During his run for office last year, one of President Donald Trump’s key proposals to improve housing affordability was to give home builders access to federally owned land. While the GOP is still looking for ways to put that proposal into action, its ability to solve the housing market’s inventory problem may be limited.
On one hand, most estimates find that the U.S. has a housing shortage of roughly 4 million units, so anything that encourages new construction and adds to the supply of homes should help bring down prices. That includes ideas to build on government-owned national parks, conservation areas, wildlife refuges and the like.
Lisa Sturtevant, chief economist at Bright MLS, says that land typically accounts for a significant portion of overall construction costs — which includes everything from materials and labor to permits and project management fees. Making public lands available for development at a reasonable cost “is one strategy that could get some new housing built,” she says.
The idea is popular with the housing industry because one of the biggest roadblocks to new construction in many parts of the country is a lack of available land. Advocates say building on federal lands could increase housing affordability and stimulate local economic development by creating new jobs. Another perk is that it would generate revenue the government could use to fund other initiatives (or cover the fiscal gap created by tax cuts).
However, a recent study by Realtor.com suggests that while Trump’s proposal could alleviate the inventory issue in some areas, it wouldn’t be a one-size-fits-all fix. One reason: The markets that are most in need of more housing would be the least likely to benefit.
“The most severe shortages exist in places like the Northeast, where developable federal land is virtually non-existent,” Danielle Hale, chief economist at Realtor.com, wrote in the report.
The lands being eyed for sale are those owned and primarily managed by four federal agencies: the Bureau of Land Management (BLM), the U.S. Forest Service, the U.S. Fish and Wildlife Service, and the National Parks Service. As it turns out, most of this land — about 640 million acres — is located in Alaska and Western states like Arizona, Montana and Nevada.
These areas either already have an adequate housing supply or lack the necessary infrastructure, such as power and water supply, roads, schools, jobs and so on, to support new housing. So allowing new construction on these lands may not be worthwhile for builders.
That’s not to say that using some federal land wouldn’t be a step forward.
Hale suggested that making federal land available to home builders could be part of the solution to the inventory shortage, provided it is located in areas with a higher demand for homes than supply. An example of the successful sale of public lands near an in-demand market occurred earlier this year in Las Vegas, when the BLM sold more than 40 acres of land for development at auction.
But to solve the nationwide problem, experts say policymakers need to take a more holistic approach. The long-term solution likely includes zoning and land-use changes, as well as infrastructure improvements in areas that are already close to jobs, schools and other amenities.
How regulatory changes impact housing inventory
Making the most of existing land requires changing local use and zoning regulations to allow for increased housing density in existing markets — in other words, moving away from single-family plots and building multifamily housing instead.
According to the Realtor.com report, 90 acres of land could support up to 5,000 new housing units if the development density of Manhattan is used, where high-rises and multifamily buildings are the rule. Those same 90 acres would yield 20 homes at the development density of Clark County, Nevada, where single-family homes predominate.
However, increasing housing density and building new homes by itself aren’t enough to ease the housing supply issue. Building new housing can take anywhere from six months to over a year, so the federal-lands pitch is not a quick fix, either.
“It would likely still be insufficient to address affordability issues for homebuyers, and it certainly would not help in the near term,” says Sturtevant.
In addition to increasing housing density and encouraging new construction, Sturtevant says other incentives could grow the supply of existing homes for sale. One such solution is the increase in the state and local tax deduction, also known as SALT, that was recently enacted as part of the One Big Beautiful Bill Act. The legislation raised the SALT deduction from $10,000 to $40,000. The increased cap means that home sellers can keep a larger portion of their home sale profits, which Sturtevant says could nudge some homeowners to put their homes on the market and move to a lower-cost area.
Another possible solution, and one that hasn’t been addressed in any proposed legislation, is to provide a tax incentive for homeowners who sell their properties to first-time homebuyers. The added tax break could help bring more supply of existing homes to the market.
The current lack of inventory in the housing market has been a long time in the making. As such, there is no single solution that will solve the problem overnight. Instead, it will take a combination of incentives from the federal and state governments — and years of effort — to find an answer that works for every market in the country.
“Opening up federal land for housing development may generate incremental supply… but it’s not a silver bullet,” Hale said. “[We’ve] got to make better use of the land we already have.”
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