Lessons from America’s Fastest-Growing Cities

America has been building far too few homes since the start of the 21st century. As a result, home prices have risen dramatically relative to people’s incomes.

Since 2000, the nation’s metros have collectively produced about 6 million to 7 million fewer homes than they would have needed to keep prices and rents from growing more than people’s incomes, the Bush Institute-SMU­ report estimates. Organizations including Freddie Mac, the Brookings Institution, the National Association of Realtors, and the advocacy organization Up For Growth, have put the shortfall at 3.8 million to 7.3 million.

The Bush Institute-SMU figure is higher than most other estimates because it takes into account that housing demand is growing much faster in some metros than in others, and the failure to build enough homes to keep up with people moving to high-demand locations adds to the national gap.

In addition, vast policy differences across cities and metro areas have led to price gaps between the most expensive metros and more affordable metros. These gaps are at least 25% larger than we would expect to see in a well-functioning housing market. Excessive home prices and rents have diminished the economic opportunities available to millions of Americans, reduced the quality of life they enjoy through hard work, and undermined their ability to build wealth and financial security.

Weak housing growth has inflicted especially severe hardship on low- to moderate-income Americans by short-circuiting the “filtering-down” process by which the new homes of the past grow older and become the main source of affordable housing of today.

In a handful of metros – notably Austin ­– a surge in apartment production over the last couple years has brought rents and home prices down by more than 10% from their peak, demonstrating that housing growth works for delivering greater affordability. But prices have continued to rise over recent months in most metros despite the negative effect on demand of recent high mortgage interest rates because new development continues to lag demand.

The Sun Belt and Mountain states, from the Carolinas to Arizona, Nevada, and Idaho, contain 21 of the country’s 25 top-performing metros for pro-growth housing policies. Fast-growing metros in these states account for more than 42% of all single family homes and 36% of all apartments built in America’s metro areas since 2010 – despite being home to only about 22% of the total U.S. metropolitan population. They also have an outsized share of all midrange and subsidized apartments built since 2010, the report shows.

Meanwhile, 17 of the worst-performing metros for housing policy are in Northeast, Upper Midwest, and especially Pacific Coast states.

The ranking delivers some surprises: New York City is a better-than-average performer, despite very high rents and home prices, because of substantial housing reforms in the 2000s and 2010s. New York has astronomical rents because it’s an exceptionally rich, productive place with strong housing demand.

But several Mountain State metros – Denver, Las Vegas, and Phoenix – rank among the 25 worst-performing even though they’ve seen better-than-average housing growth. They’ve grown as they have because of rising demand to live in scenic mountain and desert settings, despite relatively restrictive policies. They would have grown even faster with more growth friendly policies, the report suggests.

• Metros should commit to smart outward expansion:
  The best-performing metros are mostly growing outward, not upward. Most development is in exceptionally growth-minded exurban localities.

• Cities should allow medium-density development throughout the metro area:
  Outperforming Sun Belt and Mountain metros have been leaders in allowing starter homes and townhomes on small lots in expanding areas (Austin, Houston, and Salt Lake City), allowing new residential development in commercially zoned areas (Charlotte and several Florida metros), and streamlining development processes (several Texas cities).

• Innovate:
  The Austin metro is among the first to experiment with 3D-printed homes. Utah metros are poised to become leaders in promoting high-quality modular construction.

• Localities should create demand for housing as well as supply by building places where people want to live and work:
  While their policies are far from perfect, the most pro-growth metros have outperformed for focusing on public order and safety, adding infrastructure, revitalizing previously moribund downtowns, creating attractive new live-work-play centers in expanding suburban areas, and developing innovation districts. Quality placemaking and getting the urban basics right are essential features of pro-growth policy, along with avoiding overly restrictive housing and land-use rules.

America’s Top 10 Most Pro-Growth Metro Areas
(100 largest metros)

America’s Most Restrictive Metro Areas
(100 largest metros)

We calculate a housing growth score for each metro area as a composite score based on 17 measures of growth in the housing stock (Sources: U.S. Census Bureau and CoStar). We use multiple measures so that our composite housing growth scores reflect broad-based growth across property types and sizes, not just (say) relatively large detached single family houses.

Our quantitative prediction model arrives at expected housing growth scores by two methods, taking the average of the two predictions for each metro area as our predicted score. First, we find the best-fitting model we can based on a series of regressions with our composite housing growth scores as the dependent variable. Right-side predictive variables in our best-fitting model include 2010 population density, mean January temperature, whether a metro is constrained by a coastline, whether it’s known for recreational beaches, whether it’s near mountains, and whether it’s known as an exceptionally good place for young professionals and hipsters. We generate predicted values using each metro’s values for these measures and the coefficients from our best-fitting regression.

Second, we arrive at a predicted housing growth score for each metro as the point of intersection of a housing demand curve we estimate for that metro and an “as-if” housing supply curve for that metro, which we estimate based on the assumption that each metro’s supply curve has the same slope as that of all other metros but differs only based on nonpolicy constraints like coastal or mountain barriers to expansion and population density. We infer the position of each metro’s housing demand curve from its actual housing growth and price-to-income scores, calculating the latter as a composite score based on 68 distinct home price-to-income and rent-to-income ratios (Sources: U.S. Census Bureau, CoStar, Zillow). We assume that the demand curves for all metros have the same slope, drawing our slope assumptions from estimates in the economics literature. Estimated housing growth scores at the point of intersection represent the growth that would have occurred if our demand curve for each metro was correct but all metros had the same housing polices, so that supply curves varied only based on nonpolicy factors.

See Appendix 2 of the report for a full explanation of sources and methods.

Federal housing policies should start from three principles:

First, America should treat its housing crisis as a crisis, as the recently formed National Housing Crisis Task Force puts it. Local policies largely created the problem, and localities must play leading roles in solving it. But it’s a national crisis. Fewer than a third of all metros have been adding homes over the last six years at a pace that’s on track to keep up with projected population growth. And cities that build too little housing export their housing problems to other cities in the form of large out-migration to more affordable cities. The federal government, moreover, has one vital asset that state and local governments don’t: massive fiscal capacity.

Second, the goal for federal housing policy should be abundant and relatively affordable housing supply. This necessarily means home prices lower than today’s levels, relative to incomes, in most metro areas. People often say they want policies that will be “good for home values.” But there’s a key distinction. The federal government undoubtedly should pursue policies to create more high-opportunity neighborhoods with great quality of life, which would have the effect of increasing demand to live in them and thus raise home values in the absence of additional supply. It should not defend the financial interests of incumbent homeowners by supporting local policies that make homes a scarce commodity.

A successful national push to increase housing supply and affordability would make homeownership marginally less attractive in many cities for a time, until prices revert to levels consistent with well-functioning housing markets. There is simply no way to lower home prices for first-time buyers and simultaneously raise selling prices for longtime owners looking to downsize. But lower prices would increase the number of homeowners in the long run, as we documented in Section II.

Authors Charles Marohn and Daniel Herriges rightly note in Escaping the Housing Trap that America has gotten itself into a “trap” because it can’t push home prices down without harmful economic effects. For instance, lower prices would reduce the revenues of middleman industries that earn a percentage of home purchase prices, like realtors, mortgage originators, and title insurers. Marohn and Herriges, citing the example of the 2008 financial crisis, also argue that lower prices could destabilize banks and other financial institutions with exposure to assets dependent on high home values. But that crisis resulted from a rapidly collapsing speculative bubble. If home prices simply recede relative to people’s nominal incomes over several decades – as they should do in a well-functioning market – the financial system will realize any adverse effects only gradually and will be fine.

Third, the federal government should avoid subsidizing people to live in some parts of the country over others. Geographic neutrality means allowing market forces to determine which localities will experience population growth in coming decades and which ones will decline. Allowing market forces to play out will maximize people’s well-being in the long run. It implies the following:

• Don’t subsidize long-distance moves to the nation’s largest, wealthiest cities. Although people living in places like New York City and the San Francisco Bay area earn more on average, it doesn’t follow that overall well-being would be higher if millions more people moved to these very productive cities. Highly skilled people living there today enjoy about the same standard of living as people in less productive cities, after adjusting for local living costs, as we showed in Section II. Lower-skilled people in these cities are worse off on average after paying high housing costs, despite modestly higher nominal wages.At the macroeconomic level, moves to these cities don’t increase overall opportunity nationwide, because falling “agglomeration” benefits in shrinking places fully offset rising benefits in the wealthiest metros, according to a 2014 study by economists Patrick Kline and Enrico Moretti of the University of California at Berkeley.

• Don’t subsidize long-distance moves to struggling areas: The federal government likewise shouldn’t try to turn around distressed cities and rural areas by subsidizing highly skilled people or firms to move there. “Place-based policies” that subsidize particular locations typically have modest, nonlasting benefits for those places and impose offsetting losses on other areas, some of which are struggling just as much. Kline and Moretti showed this in a study of long-term effects of the Franklin D. Roosevelt Administration’s Tennessee Valley Authority initiative.People are generally better off if places with low productivity or very restrictive land-use policies shrink in size. Rather than trying to short circuit this process, the federal government should help people get the best possible education so they can pursue their goals successfully, wherever these goals take them.

• Don’t subsidize living in expensive, amenity-rich cities just because home prices are higher there: Federal as well as state policymakers should avoid asking taxpayers in lower-amenity places to subsidize the outsized rent of others who wish to live in cities with great beaches or mountain views. Federal programs should generally give equal subsidies to people earning the same income regardless of their location, which in practice means subsidizing a smaller percentage of housing costs in amenity-rich cities with restrictive policies. Subsidy programs should perhaps carve out an exception for the lowest-income, least mobile people who have lived in an expensive city for a long time and thus have strong connections there.

• Don’t subsidize choosing locations with high flood risk: Federal policies that subsidize people wishing to live near the Florida coast or in neighborhoods below sea level in New Orleans make no sense, particularly as climate change increases the risk to properties in these places.

• Don’t subsidize choosing some locations within a metro area over others: A frequent argument is that the public sector subsidizes people living in exurban areas over core cities by building roads and highways.  But this argument starts from the premise that the natural state of things absent subsidies is for growing populations to live in ever-denser conditions in core cities. Another way to think about it: People should choose where they want to live and then government should build the best transportation network it can for everyone’s benefit. In any case, the federal government invests far more in public transit serving core urban areas on a per-user basis than it does in highways. Local transit agencies also subsidize urban riders by subsidizing significant operating losses. Federal policy should aim to support people of similar income levels at similar levels, regardless of where they choose to live.

The federal government should engage in a sweeping rethink of its policies toward supply-side housing subsidies. We suggest the following:

• Promote smart, sustainable, medium-density expansion of growing metro areas as well as higher-density urban infill development as top-tier national priorities: Physical expansion of booming metros is inevitable. How America’s growing metros expand will do more than anything else to determine whether the nation’s housing crisis gets a lot better or a lot worse. It’s time to move on from the unstated premise of many commentators that the United States can realistically add all the homes it needs by increasing the density of built-up areas – which would require a 50% increase in population per square mile throughout metropolitan America if metros stop growing outward. This idea is a dangerous fantasy because it distracts energy and resources from initiatives that could make a difference at large scale.At the same time, effective implementation of the pro-growth policies we outline in our Principle Two could realistically add some 5% – or conceivably 10% – to populations in built-up areas, amounting to 3 million to 6 million homes. If cities mostly put these additional homes in good locations in or near commercial areas and other job centers, they can boost the economic opportunities available to residents dramatically.
  • Launch a “Smart Growth” initiative to ensure that growing metro areas build out as much of their expanding physical footprint at medium rather than low densities and achieve as much quality placemaking as possible: A Smart Growth initiative should promote development patterns with a full range of housing types, substantial mixing of land uses, walkable town centers, and ample green space. Building at the density of Fort Worth or McKinney, Texas, would add at least 15 million more homes than building at the density of the most sprawling suburbs in the Boston or Phoenix areas, as we show in Section IV. America needs a lot more places like the most successful suburban cities in our 25 large Sun Belt and Mountain metros.Five significant incentive problems stand in the way of this vision:
    • Existing residents in expanding areas may want their towns to remain low-density bedroom communities even though they also want nearby jobs and amenities. They have incentives to take a free ride on the job centers, walkable neighborhoods, and amenities of nearby cities. But if all towns in the area think this way, the result will be low housing density and long commutes for everyone.
    • Expanding cities have incentives to push the future homes of low- to moderate-income people into other cities nearby, even if they want some of these people working in their city by day. Again, the result of uncoordinated growth is likely to be a monoculture of single-family houses on large lots everywhere.
    • Elected leaders have incentives to build out low-density infrastructure that is cheap today but financially unsustainable in the long run given the tax revenues the area will generate, since they won’t be in office when the bills come due.
    • Developers have incentives to underprovide green space and take a free ride on the parks and trails built by other developers nearby. If local authorities don’t manage growth with a clear vision of what they’re trying to achieve, cities will expand with less green space than residents would have preferred and become dull places that people will want to leave as soon as they can.
    • Residents have incentives to stop growth altogether if they believe further growth will add to local government expenses without bringing them better schools or quality-of-life amenities.

The federal government is the only player positioned to solve these collective action problems. A Smart Growth program should present localities with a bargain: infrastructure funding for expanding areas in exchange for smart growth plans in every locality in the area, with no holdouts or free riders. Congress should move a large part of federal infrastructure spending into competitive grant programs that link infrastructure grants to comprehensive, area-wide smart growth plans.

• • Launch a similar Smart Infill initiative to help cities build out the infrastructure they need to support medium- to high-density development in commercial areas and on raw or repurposed land: A Smart Infill program could include subsidies to support office-to-multifamily conversions where they’re technically feasible, pocket parks in transitioning downtowns, affordable units near growing innovation districts, basic infrastructure for raw land development, tiny home and manufactured home communities, new bus routes, and other investments that add incremental homes in high-opportunity locations.A Smart Infill initiative, like a Smart Growth initiative focused on expanding suburban areas, should make grants on a competitive basis to incent relatively intensive, high-quality development plans.
• Create a significant federal funding stream to subsidize preservation and rehab of rental properties by public, nonprofit, and for-profit landlords: The goal should be to establish a supply-side subsidy that addresses the largest gap in the nation’s affordable housing ecosystem – rental units affordable to very low-income families. These families suffer most from America’s dysfunctional housing market, and it will take decades of good policy to solve the market’s accumulated problems. America needs a bold initiative to help its most vulnerable families as fast as possible. We suggest the following principles:
  • Focus on preservation and rehab of existing rental properties, with some flexibility to support new construction or office conversions in opportunity-enhancing locations.
  • Promote geographic flexibility. Support affordability anywhere. Avoid tying subsidies permanently to any one building or location.
  • Promote mixed-income communities. Create funding opportunities that allow landlords to make some but not all the units in their buildings available at rents affordable to very low-income residents and receive commensurate subsidies.
  • Emphasize loan guarantees or direct loans, with some flexibility to make grants in certain circumstances. Loans with sufficiently low loss rates would create a self-sustaining capital source to support deeply affordable rental housing in perpetuity.
  • Allow all kinds of landlords to borrow under the terms of the program, including for-profit firms, local governments, traditional nonprofits, and new nonprofit landlords, perhaps modeled on Dutch Housing Associations.
  • Leverage loans with enticements for private and nonprofit capital. One possibility: second-mortgage loans to landlords to match senior loans by philanthropic funders.
  • Support local government initiatives to acquire land ahead of value-enhancing infrastructure investments.
  • Incorporate loan terms that incent landlords to offer rent-to-own opportunities or to convert rental properties to condos.

We envision a new program run by existing government-sponsored entities (GSEs) like Fannie Mae and Freddie Mac empowered to make, buy, or guarantee loans and to issue bonds backed by the full faith and credit of the U.S. Treasury. Loan purchases or guarantees under this program could give rise to a new industry of private sector loan originators like today’s mortgage firms and new business lines within commercial banks, all focused on financing preservation, rehab, and sometimes construction of deeply affordable rental properties and apartments.

Loans purchased or guaranteed under the program should feature very low interest rates, long maturities, and special terms like allowing landlords to defer interest payments during difficult times when tenants fall behind in greater numbers than usual. Loans should allow landlords to move units flexibly back and forth between market-rate and below-market rents, as well as across different levels of affordability, with commensurate adjustments in payment terms for landlords. Crucially, landlords should be able to access loans with no involvement by local governments.

Suppose Congress were to authorize the GSEs to add assets of up to $1.2 trillion (compared with a combined $7 trillion in total assets at Fannie Mae and Freddie Mac today). Suppose further that tenants could afford to pay $750 a month on average in today’s dollars. Assume that acquiring and rehabbing one unit costs $175,000, nonprofit landlords put up 33% equity when acquiring and rehabbing properties, and landlords borrow at a 5% interest rate on average. Based on these assumptions, the GSEs could buy or guarantee loans sufficient to finance 10 million deeply affordable rental units.* One could imagine a Department of Housing and Urban Development program supplementing loan purchases or guarantees with grants to support landlords making units available to extremely low-income families.

We assume the GSEs could borrow roughly at long-term Treasury borrowing rates, buy or guarantee loans paying a 1% markup over these rates, and cover operating costs with net interest.

As an alternative, Congress could expand and liberalize the Federal Housing Administration’s existing 223(f) lending program. This FHA program makes loans to multifamily property buyers at relatively competitive interest rates in amounts of some 80% to 87% of property value. Disadvantages include very long approval times and strict limits on how much of a property is allocated to retail and restaurant tenants, which makes it hard to use these loans to redevelop properties for mixed uses. Congress could direct FHA to loosen these terms, lower interest rates for qualified properties fully or partly devoted to income-restricted housing, and make loan approvals faster and more predictable.

• Reform the LIHTC program to make it more flexible, but don’t expand it: Make it easier to combine LIHTC with other funding sources and build buildings with market-rate as well as subsidized units. Set aside a significant share of tax credits for preserving and rehabbing units and require states to develop separate point systems for these projects in their QAPs. Loosen the “50% test” requiring developers receiving 4% credits to fund at least 50% of their developments with private activity bonds, as this rule unnecessarily limits the number of units developed with otherwise unlimited 4% credits. Increase or eliminate existing state-by-state caps on annual issuance of private activity bonds. Streamline onerous income verification requirements for both applicants and landlords.Congress should devote any increase in housing expenditures to well-structured demand subsidies or geographically flexible supply-side subsidies – as envisioned in the previous bullet point – in view of the LIHTC program’s inherent limitations and poor return on investment in terms of families helped per dollar of spending. We recommend maintaining the program at its current size because it is familiar and has a substantial built-up ecosystem of specialized developers and credit syndicators, which Congress would be unwise to disrupt for the time being.

• Loosen rules on other federal lending programs to support housing development: The Bipartisan Infrastructure Law of 2022 expanded eligibility for U.S. Department of Transportation loans under the Transportation Infrastructure Finance and Information Act (TIFIA) and Railroad Rehabilitation & Improvement Financing (RRIF) programs to support transit-oriented residential and mixed use development. However, restrictive rules governing these programs have made it difficult for private sector developers to access these them for housing development near public transit stops.

• Make well-located federal land available for housing and mixed-use development: The Lincoln Land Institute estimates that the federal government owns land near public transit stops that could support between 35,000 and 135,000 new apartments.  The federal government’s General Services Administration (GSA) owns more than 500 million square feet of office space, a significant source of property for office-to-residential conversions because GSA plans to reduce its real estate footprint in U.S. cities. The federal government also has significant holdings of undeveloped land on the outskirts of many metropolitan areas ­– particularly western metros like Las Vegas, Phoenix, and Salt Lake City.

• Renew and expand the Opportunity Zone (OZ) program: The OZ program, introduced in the Tax Cuts and Jobs Act of 2017, created a new limited-time, uncapped federal tax benefit for taxpayers who invest capital gains from past investments into real estate or businesses located within low-income Census tracts designated by state governors as opportunity zones. From the program’s launch to 2024, the nation’s 8,764 designated zones saw an increase in residential addresses amounting to 313,000 homes, according to a 2025 analysis by the Economic Innovation Group (EIG). While it is too early to say how many of these homes would have come into being absent the program, EIG’s analysis suggests that the OZ program accounts for at least a quarter of them, at a cost to the federal government in foregone tax revenues much lower than the LIHTC program and other subsidies.Congress should renew the program – which will expire in 2026 in the absence of new legislation – and expand it geographically, since at present it covers only a quarter of eligible low-income Census tracts, home to just 10% of the U.S. population. Congress should also remove the program’s complex rules governing the sources of funds for qualified investments, tighten the range of qualified investments in ways that include affordable and mixed-income housing but exclude some kinds of investment like luxury hotels and apartment buildings, create more transparency around specific investments that have qualified for tax exemptions, and require the IRS to collect and publish data on results.

• Subsidize supply-side innovation: New technologies that take 20% or more out of the cost of building new homes would add tremendously to human well-being in the United States. While the private sector can and should fund most research and development work in this area, the federal government should invest in basic science supporting innovative housing technologies. One idea: Congress might create an innovation-focused office within the National Science Foundation or the Department of Housing and Urban Development to fund research on cheap, lightweight, super-strong building materials.

Congress should reform and expand demand-side subsidies, but it should also design demand subsidies so that they have as little upward effect on rents and home prices as possible.

• Reform and expand the Section 8 housing choice voucher program: Straightforward reforms would make the housing choice voucher program more effective, as we discussed in Section IV. Reduce disincentives to work; restrict use of vouchers to units below a relatively low ceiling so that they don’t drive up rents for apartments modestly above this level; loosen inspection requirements; and make vouchers more financially attractive and easier to navigate for landlords. Congress should fully phase out the “project-based” rental assistance part of the Section 8 program and shift funds entirely to tenant-based assistance, since the former needlessly ties subsidies to specific inflexible locations. Congress should also expand the program’s budget of $45 billion. Housing choice vouchers are the most effective federal subsidy program for very low-income families, and most U.S. cities have long waitlists filled with qualified families.

• Direct FHA to pilot a program supporting rent-to-own pathways: This might include loans on preferential terms to landlords that offer appropriately structured purchase opportunities for current tenants.

• Subsidize crosstown moves for low-income families: Moving subsidies help low-income families relocate within their cities for job opportunities but don’t drive up home prices overall. Congress eliminated income tax deductions for movers as part of the Tax Cut and Jobs Act (TCJA) of 2017 – a good policy change as the tax deduction had primarily subsidized affluent people who itemize tax deductions. Congress should create a means-tested, refundable tax credit to support opportunity-enhancing moves without distorting housing markets.

• Create a universal savings plan to help low-income families afford down payments: Congress should generally promote household savings by replacing the current mix of complex savings plans – 401(k) plans, individual retirement accounts, Roth IRAs, 529 plans, and more – with a single unified, flexible, tax-advantaged savings plan. A universal savings plan should have high annual contribution limits, tax-free accumulation over time, simple penalty-free withdrawal rights, opportunities for employers to contribute, and federal matching contributions for low-income families. It should allow households to use funds for first-time down payments as well as for education, starting a business, or retirement spending.

• Eliminate and avoid counterproductive subsidies that drive home prices up: Congress should get Fannie Mae and Freddie Mac fully out of the business of subsidizing second homes and investment properties charging market-rate rents. Subsidizing mortgages for such house purchases drives up home prices and advances no good policy purpose.

Our recommendations for reforming the LIHTC program, renewing the Opportunity Zone program, subsidizing home moves, and creating a universal savings plan would all require changes to the federal tax code.

Congress should also eliminate the mortgage interest deduction (MID). The MID, which lets tax filers deduct all interest on mortgages up to $750,000, drives up home prices while primarily benefiting relatively affluent households which itemize tax deductions. Because of the MID, a family with income just over $100,000 can pay a purchase price about 17% higher than they otherwise could afford. Since home prices are higher as a result, the MID undermines its stated purpose of promoting homeownership.

The main effect of the MID is to redistribute wealth. Beneficiaries include households with incomes over $100,000 and a mortgage – which receive some 75% to 90% of the MID’s tax benefits – as well as industries that profit from high home prices, like realtors, mortgage originators, and title insurers. Moderate-income people hoping to become first-time homeowners or trade up to a larger home lose out. The MID also distorts markets by inducing people to demand larger homes than they otherwise would.

Eliminating the MID would lower home prices by some 4% and increase homeownership rates by 5%, economist Kamila Sommer and Paul Sullivan estimated in a 2018 study. Home prices declined relative to incomes after Denmark eliminated its own version of the MID in the 1980s.

Ending the MID would also generate substantial incremental tax revenues that Congress could reallocate to more useful housing policies. The MID currently reduces federal revenue by approximately $30 billion per year. If Congress allows the 2017 tax law’s lower tax rates and higher standard deduction to expire as scheduled in 2025 but eliminates the MID, it will raise at least $60 billion more per year than it would if the MID continues with the 2017 law’s maximum deductible mortgage of $750,000.

Congress should direct the mortgage giants Fannie Mae and Freddie Mac to make significant policy changes to reduce market distortions and encourage lower-cost home development.

• Reduce Fannie and Freddie’s overall footprint in the housing market. Stop supporting mortgage refinancings as well as second homes and investment properties leased to market-rate tenants.

• Support better-designed residential mortgage products. Standard mortgages should let borrowers take their mortgage and its associated interest rate with them when they move and should provide for automatic refinancing when interest rates go lower. They should allow homebuyers to roll student debt into their mortgage, provided they can afford total resulting payments.

• Support development of specialized mortgage products for manufactured homes to promote wider use and ownership of affordable, high-quality alternatives to site-built homes.

• Authorize Fannie and Freddie to make mezzanine construction loans to support development of new market-rate as well as income-restricted housing

The U.S. Census Bureau and the Department of Housing and Urban Development (HUD) should support federal, state, local, for-profit, and philanthropic housing initiatives with far better data and technical assistance.

• Data: Collect geographically granular data on housing inventory, new construction, rents, and home prices, disaggregated by building type, size, and income-restricted status and make it as accessible as American Community Survey data. Federal agencies are uniquely positioned to maintain much-needed nationally consistent data.

• Building codes: HUD should write and encourage use of modern, standardized building codes to reduce construction costs imposed by idiosyncratic local codes. It should also create standardized code for manufactured, modular, and 3D-printed homes to encourage rollout of cost-saving technologies.

• Model zoning ordinances: HUD should also create model ordinance language for specific environments, including residential development in commercial areas, development on vacant or repurposed urban land, and medium-density development in expanding exurban areas

Federal legal authorities should vigorously enforce the Fair Housing Act of 1968. Recent examples of well-justified enforcement: The Department of Justice has investigated mortgage originators and realty firms in Maryland, North Carolina, Ohio, Pennsylvania, Rhode Island, Tennessee, and elsewhere for illegally steering Black or Hispanic families away from affluent White-majority neighborhoods or “redlining” Black and Hispanic-majority neighborhoods, leading to consent orders in 2023 and 2024.

But the federal government should abandon the premise, embodied in the Obama Administration’s 2015 “Affirmatively Furthering Fair Housing” rule and updated in a 2023 Biden Administration rulemaking process, that single-family zones inherently reinforce housing segregation. It’s time to move past ideologically driven, unsupported arguments against allowing the kinds of neighborhoods where many Black and Hispanic people in fact wish to live.

Congress should explore strategies to mitigate the effects of fast-rising property insurance rates on multifamily development and investment. While a full analysis of recent developments in the property insurance market is beyond the scope of this report, we note here that surging insurance premiums are taking a toll on housing affordability and threaten to exacerbate the nation’s housing crisis significantly. Possible federal policies include a role for federal capital in providing reinsurance or acting as an insurer of last resort, as the federal government does through the National Flood Insurance program.

Congress should exempt qualifying infill housing and mixed-use development from the onerous requirements of the National Environmental Protection Act (NEPA). Required submissions can take years to complete, even for developments nearly certain to have no meaningful environmental impact. Congress has considered permitting reform for energy projects. It should incorporate housing exemptions into any reform bill.

Congress should provide financial support for state education and workforce development initiatives aimed at preparing people to work in skilled construction trades. The number of workers in the construction trades is approximately 1 million fewer than before the 2008 financial crisis. Millions of skilled construction workers will retire over the next decade, exacerbating labor challenges that constrain housing development. America’s need for construction workers should also play a role in federal immigration policies.

The federal government shouldn’t reinforce counterproductive local policies – or implement them nationwide, as the Biden Administration suggested doing with a 2024 proposal for a federal rent control system.

The policy changes we recommend wouldn’t necessarily add to total federal spending. Eliminating the mortgage interest deduction would raise more than enough revenue to offset the modest increases we suggest in supply and demand-side subsidy programs. Congress could of course amplify the effects of these measures by stepping up grants for building, buying, and rehabbing rental properties.

America’s strategy to build more homes and expand opportunity should draw on lessons from its fastest-growing cities, because the model they embody works better than any alternative at the scale the nation needs. The main principles of the strategy we outline in this report are as follows:

• Expand metropolitan areas outward in smart, sustainable ways: Congress should launch a Smart Growth initiative to promote medium- rather than low-density expansion. Expanding localities should allow and promote a full range of housing types, well-designed walkable mixed-use centers, ample green space, and diverse local employers. States and localities should make growth models more financially and ecologically sustainable by allowing closer mixing of job centers and residential areas, coupling infrastructure with smart development plans, and supporting the growth of electric vehicle infrastructure and renewable power generation. Property tax systems should tax land more heavily than structures to incent development.

• Allow and promote infill development: Congress should also initiate a Smart Infill initiative to support residential development in feasible high-opportunity locations. Cities should allow apartments, townhomes, tiny homes, and manufactured homes in a substantial share of their land mass; streamline permitting processes; reduce minimum lot sizes; allow residential development as of right in commercial-zoned areas and rezone others; and reduce parking minimums.

• Innovate: Federal, state, and local policymakers should launch initiatives to support the growth of cost-reducing building technologies, including manufactured homes, modular construction, and 3D-printed homes.

• Build more high-opportunity cities, towns, and neighborhoods: This means getting the urban basics – safety, schools, infrastructure, and financial sustainability – right; support knowledge-generating institutions and innovation; run light-touch, commerce friendly regulatory policies; aim for places that embody the Jane Jacobs Principle of fine-grained mixing of diverse activities; revitalize traditional and alternative downtowns as vibrant live-work-play environments; build innovation districts; build great parks, trails, and waterfronts; and promote local social capital.

• Rethink subsidized housing policies to stretch dollars further and help as many families as possible: Congress should create a new government-sponsored program focused on financing private sector, nonprofit, and public-sector initiatives to preserve and rehab rental housing and make it available to very low-income families; reform the LIHTC and Section 8 housing choice voucher programs; renew the Opportunity Zone program; and step up housing-focused data collection and technical assistance to localities. States and localities should emphasize preservation of existing housing stock over new builds, focus new construction on opportunity-enhancing locations; promote mixed-income communities; and get more creative about combining public, nonprofit, and for-profit capital.

• Do no harm: Congress should eliminate the mortgage interest deduction from the federal tax code. States and localities should avoid efforts to freeze neighborhoods in place like rent control and policies that subsidize demand in supply-constrained markets.

Solving America’s housing crisis is within reach, this report shows. The answer is to build our way out of the hole we’ve created over the last 20 to 30 years – and to do so in ways that expand the geography of opportunity in the United States. America’s cities and metro areas have more than enough land, capital, and expertise to build the homes Americans need. They just need to get smarter about public resources and let markets work.

It’s time to start building.