Trump doesn’t want America to be ‘a nation of renters,’ but experts say at least one of his proposals may put homeownership more out of reach

President Donald Trump said he is reestablishing the American Dream of homeownership, but one of his most recent housing policy proposals may put the dream even more out of reach, experts say.

Speaking Wednesday at the World Economic Forum meeting in Davos, Switzerland, Trump touted his barrage of recent housing policy executive orders, including preventing institutional investors from buying single-family homes and attempting to lower mortgage rates by directing government-controlled mortgage finance firms Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities.

“It’s just not fair to the public [that] they’re not able to buy a house,” Trump said Wednesday of institutional homebuying. “And I’m calling on Congress to pass that ban into permanent law, and I think they will.” Trump has also asked Congress to cap credit-card interest rates at 10%, which he claimed Wednesday “will help millions of Americans save for a home.” 

Trump also spoke directly to Wall Street giants and institutional homebuyers at Davos, saying: “Many of you are good friends of mine, [and] many of you are supporters,” but “you’ve driven up housing prices by purchasing hundreds of thousands of single-family homes. 

“It’s been a great investment for them, often as much as 10% of houses on the market,” Trump said. “You know, the crazy thing is, a person can’t get depreciation on a house, but when a corporation buys it, they get depreciation.” 

One policy that went unmentioned during Trump’s Wednesday speech in Davos, and one experts say could carry potentially big risks and do little to address the root causes of high housing costs, is his proposal that would allow Americans to tap their 401(k) savings for mortgage down payments, which now averages 19% of a home’s price. The current U.S. median home price is about $428,000, according to Redfin, meaning a down payment could amount to a whopping $81,000. Trump hasn’t put a dollar or percentage figure on the cap for the amount Americans could pull from their 401(k)s to use toward a down payment.

Trump’s final plan on allowing Americans to use their retirement savings for down payments would likely require congressional approval because it may involve changing the tax code. The proposal, announced Friday by Kevin Hassett, director of the National Economic Council, is Trump’s latest attempt to address growing concerns about affordability across the U.S. economy, especially in the housing market, and prevent America from becoming “a nation of renters,” as he said in his address at the World Economic Forum meeting on Wednesday.

A spokesperson for the White House told Fortune in a statement that President Trump has pledged to improve housing affordability for Americans.

“That’s why President Trump signed an executive order aiming to protect single-family homebuyers from large institutional investors and help them achieve the American Dream of homeownership,” the spokesperson said.

Benefits of using 401(k) funds for a down payment

Trump’s idea has some benefits. The number of first-time homebuyers has fallen to half of what it was about a decade ago, according to data from the National Association of Realtors. In addition, 22% of those who are able to buy their first home are already using either borrowed money or a gift from a friend or relative for their down payment, according to the NAR.

While Americans can already withdraw up to $10,000 to pay for a home from individual retirement accounts (IRAs) without repaying it before age 59½, this rule doesn’t apply to employer-sponsored 401(k)s, the most common retirement account, unless account holders pay a 10% penalty. 

Americans can withdraw money without a penalty from their retirement plans for some exempted purposes such as recovering from a natural disaster and some medical expenses, but still have to pay income taxes on their tax-deferred accounts. These “hardship withdrawals” increased to 4.8% of participants in Vanguard retirement plans in 2024, up from 3.6% in 2023.

Most employer-sponsored 401(k)s also allow Americans to borrow for a limited time from their retirement savings penalty-free before 59½, including for a home purchase, as long as they repay the amount borrowed to the account with interest.

Given the limited options for accessing retirement accounts, the president’s proposal could help Americans in need of cash to unlock liquidity for a down payment. This could be especially helpful for those who may struggle to repay an IRA loan, Robert Goldberg, a finance professor at Adelphi University in Garden City, N.Y., told Fortune.

Drawbacks of using 401(k) funds for a down payment

Still, Goldberg warned swapping out the diversified investments of a 401(k) and concentrating a large chunk of their investment into one asset is risky. While some believe home prices always go up, the housing market collapse of 2008 showed this isn’t always the case.

“Imagine home prices drop so much that the home price goes not just down to the mortgage level, but to below the mortgage level, wipes out your equity position,” he said. “You would have lost your equity, your 401(k) equity. Bad outcome.” 

Experts say Trump’s proposal also does little to address the supply side of the housing market, which has been largely frozen as homebuyers who bought in at lower interest rates prior to the pandemic have been hesitant to sell, Goldberg said. Giving more people the means to buy homes without adding more supply may inadvertently increase prices and lock more people out of the housing market, instead of making it more affordable, he argued. 

“Some people will benefit from [Trump’s plan], but overall it will just be more competition for homes,” Goldberg said. 

Yet Trump’s proposal dealing with retirement savings is especially risky because it makes it easier for Americans to use crucial retirement savings meant for the future for non-retirement uses, said Jake Falcon, a chartered retirement planning counselor and the CEO of Falcon Wealth Advisors.

The median retirement savings for an American between the ages of 45 and 55 was $115,000 as of 2022, according to the Federal Reserve. Yet this amount may not suffice for everyone, as some experts suggest the average person needs to have saved eight to 10 times their annual salary to retire comfortably.  

“People, generally speaking, are more than likely behind, and this will just make them further behind,” Falcon said.

Given the bleak data on American retirement savings, Falcon said the government should make dipping into a retirement account for other uses harder instead of easier.

“Allowing people to raid their 401(k) doesn’t solve the problem,” he said.

This story was originally featured on Fortune.com