The Federal Housing Crisis: Navigating Policy Shifts and State-Level Solutions
Summary
Supply and demand are the main issues impacting the United States’s housing supply. With homelessness at the highest levels in recent history and the need for about seven million housing units to meet demand (100,000 in Pennsylvania alone), there is bipartisan agreement that this is a national crisis.
How to solve it remains partisan.
On the campaign trail, President Trump vowed to tackle housing affordability as part of his strategy to address inflation by reducing regulations and opening up portions of federal land for large-scale housing construction projects. Trump has also committed to pressuring the Federal Reserve to cut interest rates. It is important to keep in mind that most zoning and regulatory policies are done at the state and local levels.
In stark contrast to his stated goal of addressing housing affordability, Trump's first administration drastically reduced the Department of Housing and Urban Development (HUD) budget. President Trump has pledged to continue these budget cuts during his second term. As a result, homeownership advocates are gearing up to protect many policies and programs expanded under the Biden administration, such as the HOME Investment Partnerships Program (flexible funds that municipalities use to increase housing supply for low-income individuals) and fair housing policies.
Even with the prospect of significant cuts at the federal level, a meaningful impact on housing availability and affordability is still within reach at the state and local levels.
What Could Change
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Potential government budget cuts could place the Department of Housing and Urban Development “on the chopping block.” During the first Trump administration, his proposed budgets slashed critical housing programs such as the Community Development Block Grants and Housing Choice Voucher program. However, the Republican-controlled Congress stepped in to save the programs in 2017 and continued to increase funding. Still, the future of these programs and others remains uncertain in the second Trump administration. There is anticipation that President Trump may not fund many of the programs in his first budget, and Congress will need to push back again.
In addition to defunding programs, the Project 2025 policy book calls for many of HUD’s programs to consolidate or see responsibilities transferred to states and other federal agencies, potentially further reducing federal investment and placing the onus on states and local entities.
Trump’s HUD secretary nominee, Scott Turner, laid out his vision for HUD in his confirmation hearing: expanding opportunity zones, adding work requirements for recipients of HUD funds, and evicting mixed-status households (in which one family member is an undocumented immigrant). When asked about defending programs that the Trump Administration may cut, Mr. Turner was evasive. Mr Turner has not yet been confirmed as HUD Secretary by the full senate.
The first Trump administration focused heavily on expanding opportunity zones, which used tax incentives to attract private investment into low-income, marginalized communities. Since their creation in the 2017 Tax Cuts and Jobs Act, opportunity zones have helped attract new investors and increased market-based affordable housing. Given that the HUD Secretary nominee previously oversaw these zones, there is an expectation that the Trump Administration will continue using opportunity zones as a key policy tool.
Additional investments by the Trump administration may be in programs such as HUD’s Family-Self Sufficiency, as these initiatives have bipartisan support. This program, run by local housing authorities, is open to families in the housing choice voucher program, which provides financial incentives for participants to save money.
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As Trump did in his first administration—and as recommended in Project 2025—he is expected to roll back many rules regarding fair housing, including the Affirmatively Furthering Fair Housing, which requires organizations, states, and local governments that receive federal funds from HUD to take meaningful action in combatting discrimination and segregation and promoting housing equality. There is also anticipation that the administration will not enforce the Fair Housing and Equal Opportunity Act. Advocates are concerned that this will lead to more housing discrimination.
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While not directly tied to affordable housing, unintended consequences could stem from the Trump Administration’s immigration and tariff policies rolled out over the past two weeks. Immigration policies continue to create uncertainty in many areas of the United States economy, including construction. According to the National Association of Home Builders (NAHB), immigrants comprise one in four construction workers. A potential scarcity of workers could significantly impact the cost of housing as labor costs and builders’ ability to bring units online could increase.
Trump’s stance on tariffs has also added uncertainty to the housing market. Traditionally, increasing tariffs on goods such as lumber could increase building costs, which consumers would bear the brunt of.
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The Trump Administration has expressed continued interest in reducing regulatory burdens, citing some studies that have attributed up to 25% of rising housing costs to regulatory issues. One of President Trump’s first executive orders directed agencies to examine regulatory burdens impacting housing construction and supply. Additional federal review could include permitting and inspection fees, which are generally controlled at the state and local levels.
One issue the federal government does control is mortgages through Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs. The Trump Administration could explore ways to reduce the fees associated with getting a mortgage as a potential avenue to ease the financial burden of owning a home. Another lever the federal government can use is lowering the cost of homeowner's insurance.
Impact on Philadelphia and Pennsylvania
Through various grants, block funds, and competitive programs, HUD funds significantly impact Pennsylvania citizens. Many of these funds go directly to counties and municipalities based on population and the number of homeless individuals. These funds impact programs such as Community Development Block Grants (CDBG), Emergency Solutions Grants (ESG), and Continuum of Care (CoC). Pennsylvania has 43 agencies operating in 64 counties that receive Community Development Grant Block funding, and in 2024, HUD sent over $800 million to Pennsylvania counties under the Housing Choice Voucher program alone. Funds like these directly affect the state’s economy and residents' access to affordable housing. However, there is anticipation that the Trump administration will propose reducing or consolidating many of these programs.
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In keeping with national trends, Governor Shapiro has prioritized housing for his administration. He is expected to release a comprehensive Housing Action Plan in the coming months, linking the availability and affordability of housing to the Commonwealth’s economic competitiveness. With the likely reduction of federal funds under the Trump administration, Pennsylvania will need to increase state funding for critical housing programs like the Whole Home Repair Program and the Pennsylvania Housing Affordability and Rehabilitation Enhancement Fund (PHARE), which provide essential resources for low-income homeowners and renters.
Pennsylvania’s ability to maintain and expand affordable housing will depend on how state lawmakers respond to potential federal cuts. Governor Shapiro’s February 4 budget proposal previewed his Housing Action Plan and called for increases to these programs, emphasizing the need for bipartisan support to ensure housing stability. As the federal landscape shifts, Pennsylvania must adjust its policies and funding strategies to meet growing housing needs and offset challenges posed by federal housing policies.
As home to some of the largest producers of manufactured homes in the U.S., Pennsylvania can also be a national leader in contributing to the supply of housing. Project 2025 underscores the need to cut through regulatory red tape to expand access to manufactured homes. One key recommendation is updating the HUD Code definition of manufactured housing by eliminating the permanent chassis requirement. This change could make building and placing manufactured homes easier in communities where zoning and regulatory barriers have previously limited their use.
During his confirmation hearing, Secretary of Housing nominee Scott Turner pledged to review this definition, a move that could significantly boost the availability of affordable homes. However, this shift in federal policy may come with challenges, particularly regarding local zoning laws and state funding for housing initiatives.
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The Philadelphia Housing Authority receives over 90% of its housing budget from HUD to build new units and address homelessness. Current initiatives that have received HUD funding include the Sharswood-Blumberg neighborhood transformation plan and the Bartram Village Redevelopment. Each of these projects was awarded funds through the Choice Neighborhoods Implementation Grant. With the anticipation of a reduction of federal funds, Philadelphia will most likely not see new additional funds for large-scale housing projects. However, the Philadelphia Housing Authority has successfully utilized public-private partnerships to continue its success in revitalizing neighborhoods.
Even before the Trump administration, Philadelphia City Council and Mayor Parker’s Administration have prioritized affordable housing. Mayor Parker has a stated goal of building, rehabilitating, and restoring 30,000 housing units. In recent years, Philadelphia has utilized its funding streams, such as Turn the Key, to increase its affordable housing supply. The City Council has recently proposed bills to proactively implement zoning reform and potential policies encouraging affordable housing and cutting regulations.
Conclusion
In conclusion, while the federal government’s stance on housing policy remains uncertain, particularly with the potential for budget cuts and regulatory changes under the Trump administration, state and local governments hold the key to addressing the housing crisis. For Pennsylvania and Philadelphia, the path forward will require creative solutions, increased state funding, and proactive local policies to ensure the continued development of affordable housing. By leveraging federal grants, fostering public-private partnerships, and exploring innovative approaches to zoning and manufacturing housing, both the state and city can mitigate the impacts of federal cuts and help meet the growing demand for housing. The time to act is now, and bipartisan support will be essential to securing housing stability for all.
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