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Trump Understands Housing

Friday, November 11, 2016 13:55
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Trump won, and free market types have valid concerns about a Trump presidency. It certainly won’t be a conventionally free-market administration, and it won’t likely be an ideologically coherent one in the conventional Republican sense. However, one area that free-marketers can find some solace is development regulation. In fact, as a developer and businessman himself, there’s reason to think that Trump intuitively understands this policy area better than any other and self-interest makes him an ally.

All the way back in August, Trump spoke to the National Association of Homebuilders and decried the “horrible regulations” that are stacked against developers to the resounding cheers of the crowd. He described development regulations as increasing by almost thirty percent over the past five years, and complained about the “frivolous lawsuits” brought against homebuilders. Notably, he even framed the discussion in terms of low-cost housing, rather than housing affordability.

Decades of experience taught Trump that more regulation means higher cost housing. Taken together, Trump emphasized that development regulations increase the cost of housing by a whopping 25%. Although that figure may sound substantial, it may actually underestimate the impact of regulation on housing prices in some areas of the country. In Manhattan, for instance, it’s estimated that up to half of the price paid for housing is attributable to the hidden costs of restrictive zoning regulations alone.

As a businessman who grew his business under a heavy New York City regulatory burden, Trump also knows that the expansive regulatory state is particularly punishing for burgeoning companies that don’t have entire departments dedicated to divining the morass of construction, design, mortgage finance, and tax requirements that they are subject to at every step of the development process.

Trump is likewise averse to central planning schemes like those advanced under Julian Castro’s Housing and Urban Development Department. Back in June, Trump said that if he was elected, he would rescind HUD’s Affirmatively Furthering Fair Housing rule. Although the rule’s title sounds inherently appealing, the rule itself, as explained elsewhere, is not.

When affordable housing advocates complain that Trump has no plans for affordable housing, they are mistaken. A reduction in development regulations is a plan for low cost housing. While this is good news, don’t expect a Trump administration to take on eminent domain or eliminate the mortgage interest deduction anytime soon. Also, watch for the aggressive use of agency power to implement his agenda.

That said, developers, private citizens, and market urbanists have reason to be cautiously optimistic.


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