Government almost always has the answers. It’s just too bad that its answers are often wrong. The same can be said about President Donald Trump’s solution to improve the housing market. Americans have been facing high housing costs, high mortgage rates and low inventory for years now. So Trump has decided to take action.
He shared a post to Truth Social comparing himself to former President Franklin Roosevelt who introduced the 30-year mortgage, which is now the standard. Next to FDR was an image of Trump suggesting that he will soon endorse a 50-year mortgage. While some will surely applaud this proposal, it misses much of the point and sidesteps the core problem—like government is wont to do.
This is the equivalent of emergency responders arriving at the scene of an ongoing house fire, and instead of dousing it with water, they begin planting a flower bed next to the conflagration. Sure, it improves the overall aesthetic, but it doesn’t solve the problem whatsoever. Instead, the fire continues unabated.
“I don’t like 50-year mortgages as the solution to the housing affordability crisis,” Congresswoman Marjorie Taylor Greene, R-Ga., responded. “It will ultimately reward the banks, mortgage lenders and homebuilders while people pay far more in interest over time and die before they ever pay off their home. In debt forever, in debt for life!”
In many respects, she’s right. Just look at the numbers: The rate for a 30-year fixed mortgage today is around 6%. If you purchased a $400,000 home and put 5% down, then your monthly payment—excluding taxes, insurance and HOA fees—would be around $2,278, but over the course of the loan, you’d pay the bank over $820,000.
Meanwhile, a 50-year mortgage based on the same terms would only make your monthly payment $278 cheaper, but by the end of the loan period, you’d pay the bank much more: a shocking $1.2 million. That’s a difficult reality to accept as is the fact that people who would ink a 50-year mortgage agreement might never be able to retire. The average age of first-time home buyers is 40—meaning they could be 90 before they finally paid off their house.
If banks want to offer a 50-year mortgage product, then go for it. That’s up to them and the consumers who might take advantage of it, but policymakers should not pretend that reducing monthly mortgages by a couple hundred dollars through gimmicky loans—while tacking on another several hundred thousand dollars to the total cost of a loan—will fix the housing crisis.
The underlying causes of our frozen housing market are affordability and availability, and the government has its dirty fingerprints all over them. Developers have not built enough homes to keep up with rising demand, thanks in part to burdensome red tape; mortgage rates remain incredibly high compared to pre-pandemic levels, as they keep pace with the Federal Reserve rate; and those who secured low mortgage rates in prior years are loath to sell their homes and lose out on their sweetheart rates.
Due to this confluence of factors, the housing shortage across the country has reached stunning levels. Zillow estimates that there is a deficit of 4.7 million homes. Addressing this goes far beyond offering a newer, lengthier mortgage product. After all, what good does a 50-year mortgage do you if there aren’t enough homes available?
As I have written before, the path to reversing the crisis rests with the government getting out of the way. Federal, state and local governments need to reduce construction-inhibiting regulations so that developers can more easily meet demand. Moreover, if the Federal Reserve continues to reduce its rates, then mortgages will become cheaper. This will benefit homebuyers and may induce current homeowners to sell—thereby thawing the housing market.
On paper, it seems like a relatively easy solution. I understand that there are many complexities and variables affecting housing, but that doesn’t change the reality that the crisis boils down to two issues: housing affordability and availability. Rather than truly tackling these root causes, Trump wants to promote a 50-year mortgage that does little other than saddling people with seemingly insurmountable debt they might not ever be able to repay.
He does so while comparing himself to a former president. “Tying yourself to FDR, whose economic policies prolonged the Great Depression, is not a good move,” Georgia’s own Erick Erickson tweeted, but perhaps this is appropriate. As Erickson alluded, FDR had many answers and not all of them good.