Many people believe the American dream of owning a home is becoming further and further out of reach. Market data paints a striking picture. As home prices rapidly rose in the wake of the COVID-19 pandemic, increases in median income failed to keep pace. Whereas a market standard is that homeownership costs generally should not exceed a 30 percent share of income, Federal Reserve Bank of Atlanta data suggests that the median household income share of median homeownership costs is now approximately 43 percent. The contributing drivers have ebbed and flowed: high interest rates on mortgage loans peaked as a key affordability factor in 2023, but rates have begun moderating, with Freddie Mac reporting in its Primary Mortgage Market Survey in July 2026 a 6.55 percent weekly average, 0.20 percentage points down from a fifty-two-week high. However, the S&P Cotality Case-Shiller U.S. National Home Price Index continues to climb.
The rise in home price appreciation is significantly driven by an imbalance of supply. Data published by the Joint Center for Housing Studies of Harvard University shows that home inventories for sale have modestly risen since the pandemic, but recent upticks in inventory are partially attributable to average time on the market for sale increasing as well. In any event, existing home inventory for sale remains below pre-pandemic levels. New housing starts likewise have increased modestly but not above the levels prior to the 2008 financial crisis. At the same time, current homeowners are staying in their homes longer. Redfin data placed the average time U.S. homeowners stay in their homes at 12 years in 2025, almost double the length before the financial crisis of 6.5 years. Furthermore, homeowner turnover (i.e., home sales per 1,000 homes) measured only 2.77 percent, one of the lowest levels since the mid-1990s. Factors contributing to longer tenure and lower turnover may include home price affordability, retaining lower interests on existing mortgage loans, and economic uncertainty.
Existing housing policy is likely driving these trends and can also be tailored to address them. For example, in California, Proposition 13 amended the state constitution to limit year-over-year increases in property taxes, and for nearly fifty years, these increases have not kept pace with the market value of the properties. Instead, Proposition 13 generally limits reassessment to the time a home sells, creating an incentive for established homeowners to stay. This is consistent with observed homeowner tenure patterns; whereas the national average homeowner tenure is about twelve years, California’s average is about twenty years. On the other hand, numerous proposals have aimed to combat supply-side housing constraints, including the Trump administration’s executive order to prevent “large institutional investors” from acquiring single-family homes, efforts to “upzone” existing neighborhoods to allow for more density, local neighborhood stabilization programs to address blight, and housing subsidized through nonprofit community land trusts and low-income housing tax credits.
The housing finance industry and agencies are also addressing affordability through demand-side affordability products. The proposal that has gotten the most public attention in the last year has been the Trump administration’s fifty-year fixed rate mortgage. Although the true affordability of a fifty-year mortgage product can be scrutinized, lenders and government agencies have other tools to make homeownership more affordable. These include assumable mortgages securing FHA (Federal Housing Administration), VA (U.S. Department of Veterans Affairs), and other loans that need not be paid off at sale; loans that have low down payment requirements (such as the Fannie Mae HomeReady program) or no down payment (such as VA and U.S. Department of Agriculture loans); down payment assistance grants such as those offered by Federal Home Loan Banks and local nonprofits; and “piggyback” second mortgage programs (such as the Freddie Mac Affordable Seconds program) that allow borrowers to take a first mortgage at a loan to value ratio low enough to avoid private mortgage insurance and a simultaneous second mortgage to fund a portion of the down payment.
There are potential policy-based solutions to address both supply- and demand-related challenges in housing affordability, including the expansive reforms in the 21st Century ROAD to Housing Act enacted in July 2026. While these reforms will take time to implement, the Act includes initiatives to study and expand access to small-dollar mortgage loans, raise awareness of federally backed programs like VA lending, increase housing supply, and support public welfare investments in affordable housing. On the other hand, existing law also includes guardrails to limit features that might potentially harm borrowers. These guardrails include the requirement that creditors assess borrowers’ ability to repay their mortgage loans. Many lenders comply with the ability-to-repay rules by originating only so-called “qualified mortgages,” which cannot include features such as negative amortization, interest-only payments, balloon payments, terms in excess of thirty years, or points and fees in excess of 3 percent of the loan amount. Furthermore, both the Home Ownership and Equity Protection Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act include additional restrictions on “higher-priced mortgage loans” and “high-cost mortgages.”
Another consideration is whether affordability products are offered where they are needed most. Federal and state credit and housing discrimination laws, such as the Equal Credit Opportunity Act and the Fair Housing Act, are designed not just to increase access to credit but also to prevent predatory lending affecting protected classes. Key exceptions include special purpose credit programs (“SPCPs”), which historically could be targeted to benefit certain identified classes who might not otherwise obtain credit on favorable terms and have previously been applied to make housing more affordable. Recent rulemaking by the Consumer Financial Protection Bureau, however, limits SPCPs as an option for certain protected classes. And for banks that are subject to the Community Reinvestment Act, their penetration into low- and moderate-income neighborhoods through home lending, community development investments in housing-related programs, and flexible and innovative products all contribute to the evaluation of whether they are meeting the needs of their communities. Affordable housing is poised to remain at the forefront of policy debate for years to come.
This article is related to a CLE program that took place during the ABA Business Law Section’s 2026 Spring Meeting. The panelists have diverse viewpoints, so not all opinions expressed here are attributable to all panelists. To learn more about this topic, listen to a recording of the program, free for members.
