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By: Shannon McGahn
Chief Advocacy Officer for the National Association of REALTORS®

Whether you want to rent or buy, housing is in short supply—and it’s a crisis.
The National Association of REALTORS® (NAR) is in an all-hands, all-front advocacy posture in this fight that impacts every American.

A recent national survey from the University of Michigan and the Financial Times found that Americans' financial ability to afford a home was ranked as a top concern by an almost equal 70% share of Democrats, Republicans, and independent voters alike.

Housing affordability is a cause every elected official can rally around at the local, state, and federal levels.

It will take this kind of comprehensive, all-of-government approach to win this fight.

Housing Investment is a One-Two Punch for the Economy

The housing sector not only provides shelter—a basic human need—but also plays an integral role in economic growth in two significant ways.

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First, an investment in housing is an investment in the American economy. Each home sale generates two jobs.

In 2023, the real estate sector contributed 18%—equivalent to $4.9 trillion—to the GDP. That equaled $125,000 from every median-priced home sale.

Second, homeownership is the primary way Americans build generational wealth.

Mortgage payments operate like a forced savings account that goes right back into the homeowner's pocket each month. The net worth of a typical homeowner is about 40 times that of a renter.

As the principal grows and the home appreciates in value, equity compounds over time.  In the last decade, the median-priced home has been  worth about $210,000 more.

Row of large homes on a suburban street

18%

of the US GDP is contributed by the real estate sector and each home sale generates two jobs

America’s Missing Middle

Housing construction peaked in 2005 with over 2 million housing starts, but just four years later, it bottomed out at 550,000 starts. With a historical average of 1.5 million starts per year, we are in a deficit that will take years to correct without urgent action.

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Homebuyers today face a market with a 5.5-million-unit shortage, and those looking to rent face a 600,000-unit shortage. That’s a formula for high prices for both groups, with inflation and high mortgage rates turbo-charging the crisis.

The problem is even worse when it comes to affordable housing. Our country has the largest shortage of homes in the middle-income price range, creating what’s called the ‘missing middle.’

With an even larger shortage of entry-level and mid-level housing, renters ready to buy their first home can’t afford what’s available. The median income of renters nationally is nearly $50,000, meaning these buyers can afford to purchase a home with a price up to $200,000. Fewer than 15% of the current listings are in this price range.

In high-cost cities, affordability is even more acute. In the San Francisco metro area, for example, renters with a median income can afford to purchase less than 5% of the available homes for sale.

NAR is fighting for housing affordability and access on all fronts–research, policy, and legislative—and is working to implement solutions on the local, state, and federal levels.

Home construction framing

5.5 Million

Homebuyers today face a market with a 5.5-million-unit shortage, and those looking to rent face a 600,000-unit shortage

Shopping Local for Solutions

On the local level, overly restrictive zoning and burdensome permitting regulations are slowing construction and preventing lower-cost housing from being built where needed.

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City and state regulations should encourage the construction of affordable housing by supporting zoning for multi-family structures and manufactured homes.

NAR is also fighting against misguided attempts to cap or control rental rates. Price controls may seem seductive, but they have backfired on local governments and harmed the people we need to help the most.

Developers are reluctant to build in areas where the government imposes rent controls on new buildings, and these policies actually decrease the supply of low- to mid-range housing units.

We can protect the most vulnerable by supporting targeted assistance to renters and housing providers when there is a gap between rising wages and rising rent. But the long-term solution remains increasing supply.

Modern low rise apartment buildings in urban area

Zoning

Overly restrictive zoning and burdensome permitting regulations prevent lower-cost housing construction

Calling on Congress

At the federal level, NAR is leading the national charge to update America’s tax law to promote homeownership, build stable communities, and boost economic growth.

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Many long-term owners continue to hold on to their homes to avoid paying capital gains taxes, creating a bottleneck for Americans who want to climb the housing ladder. The capital gains tax exclusion for the sale of a primary home is currently the same amount it was when created in 1997 when median home prices were a fraction of what they are today.

NAR supports the More Homes on the Market Act, which would incentivize more long-term owners to sell their homes by increasing the maximum amount of capital gains a homeowner can exclude on the sale of a principal residence and adjusting it for inflation annually.

We are also going all-in to support a suite of legislation and tax credits to help revitalize struggling neighborhoods. Tax credits can help attract private investment to neighborhoods where property values are currently too low to support the cost of building or rehabilitating homes.

Congress can design the tax credits to help low- and moderate-income households earning less than 140% of the area's median income who want to purchase affordable, entry-level homes and live in them for at least five years.

A tax credit of just $40,000 would yield 500,000 homes built or substantially rehabilitated, nearly 800,000 jobs, and almost $30 billion in federal, state, and local tax revenues and fees in just ten years.

Improving or replacing a critical number of homes in these neighborhoods would also raise the appraised values of all homes, increasing the area's desirability.

The bipartisan Neighborhood Homes Investment Act would accomplish much of this, attracting private investment through tax credits for building and rehabilitating owner-occupied homes.

The Affordable Housing Credit Improvement Act or other legislative provisions to expand the Low-Income Housing Tax Credit and encourage investment in creating and preserving affordable housing would help, too.

The Low-Income Housing Tax Credit is the most successful affordable rental housing production program in U.S. history, and expanding it is projected to result in nearly 2 million additional affordable rental homes.

We are also fighting to preserve the 199A qualified business income deduction for small businesses and keeping taxes on business income lower for independent contractors and pass-through business owners. Allowing the lower rate to expire in 2025 would be grossly unfair and harmful to most of the nation’s business enterprises and the economy.

Preserving 1031 like-kind exchanges can support commercial real estate investment and economic development. Some in Congress believe that like-kind exchanges are an unwarranted “loophole.” In reality, they accelerate economic growth by preventing properties from languishing. Small investors hold the great majority of properties exchanged, and in 89% of the exchanges, clients invested significant additional capital into the property, creating jobs and increasing economic growth.

Congress can also incentivize homeownership by increasing the $10,000 cap on the state and local tax (SALT) deduction and eliminating the penalty for married taxpayers filing jointly, who have the same maximum deduction as single filers.

Shannon McGahn, NAR's Senior Vice President of Government Affairs in front the US Capitol

$40,000

A tax credit of just $40,000 would yield 500,000 homes built or substantially rehabilitated, nearly 800,000 jobs, and almost $30 billion in federal, state, and local tax revenues and fees in just ten years

Executive Action Now

In 2022, the Biden Administration rolled out an action plan on affordable housing with many policy ideas advocated by NAR and supported by our research.

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Executive agencies have the power to act quickly on rules to promote homeownership.

We have seen some big wins on that front, like the reduction in FHA's annual mortgage insurance premium, which will save new homeowners an average of $800 annually.

The White House and FHA recently increased loan limits for Title One manufactured homes, and the FHA is working on expanding their 203(k) renovation loan program to make it easier for buyers to purchase homes that need renovations.

The FHA also increased its multifamily large loan limit threshold, its first increase since 2014.

The FHA and VA have both taken several steps to address shortfalls in assumable mortgages, which are a tool for putting homes on the market and making them affordable to new owners.

The VA recently updated its policies to allow military and veteran buyers to compensate their agents directly. It was the only loan program that specifically banned that practice. This action will provide military buyers with more and better financing options.

The FHA also allowed buyers to use rental payments towards their loan qualifications when they lack credit history. Alternative credit scoring can help renters break through another barrier to homeownership.

Low angle view of the White House front lawn in late winter, Washington DC

$800

The reduction in FHA's annual mortgage insurance premium will save new homeowners an average of $800 annually

Time to Rally

You don’t have to go any further than the GI Bill—celebrating its 80th anniversary this year—to see what government action can do to promote homeownership and unleash generational prosperity for the American middle class.

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The VA’s Home Loan Guaranty Program has helped more than 28 million service members and their families become homeowners over the decades—contributing $3.9 trillion to the U.S. economy.

About 11% of new mortgages are VA loans, and that number has been on the rise since the Great Recession. Nearly 60% of VA purchase loans in fiscal year 2023 went to millennial and Generation Z buyers.

NAR has long advocated for this program’s expansion, especially for minority veterans excluded from its original benefits.

When this nation takes a stand to make housing more affordable, accessible, and available, it benefits both individual Americans and the American economy. Many solutions have bipartisan support, and it’s time to rally.

Woman in military fatigues and child walking toward house

28 Million

The VA’s Home Loan Guaranty Program has helped more than 28 million service members and their families become homeowners over the decades—contributing $3.9 trillion to the U.S. economy

Dive deeper into NAR’s legislative priorities at FlyIn.Realtor

Shannon McGahn

Shannon McGahn

Shannon McGahn is the Chief Advocacy Officer for the National Association of REALTORS®, which represents more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.