The Trump Administration Wants to Turn the Housing Crisis into a Retirement Crisis, Too

In his 1944 State of the Union address, Franklin D. Roosevelt laid out the Second Bill of Rights, a declaration of the economic conditions that all people have a right to enjoy. Among these were the rights to shelter and social insurance, or in FDR’s words: “the right of every family to a decent home,” and “adequate protection from the economic fears of old age, sickness, accident, and unemployment.”

We’re still fighting for a government that can secure these rights—and it’s clear that the Trump administration will not be delivering it. Last week, President Trump teased his housing affordability plans at the World Economic Forum summit in Davos, Switzerland, saying that “Homes are built for people, not for corporations.” We agree. But even if we believed his stated intentions—which don’t comport with the administration’s track record of making the wealthy wealthier and the powerful more powerful—Trump’s actual proposals will neither adequately tackle the housing affordability crisis nor protect Americans in their old age.

One recent proposal the administration floated would let prospective homebuyers use the money saved in their 401(k) retirement accounts toward a down payment on a house. The plan, which would allow for penalty-free early withdrawal of funds, was touted as a solution to the housing affordability crisis, when in reality it’s a surrender to unaffordable housing. Trump has already walked back his support for the idea, but it exemplified the crux of his administration’s economic philosophy: Don’t fix broken markets, just let Americans gamble away their futures to participate in them.

Trump has already walked back his support for the idea, but it exemplified the crux of his administration’s economic philosophy: Don’t fix broken markets, just let Americans gamble away their futures to participate in them.

“Raid your 401k to buy an overpriced house” is a proposal that, first of all, only applies to the sliver of Americans who have significant savings in their 401(k) account, if they have an account at all. The lowest-income earners, for whom homeownership is the furthest out of reach, have significantly less saved than workers with higher incomes. And more than 40 percent of full-time and nearly 80 percent of part-time privately employed workers lack access to any retirement account at all. 

This proposal also fails to address the long list of root causes of housing unaffordability. Decades of restrictive zoning and local opposition have limited additional supply in many of the most expensive markets. In addition, the administration’s immigration crackdown and ill-conceived tariff policy increase housing costs by limiting the labor supply and increasing the cost of imported building materials. Combine this with market speculators financializing housing in many cities, and you have the recipe for a housing crisis.

Trump’s proposals have so far failed to include serious efforts to fix this market, particularly by increasing the supply of housing—no incentives for local zoning reform, no attempts to stimulate construction (which his erratic economy has stifled), and no federal investments in public housing. As Roosevelt Institute fellow Ned Resnikoff explained in a recent report, addressing demand without also addressing supply could make market conditions worse: “[I]n cities with severe housing shortages, increasing rental subsidies for low-income tenants may simply lead to greater competition for apartments, allowing landlords to ratchet up their rents,” he writes.

The 401(k) plan would actively worsen the broader crisis of economic insecurity on multiple levels. For individuals, in addition to “robbing Peter to pay Paul”—stealing from people’s retirement to pay for housing—it would also double down on risk. If housing prices fall, homeowners who have raided their 401(k) would have little else to rely on. At the market level, the proposal subsidizes demand without boosting supply, which is a recipe to push prices even higher—benefiting sellers and banks, not buyers. And on a societal level, it kicks the retirement security crisis down the road and ensures that the next generation of seniors have depleted savings. In sum, this shortsighted proposal manages to turn the housing crisis into a retirement crisis. This is the Trump administration playbook: sidestep structural reform in favor of shifting risk onto individuals.

Trump’s willingness to use executive power has drawn comparisons to that of President Roosevelt. But to no one’s surprise, the administration’s 401(k) housing proposal could not be further from a Rooseveltian vision of government. Take FDR’s transformative retirement plan, Social Security. Part of the New Deal, the Social Security program was a direct solution to the crisis of elderly poverty that also ensured lasting economic security for all Americans. It tackled an immediate problem, removed individual risk by creating social insurance, and built a collective governance infrastructure that shaped an economy that could actually work for people. It transformed the common consensus of what government can and should do: provide economic security to the public. Trump’s ambitions, on the other hand, burden individuals with more risk to compensate for broken markets.

So what would good housing policies that lower costs for homeowners and renters actually look like? We can learn again from FDR (indeed, the New Deal era was also the beginning of federally funded public housing in the US): build infrastructure that reduces risk for everyday Americans and strengthens economic security.

This could mean major federal investment in housing supply (including various models of development subsidy and social housing at all levels of government, as well as ending wrong-headed immigration enforcement and overbroad tariff policies), strengthening tenants’ rights and rent regulations, providing down payment assistance that doesn’t cannibalize other forms of financial security, and incentivizing local-level zoning reforms to allow more, denser, and deeply affordable housing. In short, these are policies that address the problem and actually try to solve it—not policies that help people cope with the forces of an unfair economy that leaders pretend are unchangeable.

Trump’s economic advisors want Americans to believe that drawing down your retirement fund is a smart way to afford to buy a house. They peddle this as an “affordability” policy, but it’s actually an admission of defeat: We won’t fix the housing market, so go ahead and cannibalize your retirement to pay inflated prices. While FDR’s transformative Social Security program made retirement more secure, the Trump team appeared ready to ask Americans to gamble it away.

The choice is clear. Will we build an economy that works for the working class, or one where we have to rob our futures to survive the present?