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President-elect Donald Trump's plan to make housing more accessible might do anything but, according to UBS analysts.
The firm says the plan's proposal to turn federal land into housing and tax incentives for homeownership could unintentionally fuel higher prices, while his other policy proposals could drive up mortgage rates, they say.
Trump's plan to transform federal land into more housing seems particularly challenged, the analysts say. With those lands heavily concentrated in rural areas of the western US, there is little existing infrastructure to build, which will make any development costly and therefore unlikely to actually boost supply.
His tax incentives to encourage homeownership, meanwhile, could increase buyer competition amid an already constrained housing supply, driving up home prices in the process.
"While details are limited, we believe the federal land initiative could be challenged by a lack of existing infrastructure in these generally rural areas, and tax incentives for homeownership could result in the unintended consequence of driving home prices higher in a supply-constrained market," the analysts said in a Thursday note.
Trump and Vice President-elect JD Vance have repeatedly pushed back on the notion that they will negatively impact the housing market. From the perspective of prices, they have said that deporting immigrants would bring down housing costs by reducing demand for homes.
In a September address, Trump said that Americans shouldn't "ignore the impact" millions of illegal aliens have had on driving up housing costs.
Critics — most notably homebuilders — have also said that Trump's immigration plans could deplete the home-construction workforce, which would worsen America's ongoing inventory shortage. Vance, meanwhile, has countered that there are ample displaced American workers ready to take those jobs.
All the while, homebuyers have faced a steepening housing shortage in recent years. In 2022, the US was short roughly 4.5 million homes, and while the number of US families increased by 1.8 million that year, only 1.4 million housing units were built, according to a recent Zillow report.
The UBS analysts say that Trump's plans to deregulate more broadly, with the hopes of that trickling down to housing, is likely overly optimistic.
"Deregulation at the federal level would arguably have little impact on land bottlenecks that permeate municipalities across the country," they wrote.
With those policies likely to fail, the analysts see mortgage rates as the key indicator for how housing will fare under the Trump administration.
They say Trump's pro-growth initiatives, like corporate tax cuts, relaxed bank regulation and higher deficit spending, plus higher tariffs and a crackdown on immigration, appear likely to lead to yield curve steepening — driving up rates in the process.
The higher rates will likely continue the housing lock-in effect, where existing homeowners prefer to remain locked in at their current lower rates. That means buyers will have fewer options among resold homes, the analysts say.
UBS adds that builders will likely still be able to execute even at high rates, and will continue to offer mortgage rate buydowns and build smaller footprint homes to attract cash-strapped buyers, the analysts say.
Other reports, though, have cautioned that Trump's tariff hikes on materials like steel could make construction more expensive, stalling homebuilding. Builders have also warned his plans for mass deportation would eliminate a key part of their labor force, driving up construction costs even more.
High building costs have been part of the reason why the US has seen such a supply-challenged market in the first place.
Much of the outlook for buyers thus remains on the Federal Reserve's easing path, the analysts say.
"It remains unclear how the Federal Reserve's progress on taming inflation could serve as an offset if any/all of these proposed initiatives come to fruition, but higher mortgage rates would likely have varying impacts on components of the housing value chain," the analysts said.
In prepared remarks on Thursday, Fed Chair Jerome Powell said the US is in no hurry to cut rates, signaling that mortgage rates could stay higher for longer.
