Housing Shortage Pushes Construction to Center of Policy
Economists argue building more homes should be the priority as Democrats take Congress and the Federal Reserve weighs further rate moves.
Updated on Nov. 5, 2026 in Residential
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Oxford Economics economist Bernard Yaros said construction should be the main housing policy focus following the midterm election that returned Democrats to control of Congress. Housing policy has not played a central role in Trump's second term to date.
Why it matters
Housing affordability is expected to be top of mind in Washington, with more demand-side proposals likely. Oxford Economics expects the Fed to maintain a hawkish tone, which could keep mortgage rates elevated.
Freddie Mac and the U.S. Chamber of Commerce put the housing shortage well above 3.5 million units, while Realtor.com's 4.03 million estimate for 2025 is growing by about 50,000 units per year. Whether Congress will move on construction policy has not been established.
The players
Bernard Yaros
Yaros is an economist at Oxford Economics who argues that construction should be the main focus of housing policy.
Oxford Economics
Oxford Economics is a global economic consultancy whose forecasts on Federal Reserve policy are widely followed by analysts.
Federal Reserve
The Federal Reserve is the central bank of the United States, setting interest rate policy that shapes mortgage costs.
The details
Yaros said demand-side drag from mortgage rates is a bigger issue than supply-side constraints, though construction remains the core remedy he advocates. Down payment assistance drives up demand, and with limited supply that pressure bleeds into higher prices. The NAHB/Wells Fargo Housing Market Index slipped again in October as sales expectations dimmed.
Timeline
• October 2026: NAHB/Wells Fargo Housing Market Index fell again on weaker sales expectations.
• December 2026: Oxford Economics expects a possible Fed rate hike.
• March 2027: Oxford Economics expects a possible Fed rate hike.
• 2027: A resolution of the Iran war would be needed to ease inflation.
Big Picture
The Harvard Joint Center for Housing Studies' State of the Nation's Housing report frames the shortage as a national structural problem, and the new Congress's attention to construction builds on that diagnosis. Current estimates of a shortage above 3.5 million units show the gap has not narrowed.
Higher mortgage rates and a persistent shortage mean buyers face tighter affordability and fewer listings. Renters may see continued upward pressure on rents as construction lags behind demand.
The takeaway
Housing affordability depends on building more homes, not only on subsidizing demand. Watch how Congress and the Fed respond in the months ahead.
Further reading
Explore more on Residential real estate trends shaping the national housing market.
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Should the federal government prioritize building more homes over helping people buy them?
