Washington Keeps Fixing Housing the Same Way

Housing affordability is back at the center of the conversation in Washington.

The proposals vary—allowing retirement funds like 401(k)s to be tapped for down payments, directing Fannie Mae and Freddie Mac to purchase hundreds of billions in mortgage-backed securities to push rates lower, floating 40- and even 50-year mortgage terms, and restricting large investors from buying existing homes.

Different tools, same objective: expand purchasing power without expanding supply.

To understand why these ideas keep resurfacing—and why they rarely solve affordability—you have to look at what actually happened to housing over the past five years.

The Market Froze

When mortgage rates doubled, the housing market froze.

Listings thinned, transactions fell sharply, and prices stayed elevated. Existing home sales dropped roughly 30% from their 2021 peak, while inventory remained far below pre-pandemic levels.

Over that same period, national home prices rose by nearly half from pre-COVID levels, even as borrowing costs surged. Instead of correcting, the market locked.

Why? Millions of homeowners are sitting on mortgages below 4%. As rates rose, sellers didn’t cut prices—they stayed put. Supply vanished, buyers pulled back, volume collapsed, and prices held. The result wasn’t a reset. It was paralysis.

The Villain Fallacy

That paralysis has fueled a search for villains. Institutional investors dominate headlines, but not the market. Large investors—those owning more than 1,000 homes—account for roughly 1–3% of purchases nationally, and their share has declined as rates rose.

Even critics of institutional ownership acknowledge that banning these buyers wouldn’t fix affordability in a market short millions of homes. The focus persists because it’s politically convenient, not because it addresses the constraint.

The real problem is supply.

But supply is slow, local, and politically difficult. Zoning reform, density increases, and permitting changes take years—and risk price declines policymakers are reluctant to tolerate. So policy gravitates toward the lever that moves quickly: Financing.

Lower rates through bond purchases. Longer loan terms that stretch payments across decades. Each proposal looks different on paper, but the effect is the same: purchasing power rises without adding homes.

In a supply-constrained market, cheaper money doesn’t make housing cheaper. It gets capitalized into prices. That’s why a 6% mortgage—historically normal—now feels punitive. The issue isn’t just the rate; it’s the price level the rate is being applied to, especially as insurance, property taxes, and HOA costs continue to rise.

The New York Exception

Here’s where the story diverges.

New York City did not experience a uniform post-pandemic price surge. In many segments—particularly Manhattan co-ops and older condominium stock—prices today often remain below their 2016 peaks in nominal terms.

While much of the country ran hot, New York absorbed years of local headwinds: the SALT deduction cap, higher transfer taxes, and the shift to remote work. Inventory exists. Sellers are realistic.

For buyers in Manhattan and Brooklyn, that matters. You’re not stepping into a market inflated by a recent national run-up. You’re operating in one that already repriced and stabilized, even as national policy continues to defend prices elsewhere.

Corey Cohen

Founder, The Roebling Group