The U.S. housing market is at a breaking point. In fact, the nationwide shortfall is estimated to be between 4 and 8 million homes. This staggering deficit has pushed prices to unsustainable levels, consequently locking millions out of homeownership. In response, states and regions are now becoming laboratories for bold, large-scale solutions. However, these efforts reveal a fundamental split in how to solve the crisis. Across the country, three distinct philosophies are emerging: unleash the market, subsidize the middle, or tax the rich.
The Sun Belt’s Answer: Build Outward, Not Up
The dominant strategy across the American South is simple: build, baby, build. For example, a new report from the George W. Bush Institute-SMU Economic Growth Initiative champions this model of suburban expansion. It argues that “sprawl” is not a dirty word. Instead, it’s the most effective tool for delivering homes at the scale America needs.
The numbers, in particular, are compelling. Since 2010, just 25 Sun Belt metro areas have accounted for 41% of all new single-family homes and 35% of new apartments in the country. Proponents argue this success is the result of a pro-growth formula. Specifically, they build out infrastructure, allow a mix of housing types, and avoid restrictive urban growth boundaries. According to Cullum Clark, director of the initiative, this approach provides a “pressure valve” that keeps home prices from skyrocketing. Even though critics decry the impacts of sprawl, millions are “voting with their feet.” As a result, they are turning suburbs like Frisco, Texas, into fully-formed cities with their own jobs and communities.
Michigan’s Model: Direct Subsidies to Fill the Gap
While the Sun Belt bets on market forces, Michigan is taking a more hands-on approach. For instance, the state just unveiled the $800 million Michigan Home Program. This five-year plan will directly fund the creation of 10,000 new and rehabilitated homes. This strategy aims to solve a core problem builders face, namely the financial gap created by soaring costs.
By injecting $160 million annually in direct funding to developers, the state hopes to spur construction of “attainable” housing. In short, this is housing the market currently deems unprofitable. “The need for more housing exists all across Michigan,” said Sault Ste. Marie Mayor Don Gerrie. Crucially, the program also targets a specific demographic. Properties built with these funds must be sold or rented to individuals earning no more than 120% of the area median income. Ultimately, this represents a direct government intervention for the “missing middle,” a segment often ignored by developers.
The Coastal Approach: Taxing the Rich to House the Middle
On Cape Cod, the housing shortage has been declared an “existential crisis.” Consequently, lawmakers are pursuing a third path: wealth redistribution. A new proposal, for example, is gaining broad support for a 2% real estate transfer fee on all home sales over $2 million.
The plan could generate up to $56 million a year. This money would be dedicated solely to funding affordable and year-round workforce housing. This important move comes after home prices on the Cape skyrocketed over 43% during the pandemic. As a result, it has become “nearly impossible” for local workers to live in the communities they serve. Furthermore, this “mansion tax” strategy is part of a growing national trend. Rhode Island, for instance, is implementing a “Taylor Swift Tax.” Similarly, Montana recently shifted its tax burden onto second homes and short-term rentals.
As these different strategies move forward, they represent a nationwide clash of ideas over the future of the American housing market. Indeed, whether the solution lies in unrestricted growth, targeted government investment, or progressive taxation, one thing is clear. The era of inaction is finally over.
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