Across Southern California, and much of the country for that matter, housing is unaffordable for many, whether someone is trying to buy a house or rent an apartment.
Voters’ concerns about the country’s cost of living, including housing, appear to have played a major role in Donald Trump’s return to the White House.
Can he fix it now?
During the campaign, the former president promised to lower mortgage rates, cut costly red tape, open federal lands to development and deport millions of people in the country illegally — which the campaign said would lower costs by opening up housing to citizens to set.
Interviews with economists and other real estate experts paint a complicated picture of how this could all play out, with some warning that parts of Trump’s agenda could make a bad situation worse, while others could help.
“It depends on what Trump does,” said Daryl Fairweather, chief economist at real estate brokerage Redfin.
A big question is the mortgage interest rate.
Presidents do not set borrowing costs, although the policies their governments enact can influence the price of a loan.
When it comes to mortgages, interest rates are heavily influenced by inflation expectations. A growing federal deficit could also put upward pressure on interest rates.
Supply chain problems arising from the pandemic, combined with pandemic economic stimulus measures under both Presidents Trump and Biden, are blamed for the rise in inflation in recent years, although the pace of cost increases has since fallen to more normal levels.
It is unclear whether this slowing trend will continue.
A Wall Street Journal election survey found that most economists believed inflation and interest rates would be higher under Trump’s proposed policies than did Vice President Kamala Harris.
In particular, economists say the former and soon-to-be-again president’s plans for sweeping rates and tax cuts could reignite inflation and significantly increase the deficit, putting upward pressure on the cost of home loans.
“There is definitely a risk,” Fairweather said.
Ed Pinto, co-director of the Housing Center at the right-wing American Enterprise Institute, said such fears may not materialize.
He said he views tariffs primarily as a negotiating tactic and noted that Trump has made other proposals that could lower mortgage rates by reducing inflation and deficits. These include lowering energy costs through increased fossil fuel production and appointing the world’s richest man, Elon Musk, to cut government spending.
Another big component of housing construction is supply – the lack of which economists often cite as the main culprit driving up rents and home prices.
Trump has called for a rollback of regulations that make it harder to build, but many of those rules are the domain of local authorities, leaving the federal government limited ability to change course, Fairweather said.
The former president has also called for new homes to be built on federal lands, which Pinto said could improve affordability in Western states like Utah and Nevada, where the federal government owns large swathes of land and people fleeing California have driven up prices.
Even within the Golden State, there is likely a lot of federal land to build on, according to Pinto.
“This would be huge for the western third of the country,” Pinto said.
Others are more skeptical. In a report last week from banking giant UBS, analysts wrote that “the federal land initiative could be challenged by a lack of existing infrastructure in these generally rural areas.”
Immigration is another wild card. Trump has promised to carry out the largest deportation of people here illegally that the country has ever seen.
By 2022, there were an estimated 11 million undocumented immigrants in the U.S., and mass deportations would break up mixed-status families and send shockwaves through parts of the economy.
Richard Green, director of the USC Lusk Center for Real Estate, said that if Trump is successful in carrying out mass deportations, it could somewhat lower housing costs in places like Los Angeles as hundreds of thousands of people are displaced and homes sit empty.
At the same time, Green noted that deportations could also drive up rents and housing prices, as many undocumented immigrants work in construction to build the homes needed to improve affordability.
There are indications that this has happened before. A recent paper from researchers at the University of Utah and the University of Wisconsin found that increased immigration enforcement led to less home construction and higher home prices.
For now, both the sales and rental markets in Southern California appear to be slowing, but remain too expensive for most.
Last month, rent in LA County fell 1.7% from a year earlier, but is up 7.5% from October 2019, according to Apartment List. Home prices in Southern California have fallen for three months in a row , but remain near their all-time highs, according to Zillow.
What happens next is hard to know. The reason, according to Groen? “It’s hard to say which Trump policies will actually happen.”
Sign up for Essential California to get news, features, recommendations from the LA Times and more delivered to your inbox six days a week.
This story originally appeared in the Los Angeles Times.
