To make housing more affordable, President Donald Trump this week declared that his administration will try to ban investment firms from owning single-family homes.

Many other policies have been proposed to address high home prices. These include fewer environmental and other reviews of new construction, infill on vacant lands and the abolition of zoning to allow apartment blocks to replace existing single-family-home neighbourhoods. But these are microeconomic solutions to a crisis which originated in macroeconomic cataclysms of the past decade and a half.

Today’s housing affordability crisis is the result of national and global economic crises, not Wall Street greed or ill-conceived zoning codes. Following the global financial crisis of 2008, homebuilders hesitated to build new homes. During the Covid-19 pandemic, many urbanites fled big cities for suburbs and small towns, where their hasty purchases drove up home prices.

The after-effects of this perfect macroeconomic storm are the main cause of the housing affordability crisis. As a result of the combination of ultra-low interest rates and moves during the pandemic, a quarter of existing mortgages were purchased or refinanced in only two years — 2020 and 2021.

Compounding the damage, the Federal Reserve addressed post-Covid inflation — which was caused by low inventories, tangled supply chains, and excessive federal stimulus spending — by radically increasing interest rates. This indirectly caused a collapse in home sales because higher interest rates made buying impossible for many would-be purchasers.

The combination of high prices and high interest rates has priced out many young Americans. The median age for a first-time homebuyer, which was in the 20s in the Eighties, rose to a record high of 40 in 2025. While 90% of Gen Z hope to own a home some day, 62% think they may never be able to afford it, and 21% believe that World War III is more likely than their purchase of a home in the next five years.

Meanwhile, many existing homeowners are, metaphorically, locked in. If they sold their present houses, they would have to pay far more in order to buy comparable homes. In the US as a whole in October 2025, the median new monthly payment — $2236 — was 73.2% higher than the current median monthly payment ($1291).

Apart from lock-in driven by interest rates, many existing homeowners in some areas have unrealistic expectations of how much they can sell their homes for. That is, assuming that the rapid price increases that occurred during the pandemic and the inflation that followed will continue indefinitely.

While the affordability problem is real, scepticism is warranted when it comes to various technocratic fixes. Banning investors from buying up large numbers of single-family homes to be rented out, a policy favoured by many progressives and Right-wing populists and now endorsed by Trump, might help at the margins. But the effect would be small, because most would-be homebuyers are competing with other would-be homebuyers, not Wall Street firms.

Moreover, the peak of the affordability crisis may be past. Cities like Austin, Texas, and Miami, Florida saw rapid house price appreciation in the past few years, thanks to influxes of refugees from California and other expensive states and pandemic-driven migration. Today, however, eight of the 10 cities where would-be buyers are gaining bargaining power are in Texas and Florida.

When it comes to housing affordability, there is a danger of  “policy lag” — well-intentioned but belated government interventions to address a problem that is already diminishing, driven by political pressure to “do something”. Unfortunately, election cycles encourage short-term overreactions. An example is the excessive federal spending stimulus of the Biden era, which was unnecessary and came as the economy was slowly returning to normal.

It would be ironic if policymakers sought to cure a house price problem caused in part by belated and excessive policy interventions with another set of belated and excessive policy interventions. Sometimes nature — or the housing market — should be allowed to take its course.