How Trump is Planning to Address the Growing Affordability Crisis

Affordability is one of the top issues facing Americans today. As such, President Donald Trump has made it one of the focal points of his domestic agenda. The president addressed the issue of affordability in a speech on Tuesday in Detroit.

While Trump has a tendency to float big ideas that need the approval of Congress, that does not stop him from trying to exercise his executive power to push through his agenda. Here is a closer look at the ideas presented by the president in recent weeks, as well as what obstacles they may face to become a reality.

Cap Credit Card Interest Rates at 10%

Trump recently brought up an idea that he had promised during his 2024 campaign, when he said that he was going to cap credit card interest rates at 10%. The president made the announcement last week, saying that the cap would go into effect on January 20. He went on to say that companies that did not comply with the cap would be in violation of the law.

Most economic experts do not agree that this is a good approach to the affordability crisis. Andy Laperriere, head of US policy research at Piper Sandler, said that a 10% limit would make it more difficult for those with lower credit scores to qualify for credit cards. He also said that banks might have to lower their borrowing limits or raise annual fees in order to make up for the lost revenue.

According to Bankrate, the average interest rate on credit cards is now hovering just under 20%. Several members of the U.S. banking industry echoed Laperriere's beliefs, saying that a cap would reduce credit availability, proving to be devastating for both consumers and small business owners.

Despite the skepticism from most people in the financial industry, some of Trump's most vocal detractors support the idea. For example, Democratic Rep. Alexandria Ocasio-Cortez, Sen. Bernie Sanders, and Sen Elizabeth Warren all support the idea of a cap. Conversely, some of the president's typical allies are not in support of the idea, including Senate Majority Leader John Thune.

Buy Mortgage Bonds

Although affordability is an issue across the board, the cost of housing is particularly worrisome to leaders on both sides of the aisle. The president recently advocated trying to make housing more affordable by purchasing $200 billion in mortgage bonds. In a post last week on his Truth Social account, Trump said that buying the bonds via Fannie Mae and Freddie Mac would send mortgage rates and monthly payments down, putting home ownership in reach for more Americans.

Mortgage rates have slipped about 0.2 percentage points since the announcement. While every little bit helps, this change is not enough to make a significant difference. The president does have the power to increase Freddie Mac and Fannie Mae's portfolios; however, it is not likely to be a popular idea across both the financial and political spectrums. The lack of widespread support makes it unlikely that the president will push through with the plan.

Prohibit Large Institutional Investors From Purchasing Single-family Homes

The Trump administration is floating several ideas with the end goal of bringing down the cost of housing. Another one of these ideas is to ban large institutional investors from purchasing more single-family homes. Large investors are defined as those who own over 1,000 properties. This segment controls over 10% of single-family rental housing in several urban markets.

The president said last week that he is going to take steps to prevent these types of investors from purchasing more properties by asking Congress to codify his idea. Housing experts are quick to point out that these investors are getting rid of their properties in recent years, due to real estate not being as sound an investment as it was 10 years ago. However, this is another one of Trump's ideas that enjoys support from Democrats and Republicans alike, making it more likely to gain steam. Whether it makes housing more affordable would be the bigger question.

Issue $2,000 Tariff Rebates

Lastly, the White House has dangled the idea of sending $2,000 tariff refund checks to some lower and moderate-end income Americans in an effort to put more money in their pockets. Although this idea would undoubtedly be popular with those on the receiving end of the checks, the dollars simply do not add up.

According to estimates from the Tax Foundation, the government is not collecting the tariff revenue needed to support the rebates. Laperriere noted that there is no widespread support within the GOP to put this plan into action. The worry is that the rebate checks would send inflation rates even higher, similar to what happened when the COVID-19 stimulus checks were issued.

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