Harry Geels: Trump, too, wants to solve the housing crisis with market interventions

January 13, 2026

_{This column was originally written in Dutch. This is an English translation.}

By Harry Geels

Last week, President Donald Trump announced two striking interventions that make it clear that he is not a free-market thinker, but a mercantilist administrator who intervenes on a large scale. This time, he wants to stimulate the housing market with his interventions, with counterproductive results, incidentally.

On Truth Social, Donald Trump announced that he had instructed his representatives to purchase £200 billion worth of mortgage-backed securities (MBS) through Fannie Mae and Freddie Mac, with the aim of reducing mortgage interest rates and monthly payments and making homes more affordable. He also announced his intention to prohibit institutional buyers from investing in single-family homes. “People live in houses, not corporations,” he stated, calling on Congress to enshrine this in legislation.

Problems in the housing markets

In many countries, high house prices and rents are a topic of debate. Housing has become virtually unaffordable. Although there are differences between countries in terms of population growth and legislation, the problems are broadly due to the monetary and banking policies that have been pursued since the 1980s. Since then, housing has become increasingly part of the financial system. The financial and real worlds have not kept pace with each other.

Simply put, if more and more people arrive and money is “made”, house prices will rise unless the number of new homes keeps pace with the financial world. Over the past decades, the property markets have been a lucrative revenue model for banks. What Trump is now proposing does not help. His ideas do not address the essence of the problem. Just like most of the measures taken by Hugo de Jonge here, in fact. In fact, they are likely to be counterproductive.

Buying up mortgage bonds is a soft form of quantitative easing

Let's start with buying up mortgage bonds. This is reminiscent of the Fed's large-scale purchases of mortgage bonds during the credit crisis, a hard form of quantitative easing. The idea now is that Fannie Mae and Freddie Mac – so-called Government-Sponsored Enterprises (GSEs), private companies with a public mission – will do this from their own cash reserves, possibly with additional loans. The aim is to push down interest rates. But lower interest rates actually mean more expensive assets.

Excluding institutional investors

Excluding institutional investors is a serious blow to the functioning of the free market. But the big question is whether it helps. Institutional investors are often the driving force behind housing construction. Furthermore, there are several large investors, especially pension funds, that apply sustainability criteria to housing, not only in terms of climate, but also affordability.

Furthermore, in the US, the debate surrounding Single-Family Rental (SFR) is more nuanced than the slogan “People live in homes, not corporations” suggests. According to the Government Accountability Office (GAO), institutional investors increased significantly after 2008, but not everywhere (their share is particularly high in certain Sun Belt markets). According to the St. Louis Fed, large institutions represent a small fraction. Most SFRs are owned by small (‘mom and pop’) investors. Excluding institutions would therefore be too drastic a measure.

Inefficient (property) markets

A more effective approach is to use free markets to give institutions incentives to build more. A major problem in recent decades has been that, due to all the government intervention and the lack of a free market, there has been no incentive to build more cheaply. Whereas we build cars through mass production, there is still much to be gained in the construction industry. Another problem is that inefficient property markets lead to a lot of land speculation, a kind of front-running on government policy. Incidentally, this is not only happening in the US, but also in other countries, such as the Netherlands.

What does this mean?

Instead of strengthening market forces with supply policies or tax incentives, Trump is opting for (even more) drastic interventions. Trump is once again proving that he is not a liberal capitalist thinker, but a mercantilist oligarch who wants to influence large markets through direct government intervention, similar to recent Dutch measures under Hugo de Jonge. Both men advocate symptomatic measures without structural reform of the system.

Trump's approach is a large-scale capital market intervention in the housing market, while the real problem – too few homes, too much demand and monetary and banking tension – remains untouched. Lowering mortgage rates (and keeping out “foreigners”) sounds like “tough action”, but it doesn't change the core issue. On the contrary, it reinforces government interference over market forces. It's yet another example of my previously stated position that real market forces are becoming increasingly distant.
 

This article contains the personal opinion of Harry Geels

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