loan. If the proceeds are used for unrelated purposes—such as paying off credit cards, covering education expenses, or funding personal consumption—the interest is generally not deductible. This creates a critical distinction between “secured debt” and “qualified use.” A loan may be secured by a home but still fail to qualify for interest deduction depending on how the funds are used. This rule is especially important in periods where homeowners rely on home equity as a source of liquidity. Borrowing against a home should be evaluated based on financial necessity and repayment capacity, not assumed tax advantages. The Debt Limit Is Not a Deduction Cap Another frequent misunderstanding involves the $750,000 figure. This number is often interpreted as a limit on how much interest can be deducted. In reality, it is a limit on the amount of mortgage debt that qualifies for interest deduction. This means the IRS does not cap the interest amount directly. Instead, it limits the portion of the loan balance that generates deductible interest. If a mortgage exceeds the threshold, only a proportional share of the interest may be deductible. This distinction becomes especially important for higher-value properties or households with multiple loans. In those cases, the deductible portion of interest may be significantly lower than total interest paid. Why Borrowing Decisions Should Come Before Tax Assumptions One of the most important implications of mortgage interest rules is that borrowing decisions should not be justified by expected tax benefits. The presence of a deduction does not make debt less expensive in real economic terms. A financially sound mortgage decision should be based on interest rate affordability, income stability, long-term repayment capacity, and overall household financial resilience. Tax treatment is a secondary consideration, not a primary driver. In some cases, borrowers may take on additional debt assuming tax advantages that do not meaningfully offset long-term costs. This can lead to overleveraging and reduced financial flexibility, particularly when interest rates are elevated or income conditions change. Mortgage interest remains one of the most visible tax benefits associated with homeownership, but its actual impact is often overstated. Under current IRS rules, the deduction is limited by loan size, filing status, and use of funds, and it only applies when taxpayers itemize deductions. More importantly, the deduction does not reduce the underlying cost of borrowing. It simply adjusts taxable income, which means the real economic weight of mortgage debt remains intact. Home equity borrowing introduces additional complexity, as deductibility depends on how funds are used rather than simply how loans are structured. Ultimately, the most important
Do Homeownership Tax Deductions Actually Save You Money? First Compare Them With the Standard Deduction
Homeownership is often marketed as a financial decision that automatically delivers tax advantages. Among the most commonly cited benefits is the ability to deduct mortgage interest, property taxes, and other housing-related expenses. While these provisions do exist within the tax code, their real-world value depends heavily on a factor that is frequently ignored in casual discussions: whether a taxpayer actually itemizes deductions or takes the standard deduction. For tax year 2026, the standard deduction is set at $32,200 for married couples filing jointly, $16,100 for single filers, and $24,150 for heads of household. This means that before any mortgage interest or property tax benefit is considered, a household must first exceed these baseline amounts through itemized deductions in order to receive any additional tax advantage. This distinction is critical because it reframes the entire conversation around homeownership and taxes. A deduction does not automatically reduce tax liability for every homeowner. Instead, it operates within a system where taxpayers must choose between two pathways—standard deduction or itemized deductions—and only one produces incremental benefit. Understanding this structure is essential for evaluating whether homeownership delivers meaningful tax savings or whether the perceived benefit is overstated in many financial decisions. The Standard Deduction Sets the Baseline for Tax Benefits The standard deduction functions as the default reduction in taxable income for most taxpayers. It is designed to simplify tax filing by allowing individuals to subtract a fixed amount without tracking or documenting specific expenses. In 2026, these amounts are substantial enough that a large portion of households benefit more from taking the standard deduction than from itemizing. For many filers, especially those without high mortgage interest or significant deductible expenses, the standard deduction effectively replaces itemized deductions entirely. This is the first major misconception in homeownership tax planning: many households assume they are receiving additional tax benefits from owning a home when, in reality, they are simply using the standard deduction that would apply regardless of homeownership status. The implication is straightforward. If a homeowner’s total itemizable expenses—including mortgage interest, property taxes, and charitable contributions—do not exceed the standard deduction threshold, then the mortgage interest deduction provides no additional financial benefit. Why Mortgage Interest Often Fails to Create Additional Tax Savings Mortgage interest is frequently presented as a key advantage of homeownership, but its actual impact depends on both loan structure and tax filing strategy. The IRS allows interest deductions on qualifying mortgage debt, but only if the taxpayer itemizes deductions instead of using the standard deduction. This creates a two-layer requirement: The taxpayer must have eligible mortgage interest. Total itemized deductions must exceed the standard deduction. If either condition is not met, the mortgage interest deduction does not produce incremental tax savings. This is particularly important in the current housing environment, where higher standard deduction levels mean fewer households benefit from itemizing at all. As a result, many homeowners who assume they are receiving a tax benefit from mortgage interest are actually receiving no additional advantage beyond what non-homeowners already receive through the standard deduction. The Role of Property Taxes in the Itemization Equation Property taxes are another component often included in discussions about homeownership tax benefits. However, like mortgage interest, property taxes only contribute to savings if the taxpayer itemizes deductions. Even when combined with mortgage interest, charitable contributions, and other eligible expenses, many households still do not surpass the standard deduction threshold. This is especially true for first-time buyers with smaller mortgages or those who have refinanced into lower-interest loans. In practice, this means that property taxes often represent a cash expense without producing a corresponding federal tax offset for a large share of homeowners. The tax code does not reimburse these payments directly; it only allows them to be deducted under specific conditions that many taxpayers do not meet. Why the Tax Benefit Is Often Misunderstood The misunderstanding around homeownership tax benefits typically comes from conflating three separate ideas: Paying mortgage interest Having deductible expenses Actually reducing taxable income beyond the standard deduction These are not interchangeable. A homeowner can pay significant interest and still receive no additional tax benefit if itemization is not advantageous. Additionally, tax brackets further complicate perception. A deduction reduces taxable income, not tax owed directly. The actual savings depend on the taxpayer’s marginal tax rate, meaning the benefit varies widely between households. This structure often leads to overstated expectations of tax savings when purchasing a home, especially when financial decisions are based on simplified assumptions rather than full tax calculations. Why Homeownership Still Makes Sense Without Tax Assumptions Even without assuming major tax benefits, homeownership can still be financially justified. The economic case for owning a home is typically built on factors such as long-term housing stability, forced equity accumulation through mortgage repayment, and potential appreciation over time. These drivers operate independently of tax deductions. In many cases, the decision to purchase a home is strengthened or weakened more by interest rates, purchase price, insurance costs, and maintenance obligations than by tax considerations. This distinction is important because it shifts homeownership analysis away from assumed tax advantages and toward measurable financial fundamentals. The idea that homeownership automatically delivers significant tax savings is often overstated. For tax year 2026, the standard deduction of $32,200 for married couples, $16,100 for single filers, and $24,150 for heads of household sets a high threshold that many taxpayers do not exceed through itemized deductions alone. As a result, mortgage interest and property tax deductions only provide additional value when a household’s total eligible expenses surpass that baseline. For many homeowners, this does not occur, meaning the expected tax benefit is either reduced or entirely absent. The key takeaway is that homeownership decisions should not rely on assumed tax advantages. The financial strength of buying a home should be evaluated through affordability, long-term stability, and overall wealth-building potential rather than expectations of automatic tax relief. Understanding how the standard deduction interacts with itemized deductions provides a more accurate foundation for making informed housing decisions. Thank you for taking the time
A 6.65% Mortgage Is Not Just a Rate: What It Does to Your Buying Power
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Is the Housing Market Finally Becoming a Buyer’s Market?
The housing market is no longer moving in a single direction nationwide. Instead, conditions are splitting across regions, price ranges, and inventory levels, creating very different experiences depending on where buyers and sellers are active. In some metropolitan areas, homes are still moving quickly with limited negotiation room. In others, listings are staying on the market longer, price reductions are increasing, and buyers are beginning to regain leverage in ways not seen in several years. One of the clearest indicators of this shift is the broad expansion of buyer-friendly conditions across major metros. Recent market tracking shows that 70% of the 100 largest metropolitan areas are now either leaning toward buyers or actively moving in that direction. That is a significant increase from 52% a year earlier and only 37% in 2019. Even more striking, nearly 19% of those markets are now classified as outright buyer’s markets, with a strong concentration in Southern regions where 18 of those 19 metros are located. These changes reflect more than short-term fluctuation. They point to a structural transition driven by inventory growth, affordability constraints, and slower absorption rates. Understanding how these forces interact provides a clearer view of where negotiation power is shifting and what that means for both sides of a transaction. Expanding Inventory and Slower Market Absorption Inventory has become one of the most important drivers of current housing conditions. After years of tight supply, many metropolitan areas are now experiencing a steady increase in active listings. This shift is changing how quickly homes sell and how aggressively buyers must compete. In several regions, homes are now spending 10 to 20 additional days on the market compared to previous high-demand cycles. Instead of receiving multiple offers within days, properties often remain active long enough for sellers to reassess pricing strategy. This extended exposure naturally increases the likelihood of price reductions, particularly when initial listing prices are set above current market expectations. At the same time, absorption rates have slowed. Fewer homes are being purchased within short timeframes, which allows inventory to accumulate. In practical terms, this means buyers have more comparable options available at any given time, reducing urgency and increasing negotiating power. Housing construction trends also contribute to this environment. While building activity remains present, it is uneven across regions due to financing costs, labor constraints, and developer caution. In some metros, reduced new construction has helped stabilize prices, but in others, resale inventory growth has outpaced demand, contributing to softer conditions. Affordability Pressures Reshaping Demand Mortgage conditions continue to play a central role in shaping buyer behavior. Compared to previous years of historically low borrowing costs, current mortgage rates remain significantly higher, which directly reduces purchasing power across most income levels. Even small fluctuations in interest rates can materially affect affordability. For many buyers, the difference translates into tens of thousands of dollars in reduced borrowing capacity, particularly in mid-range price segments. This has created a more cautious buyer pool, where decisions take longer and comparisons are more detailed. As demand has softened, negotiation activity has increased. Seller concessions such as closing cost assistance, inspection repairs, and price adjustments are becoming more common in several markets. These concessions signal a shift away from competitive bidding environments toward more balanced transaction structures. Price sensitivity has also increased. Homes that remain on the market beyond the typical listing window are more likely to undergo price adjustments. This is especially evident in metros where inventory growth has outpaced buyer demand recovery. Regional Market Divergence and Localized Conditions One of the most defining characteristics of the current housing environment is the lack of uniformity across regions. Instead of a national trend, there are multiple localized markets operating under different conditions at the same time. Nearly 18 of the 19 identified buyer’s markets are concentrated in the Southern region, where inventory expansion has been more pronounced. These areas are experiencing stronger buyer leverage due to higher supply levels relative to demand. Other regions continue to show tighter conditions, particularly where construction is limited or population growth remains strong. However, even in these areas, early signs of moderation are beginning to appear, including longer listing durations and more frequent price adjustments. Key indicators separating market conditions now include: Year-over-year inventory growth exceeding 10% in several metros Days on market extending beyond 45–60 days in softer regions Increasing frequency of price reductions within the first 30 days of listing Sale-to-list price ratios moving closer to equilibrium rather than above asking These indicators highlight that market power is no longer concentrated on one side of the transaction. Instead, it is shifting based on local supply-demand balance. The housing market is moving into a more balanced phase, with clear evidence of buyer-friendly conditions expanding across a growing number of metropolitan areas. With 70% of major markets now leaning toward buyers or shifting in that direction, the environment is increasingly defined by longer listing times, rising inventory, and reduced urgency among buyers. At the same time, conditions remain highly localized. Some regions continue to experience strong demand, while others are seeing meaningful softening. This divergence reinforces the importance of evaluating real estate at the local level rather than relying on national averages. The most important takeaway is that leverage in today’s housing market is fluid. It changes based on timing, pricing strategy, and regional supply conditions. Buyers and sellers who understand these shifts are better positioned to navigate decisions with clarity and confidence. Thank you for taking the time to read and reflect. I write to help people think clearly about money, business, real estate, and life — not from theory, but from decades of lived experience. If you are navigating a financial decision, building a business, considering homeownership, or simply trying to make better use of your time and resources, I invite you to engage further. Subscribe to The Power Is Now TV to connect with me live every weekday, Monday through Friday, from 10:00 AM to 11:00 AM PST, as we record television shows across the
Home Sales Are Stuck: Why Mortgage Rates Are Controlling the Market
Residential housing activity has entered a phase where transaction volume no longer moves in step with price direction. In many periods, rising prices and rising sales activity tend to align, or falling prices are paired with increased buyer participation. That pattern is no longer consistent. Instead, the current environment reflects a disconnect between pricing stability and slowed sales velocity, creating the impression that the market is stalled even while values remain relatively firm in several regions. Recent national housing data highlights this tension. Existing-home sales declined 1.7% in July, reaching a seasonally adjusted annual pace of 4.06 million units. Despite the monthly decline, sales activity still remained 0.7% higher than the same period a year earlier. At the same time, the national median existing-home price rose to $434,100, reflecting a 2% year-over-year increase. Inventory levels also expanded slightly, reaching approximately 4.6 months of supply, which is generally considered closer to balanced conditions compared to the extremely tight supply seen in previous cycles. These figures reveal an important reality: weak sales volume does not automatically translate into falling prices. Instead, the market is being shaped by a combination of elevated mortgage rates, constrained affordability, and homeowner reluctance to give up historically low financing. Understanding how these forces interact provides clarity on why homes are taking longer to sell and why expectations of a rapid price correction have not materialized in many areas. Mortgage Rates and the Affordability Barrier The most influential factor controlling current housing activity is the cost of borrowing. Mortgage rates remain significantly higher than the levels that fueled previous waves of strong demand. Even small rate changes can have a meaningful impact on monthly payments, particularly for mid-priced homes where affordability margins are already tight. This rate environment has reduced the number of qualified or willing buyers in the market. Instead of broad participation, demand is now more selective, with many potential buyers choosing to delay decisions or adjust price expectations downward. The result is slower absorption of available listings, even in markets where inventory has increased. At the same time, homeowners who locked in lower mortgage rates in previous years are less inclined to sell. Moving would often require taking on a substantially higher borrowing cost, even if the next home is similarly priced. This “rate lock effect” has reduced the number of resale listings entering the market, preventing supply from expanding at a pace that would typically drive sharper price declines. Why Sales Are Slowing Without a Price Collapse A common assumption in cooling markets is that lower sales activity automatically leads to falling home prices. Current conditions challenge that assumption. Even as transaction volume has softened, prices have remained relatively stable, with the national median reaching $434,100 and posting a 2% annual increase. One reason for this stability is constrained supply in key segments. While inventory has improved to roughly 4.6 months nationally, it is still uneven across regions and price tiers. Entry-level and mid-range homes remain relatively limited in many areas, which supports pricing even when demand weakens. Another factor is seller behavior. Many homeowners are not under pressure to sell quickly. Without distress-driven inventory entering the market, pricing tends to adjust more slowly. This creates a situation where homes may take longer to sell, but values do not experience sharp declines unless broader economic conditions shift significantly. The interaction between slower demand and controlled supply results in a market that feels stalled rather than collapsing. Homes remain listed longer, negotiations become more common, and pricing adjustments occur gradually instead of abruptly. Inventory Levels and Market Balance Signals The current inventory level of approximately 4.6 months of supply is an important benchmark. Traditionally, a 4–6 month range is considered a balanced market, where neither buyers nor sellers hold dominant control. However, balance in volume does not always translate into balance in pricing behavior. In some metropolitan areas, inventory is still tight enough to support stable pricing. In others, increased supply combined with weaker demand has created more negotiable conditions. This variation reinforces the importance of local analysis rather than relying solely on national averages. In markets where listings are growing faster than sales, buyers are beginning to see more negotiation flexibility. In contrast, areas with limited new listings continue to support stronger pricing even with slower turnover. This divergence is one of the defining features of the current housing cycle. Why a “Crash Expectation” May Not Align With Current Conditions The idea that slowing sales automatically lead to a significant price collapse does not fully align with current market dynamics. Unlike previous downturns driven by oversupply or distressed selling, today’s environment is shaped more by affordability constraints and financing conditions than by forced liquidation. Homeowners with low fixed mortgage rates are largely staying in place, reducing the volume of motivated sellers. At the same time, lending standards remain more structured compared to earlier high-risk lending periods. These factors limit the type of widespread forced inventory that typically drives sharp price declines. Instead, the market is adjusting through time rather than price acceleration or collapse. Homes stay listed longer, negotiations increase, and price changes occur gradually depending on local demand conditions. This creates a slower-moving correction pattern rather than a rapid downturn. The housing market is currently defined by a clear disconnect between transaction volume and price movement. Existing-home sales have softened to a 4.06 million annualized pace, yet median prices continue to hold above $434,000 with modest annual growth. Inventory has improved to a more balanced level, but mortgage rates and homeowner reluctance to sell remain powerful stabilizing forces. Rather than signaling a collapse, the current environment reflects a market adjusting to higher financing costs and uneven supply conditions. Sales are slowing not because demand has disappeared, but because affordability constraints and rate sensitivity are reshaping buyer participation. At the same time, limited distress and cautious seller behavior are preventing sharp downward pressure on prices. The most important takeaway is that market movement is no longer driven by a single national force. It
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Homeownership Part 12: 1.82 Million Missing Households: Gen Z, Millennials, and the Parents’ Basement Problem
There is a concept in housing research called a “missing household” — a household that, based on historical patterns of how Americans move through adulthood, should exist but doesn’t. It refers to an adult or group of adults who would, in a normally functioning housing market, have formed an independent household by now: renting an apartment, buying a starter home, setting up a life. Instead, they are living with parents, sharing space with multiple roommates out of financial necessity, or staying in arrangements they would have left years ago if the math had worked out differently. In 2025, the United States had 1.82 million of these missing households — the highest count in four years, and the clearest single statistic for understanding what the housing affordability crisis is doing to a generation. About 1.82 million Gen Z and Millennial households who, based on historical trends, should have formed independent households, were forced instead into what researchers are calling a state of suspended adulthood by a mix of low inventory and high borrowing costs. These are not people who have chosen to live at home or who prefer the arrangement. They are people the housing market has structurally excluded from the next chapter of their lives — and the consequences of that exclusion run far deeper than the inconvenience of a shared address. The numbers behind the disappearance The 2026 Housing Supply Gap Report from Realtor.com found that 1.82 million Millennial and Gen Z households were missing in 2025 — the highest count in four years. Among 18- to 44-year-olds, headship rates have declined over the past decade as high housing costs and limited supply have delayed independent living. The share of young adults living with parents was, on average, 2.7 percentage points higher by age than during the 2010 to 2014 period. That 2.7-point difference might look modest in isolation, but applied across the full population of young adults in America, it represents millions of people whose life trajectories have been altered — not by personal choices, but by a market that has priced them out of independence. About 1.5 million more adults under 35 live with their parents today than a decade ago — a 6.3% jump, more than double the rate of growth for the young adult population overall. This trend is not a post-pandemic blip. It has been building steadily for years, accelerating as home prices outpaced income growth, as mortgage rates rose and stayed elevated, and as the starter home — the traditional first rung on the property ladder — became an increasingly rare product in new construction pipelines squeezed by high material costs, labor shortages, and builder economics that favor more profitable, higher-priced units. Over 70% of Gen Z and Millennials said survival spending is their norm and that wealth is out of reach, according to a March 2026 survey by Beyond Finance. Only 32% said the American Dream is still attainable. A Wells Fargo study released in the same month found that 64% of parents with Gen Z children are still providing financial support, and 56% say doing so is straining their own finances — a sign the affordability crisis is rippling upward through families, not just hitting young adults alone. The burden of a generation priced out of independence is not contained to that generation. It is being distributed across households, across ages, and across family balance sheets in ways that compound the financial stress at every level. What is actually keeping them out The barriers facing young buyers are often described as a single problem — affordability — but they are in practice a stack of distinct and compounding obstacles, each of which would be significant on its own and which together create a nearly insurmountable barrier for buyers without meaningful financial support from family. The income threshold is where the math first fails for most young buyers. The minimum income needed to purchase a median-priced starter home in 2025 was approximately $86,000 — a figure that is far higher than what many workers in their twenties and early thirties actually earn. High rents make it hard to save for a down payment, and starter homes are often priced well above what early-career incomes can support. The entry-level market is very tight, and younger buyers are often competing with repeat buyers who already have equity — a structural disadvantage that cash offers and existing equity only widen. Student debt is the second layer. Gen Z and Millennials collectively carry a disproportionate share of the nation’s student loan burden — debt that affects debt-to-income ratios, constrains mortgage qualification, and reduces the disposable income available for saving. Student loan payments severely constrain mortgage qualification and down payment savings. Even with income-driven repayment plans, debt service limits housing budgets for millions of young buyers entering the market. The borrower who earns enough to qualify for a mortgage on paper may still fail the debt-to-income test because of a student loan balance accumulated before they ever earned a meaningful paycheck. Then there is rent. In most metropolitan areas, rental costs have risen so sharply — from April 2020, the typical U.S. apartment rent climbed by 28.7%, while median household income grew by only approximately 22.5% over the same period — that the act of simply paying rent each month has become an obstacle to the saving required to exit renting. The family paying $2,000 a month in rent is not building equity. They are subsidizing someone else’s mortgage while watching their own down payment timeline extend by years. The longer rent consumes a household’s income, the longer the path to ownership becomes — and for millions of young households, the path has become so long that many have stopped believing it leads anywhere reachable. The financial nihilism problem One of the more underreported consequences of sustained housing unaffordability among young adults is what researchers and financial analysts have begun calling financial nihilism — the behavioral shift that occurs when homeownership, and the broader promise of
Homeownership Part 11: What Executive Order 14394 Actually Does and Doesn’t Do for Buyers
When a president signs an executive order on housing, it generates a predictable news cycle. The announcement lands. Headlines describe sweeping action. Advocates on both sides issue statements. And then, fairly quickly, the coverage moves on leaving most ordinary Americans, including the aspiring homeowners who actually have a stake in what the order does, with a vague sense that something happened but little clarity on what it was or whether it matters to them. That is the situation with Executive Order 14394, signed by President Trump on March 13, 2026, and formally titled “Removing Regulatory Barriers to Affordable Home Construction.” The order has been celebrated by the homebuilding industry as a meaningful step toward supply side relief. It has been criticized by housing policy advocates as a document that targets the wrong problems, leaves the biggest ones untouched, and introduces new contradictions through policies in other parts of the administration. And it has been largely misunderstood by the general public, who deserve a clear explanation of what the order actually does, what it doesn’t do, and what its likely impact on the housing market and on aspiring buyers will realistically be. This is that explanation. What the order says it’s trying to do The order’s stated purpose is direct: the American dream of homeownership depends on a dynamic housing market in which a varied inventory of new homes is built and renovated each year. Layers of unnecessary regulatory barriers, slow permitting processes, and onerous mandates at all levels of government have delayed construction, restricted development, and driven up the costs of new housing. It is the policy of this administration to reduce those regulatory barriers and to steward taxpayer dollars in a manner that promotes housing affordability. That is a reasonable diagnosis, as far as it goes. Regulatory costs do add meaningfully to the price of new construction. Permitting delays do slow housing delivery. Inconsistent building codes do add friction and cost to development projects. These are real problems with real consequences for supply. The question the one that matters for buyers trying to understand whether this order changes anything for them is whether the specific mechanisms the order uses to address those problems are the right ones, whether they are powerful enough to move the needle, and whether other policies from the same administration are working against what the order is trying to accomplish. What the order actually directs The order directs federal agencies to reduce regulatory burdens on residential development, streamline environmental permitting, and encourage state and local governments to adopt housing friendly policies. It includes several key provisions that developers and homebuilders should be aware of. The first set of provisions targets federal environmental permitting. The order directs the Secretary of the Army and the Environmental Protection Agency to revise permitting standards including stormwater permits, wetlands permits under Section 404 of the Clean Water Act, and related construction site requirements with the goal of reducing housing construction costs and streamlining regulatory decision making. These are legitimate friction points in the development process, particularly for projects near water bodies or in areas with complex environmental conditions. Streamlining them could meaningfully reduce timelines for some projects. Critics, however, note that these are also protections that exist for reasons managing runoff, protecting wetlands, maintaining water quality and that weakening them carries environmental risks that do not appear in the order’s cost benefit calculus. The second major provision targets energy efficiency mandates. The order directs HUD and USDA to take appropriate action to reform and where appropriate eliminate unduly burdensome or costly energy efficiency, water use, or alternative energy requirements for housing, including manufactured housing. Reducing energy code requirements could lower construction costs in the short term. It would also, depending on how aggressively implemented, reduce the long term energy efficiency of new homes meaning buyers could pay less at closing and more in utility bills for the life of the home. That tradeoff is not mentioned in the order. The third provision and arguably the most practically significant for the housing market involves HUD’s role in pressuring state and local governments toward housing friendly land use policies. By May 12, 2026, the HUD Secretary must issue best practices for state and local governments addressing, among other things, streamlined permitting, by right development for single family homes, limits on green energy mandates, acceptance of manufactured and modular housing, and removal of urban growth boundaries and similar restrictions. These best practices may become conditions for federal housing grants. This last element tying federal housing grant dollars to local land use reform is the order’s most powerful lever. The federal government cannot directly override local zoning laws, which remain under local and state jurisdiction. But it can use the substantial funding it distributes through housing programs as a carrot and a stick: communities that adopt housing friendly policies gain access to federal dollars, and those that don’t face the prospect of losing them. This approach has precedent, and when implemented with meaningful enforcement, it can change local behavior in ways that no amount of federal guidance alone can accomplish. The order also directs the Treasury Department and HUD to evaluate ways to better align Opportunity Zone tax incentives with the goal of expanding housing supply using an existing tax incentive framework to channel more private capital into residential development in underinvested communities. The companion order on mortgage access EO 14394 was signed alongside a second housing related order EO 14393, titled “Promoting Access to Mortgage Credit.” EO 14393 establishes a federal policy to improve the availability and affordability of mortgage credit by reducing regulatory burdens, particularly for community and smaller banks, and directs federal agencies to consider reforms to mortgage lending, supervision, and housing finance systems. The two orders together represent a two track approach: one targeting the supply side of the housing equation, the other targeting the credit access side. The mortgage credit order is notable for its focus on community banks institutions with under 100 billion dollars in assets which
Homeownership Part 10: The 4 Million Home Deficit: How America Built a Housing Crisis
Every conversation about housing affordability eventually arrives at a number that is large enough to feel abstract but concrete enough to explain nearly everything else: 4 million. That is approximately how many homes the United States is short of meeting the housing needs of its population right now. Not 4 million luxury units. Not 4 million vacation properties. Four million homes that should exist, starter homes, rental units, townhouses, apartments, and simply don’t, because for more than a decade, the country has built far less housing than the number of households being formed. That shortfall is not a statistic sitting in a single report. It is the denominator of the entire affordability crisis. It is why home prices have surged 50% since 2020. It is why rental costs have climbed fast enough to make saving for a down payment nearly impossible for middle income earners. It is why first time buyers are competing in the same market against investors, move up buyers, and cash purchasers with existing equity to deploy, and consistently losing. Understanding the supply gap does not require a degree in economics. It requires understanding one simple principle: when there are significantly more buyers than available homes, prices go up, and they stay up until supply catches up. Supply has not caught up. It is falling further behind. A decade of underbuilding coming due The housing shortage in the United States continued to widen in 2025, with the national supply gap reaching an estimated 4.03 million homes according to Realtor.com’s 2026 Housing Supply Gap Report. In 2025, approximately 1.41 million new households were formed across the country while only 1.36 million housing starts were recorded, an annual shortfall of about 50,000 homes that, while modest on its own, compounds a cumulative deficit built over more than a decade of underbuilding. The South carries the largest regional deficit at approximately 1.62 million homes, followed by the Northeast at 952,000, the Midwest at 865,000, and the West at 660,000. Measured against total construction since 2012, the Northeast faces the most acute gap even after modest improvement in recent starts. These are not regions where housing was expected to be unaffordable. Several of these markets, particularly in the Midwest and South, were long considered the country’s affordable alternatives to expensive coastal cities. The shortage has found them too, and the people who moved there hoping to escape unaffordable markets have discovered that the problem followed them. Even when annual construction and household formation are roughly balanced, the market is still digging out from more than a decade of underbuilding, as Realtor.com’s chief economist Danielle Hale noted. The fact that it would take roughly seven years to eliminate the deficit even under an optimistic building scenario highlights just how significant and persistent this shortage has become. Seven years is not a near term fix. It is a generational timeline for a problem that is affecting buyers right now, today, who cannot wait seven years for the market to rebalance. Why builders aren’t building faster The instinctive response to a shortage is to build more, and builders have tried. Housing completions in 2025 remained historically elevated. Single family and multifamily starts have been running at levels not seen since before the Great Recession in some years. The problem is not that the industry has been idle. The problem is that the structural obstacles to construction are so numerous, so entrenched, and so resistant to quick resolution that even elevated building rates have not been enough to close a gap this large. Zoning is where the analysis typically begins, and for good reason. Single family zoning, which restricts large swaths of residential land in most American cities and suburbs to detached single family homes only, remains one of the most significant regulatory barriers to increasing housing density. Local zoning boards influenced by NIMBYism have historically blocked or delayed higher density development, from duplexes and accessory dwelling units to apartment buildings near transit corridors. The result is a landscape in which land is technically available for housing but legally restricted from being used for the types of housing that the market actually needs most, smaller, denser, and more affordable units. At the local level, there remain too many review cycles in permitting, and limited consistency from town to town with local inspectors. One developer reported he couldn’t get a certificate of occupancy for two months because the town requested he change the property’s address. In Colorado alone, there are over 300 different building codes. This fragmentation of regulatory authority is not a minor inconvenience. It adds time, cost, and uncertainty to every development project, and at the margins, it is enough to tip projects that might have proceeded into abandonment. Labor is another constraint that has worsened. The construction industry has faced workforce challenges since the Great Recession, when approximately one million workers left the sector and did not return. Immigrants make up about 30% of the construction labor force, and the ongoing immigration crackdown is expected to reduce that supply further going forward. High interest rates have compounded the problem, with loan rates for smaller builders rising sharply. Regulatory costs now add an estimated $94,000 per home, about one quarter of the total price, underscoring the need for deregulation to improve affordability. The cost of building materials has risen 41.6% since the COVID 19 pandemic, far outpacing overall inflation. Recent tariff actions alone are estimated to add an average of $10,900 to the cost of constructing a new single family home. As builders shift toward constructing higher priced homes to cover their expenses, the entry level housing that first time homebuyers rely on is disappearing from new construction pipelines. This last point is particularly important. Even when builders are building, the economics of construction push them toward larger, more expensive homes where margins are easier to achieve. The starter home, the traditional entry point into homeownership for first time buyers, has become increasingly rare in new construction, precisely because it is the hardest
Homeownership Part 9: You Can Buy a Home With a Section 8 Voucher. Most People Have No Idea.
There are roughly 2.3 million households in the United States receiving Housing Choice Vouchers, the federal rental assistance program most people know as Section 8. For the vast majority of those families, the voucher works the same way it always has: a local public housing authority determines how much rental assistance the family qualifies for, the subsidy goes to a landlord each month, and the family pays the difference. Month after month, year after year, the voucher pays rent. It builds nothing. It accumulates nothing. When the lease ends, the family moves, and the cycle starts again. What most of those 2.3 million households do not know, and what most housing professionals, policymakers, and advocates rarely discuss with adequate urgency, is that the voucher can do something fundamentally different. It can pay a mortgage instead of rent. It can help a family buy a home, build equity, and begin the process of wealth accumulation that homeownership makes possible. A program exists specifically to enable this transition, it has been authorized by federal law since 2000, and as of early 2024 it had facilitated just over 10,000 closings nationwide in more than two decades of existence. That number, 10,000 purchases from a pool of 2.3 million eligible voucher holders, captures in a single statistic the size of the gap between what this program is and what it could be. What the program actually is The Housing Choice Voucher Homeownership Program, administered by the U.S. Department of Housing and Urban Development, allows eligible HCV recipients to redirect their rental subsidy toward the costs of homeownership rather than rent. The program allows families assisted under the HCV program to use their voucher to buy a home and receive monthly assistance in meeting homeownership expenses. It is limited to first time homeowners who have received housing counseling and meet minimum income requirements. The mechanics are straightforward. Participants typically pay 30% of their income toward mortgage costs, while the voucher covers the remainder, the same structure used for rental assistance but applied to homeownership expenses instead. Time limits apply: assistance lasts up to 15 years for most participants, with no time limit for elderly or disabled families. The subsidy covers a broad range of homeownership costs, including mortgage principal and interest, property taxes, insurance, and in some cases utilities, essentially the same basket of costs the voucher would have covered in a rental situation, redirected toward building ownership rather than paying a landlord. The financial logic of this redirection is powerful and direct. Instead of rent payments that disappear permanently, monthly housing payments build equity, creating an asset that grows over time. As one Sacramento participant said: “For the first time, I feel like I’m investing in my future, not just surviving month to month.” That shift, from subsidizing a landlord’s asset to building the voucher holder’s own, is the core of what makes this program so significant and its underuse so consequential. Why almost nobody uses it The HCV Homeownership Program’s 10,000 closing track record over 25 years is not evidence that the program does not work. It is evidence that the program is barely being used. Several structural barriers explain why the gap between the program’s potential and its actual reach has remained so wide for so long. The first and most fundamental barrier is that participation is optional for local public housing agencies. All public housing authorities that administer the HCV program have the option to establish an HCV homeownership program in their community. The operative word is option. PHAs are not required to offer the homeownership program, and a significant number simply do not, whether due to administrative capacity constraints, lack of familiarity with the program requirements, staff bandwidth, or institutional inertia. The limited participation of PHAs presents a significant hurdle, not every housing authority offers the program, creating geographical barriers for many families. A voucher holder whose local PHA has not established a homeownership program has no path to use this option regardless of how well qualified they might otherwise be. The second barrier is awareness, or the near complete absence of it. The Section 8 homeownership program remains one of housing policy’s best kept secrets. This is not hyperbole. Most voucher holders have never been told the option exists. Many housing counselors and social workers who work with voucher holding families are unfamiliar with the program’s mechanics. Lenders who have never processed a homeownership voucher transaction may not know how to underwrite one. The information ecosystem around this program is so thin that even motivated, financially prepared voucher holders frequently hit dead ends simply trying to find someone who can explain how to proceed. The eligibility requirements add another layer of complexity. Beyond holding an active voucher, applicants must meet income thresholds, demonstrate steady employment history, typically 30 hours per week for at least one year, qualify as a first time homebuyer, and complete a HUD approved housing counseling program. The existing HUD PHA homeownership program has had very limited success, with most successful homebuyers having higher incomes. This reflects a real tension at the program’s core: the families most in need of a pathway out of long term rental dependency are often the ones who face the most difficulty meeting the income and employment requirements designed to ensure sustainable homeownership. The program is most accessible to voucher holders who have already made significant financial progress, not those at the earliest stages of that journey. What the program looks like in practice At the PHAs that have chosen to make the homeownership program available and have invested in making it work, the results are genuinely transformative. The Grand Rapids Housing Commission in Michigan, for example, has structured its program to provide not just administrative processing but active support, working with local lenders and realtors to guide participants through the full purchase process, from orientation meetings to closing. Once a family closes on a home, the housing commission sends a predetermined housing assistance payment directly to the family each