Trump signs 2 executive orders to improve home affordability

On Friday, President Trump signed two executive orders related to making housing more affordable for Americans. The first focuses on increasing home construction, and the second aims to help small banks extend mortgage loans.

Since Trump began his second term, I have covered his ideas to improve home affordability, such as creating 50-year mortgages and portable mortgages. (The 50-year mortgage would make buying a home cheaper in the short term but much more expensive in the long run. Portable mortgages exist in the U.K. and Canada but would be difficult to implement in the U.S., to say the least.)

Friday’s executive orders are Trump’s latest attempt to shift focus to his efforts on housing affordability before the midterm elections.

One order focuses on revising environmental regulations to build homes faster

Why does Trump focus on home construction in his first executive order? Because slow construction leads to less inventory, resulting in more demand than supply. When there are more buyers than homes for sale, houses can sell for more. Ideally, more new-construction homes would make houses less expensive.

For years, new construction has struggled to keep up with homebuyer demand. According to a Zillow report released on Thursday, year-over-year single-family home constructions decreased by 6.5% in January. Speeding up new-home construction could benefit many buyers.

Related: Iran war causes mortgage rate surge

The executive order directs federal agencies to update a number of the regulations currently in place that slow down construction, specifically environmental regulations. “The Order directs the EPA Administrator and the Secretary of the Army to review and revise stormwater, wetlands, and other water-related permitting requirements to reduce building and ownership costs, streamline Federal regulatory approvals, and increase home insurability,” the White House stated in a fact sheet.

The order instructs agencies to remove or change “overly burdensome” housing requirements related to water, energy, and alternative energy. It asks federal agencies to offer state and local governments incentives to make the construction permit process faster, one item on the list being to “curtail ‘green’ building codes.”

The second order aims to help more community banks offer mortgages

Trump’s second executive order calls for the Consumer Financial Protection Bureau (CFPB) to alter its regulations so that more lenders — particularly smaller, community banks — can provide mortgages to its customers.

“Community banks and smaller lenders have retreated from mortgage markets they once served, unable to absorb the compliance costs associated with making, servicing, or holding a mortgage made to community borrowers,” the White House wrote in a fact sheet.

Among its list of demands, the order asks for streamlined regulations, alternative valuation models to make home appraisals faster and less expensive, and more digital tools to speed up the home-buying timeline.

The White House claims that by making it easier for small banks to offer home loans, there will be less competition between lenders, mortgage rates would go down, and it would help low-to-moderate income borrowers, first-time home buyers, and those buying in rural areas qualify for mortgages.

More on the housing market:

The Iran war causes mortgage rates to surgeExisting-home sales exceed Goldman Sachs’ expectationsAARP quietly releases key guidance on mortgage rates, real estateConsidering the orders’ potential ramifications

I felt conflicted as I read through the executive orders’ fact sheets, because I care deeply about both affordable housing and the environment. It’s crucial to think about how these changes could play out in reality.

Large chunks of these orders focus on cutting through red tape to speed up the housing construction and home-buying processes. However, cutting red tape also leaves more room for oversights and errors.By overturning environmental regulations, it’s possible homes will be built in areas that aren’t necessarily safe.If federal agencies update wetland, stormwater, and water-related permitting rules, will houses be built in areas that are more likely to flood?While alternative valuation models, such as desktop and hybrid appraisals, are faster and less expensive than traditional, in-person ones, they’re often less accurate. If an AVM results in a low appraisal, a homebuyer may not qualify for a mortgage large enough to buy the house.The White House wrote, “Over more than a decade, a wave of regulatory changes — driven largely by the Dodd-Frank Act and subsequent rulemaking — has dramatically increased the cost and complexity of accessing a mortgage.” The Dodd-Frank Act was enacted after the 2008 financial crisis to protect consumers from deceptive lending practices. Would becoming laxer about regulations make more homeowners more vulnerable to predatory lending?

Related: Iran war causes mortgage rate surge

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