HUD has issued recommendations urging state and local governments to reduce regulatory barriers to housing construction. However, independent analysis from Zillow and Realtor.com identified mortgage rate lock-ins, tightening consumer budgets and volatility from tariffs as supply constraints not addressed in the report.
The Department of Housing and Urban Development (HUD) has issued a series of recommendations for state and local governments to reduce regulatory barriers to housing construction. However, independent analysis points to fixed mortgage rates, tight consumer budgets, and tariff-induced volatility as more important factors causing supply constraints.
The State and Local Home Construction Best Practices Report organizes guidance into three categories: reducing home construction costs, freeing up land for new housing supply, and accelerating construction schedules.
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Scott Turner Credit: America First Institute for Policy Studies
“HUD is encouraging state and local partners to take stock of their regulations and policies and make changes that will reduce construction costs and more efficiently increase the supply of housing,” HUD Secretary Scott Turner said in a statement.
The White House’s 2026 Presidential Economic Report estimates that regulatory costs account for more than $100,000 of the final price of a new single-family home. Green energy obligations, separately estimated by HUD, increase construction costs by as much as $30,000 in some jurisdictions. A White House fact sheet projects that deregulatory efforts implemented in 2025 will save Americans a total of $212 billion.
This report is part of HUD’s implementation of Executive Order 14394, signed last year, which directs the removal of regulatory barriers to affordable housing construction.
What independent data shows
National inventory remains 18.7 percent below historical norms, and new listings are down 16 percent from pre-pandemic levels, according to Zillow’s analysis. According to Zillow’s research, active listings rose 3.7% in April compared to the same month last year, and existing home sales remained 17.7% below pre-pandemic levels.
If stocks recover, independent economists point to factors other than regulatory changes. According to Zillow, 19 of the 50 most populous metropolitan areas (concentrated in the South and West) where construction activity has surged during the pandemic have exceeded pre-pandemic levels.
“Construction boomed across the Sunbelt, and many markets entered a period of transition where activity slowed,” said Orfe Divongay, senior economist at Zillow. “The same market is now emerging on the other side as incomes become more aligned with prices.”
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The strongest rebound in spring signings is concentrated in Midwest markets such as Kansas City, Missouri. Louisville, Kentucky. Indianapolis; Columbus, Ohio; For Cincinnati, Jake Krimmel, senior economist at Realtor.com, attributes this to “relatively affordable price points, improving inventory, and real buyers.”
Neither Zillow nor Realtor.com linked regulatory changes to supply recovery in these markets.
Lock-in effect, budget and fees
Both independent analyzes identified supply and demand constraints that were outside the scope of building codes or reform permits.
Homeowners with pandemic-era mortgage rates of 2.5% to 3% remain reluctant to list, a phenomenon known as the lock-in effect. “Homeowners with interest rates of 2.5% or 3% may be reluctant to waive their interest rates unless they really need to move,” Gordon Hageman, a Phoenix area agent with Arizona 1 Real Estate, told Realtor.com. “That lock-in effect continues to limit the number of new listings entering the market.”
On the demand side, Zillow cited rising consumer costs as a limiting factor, and “rising costs for all others are among the limiting factors, straining budgets and pausing large purchases,” the company said.
Realtor.com’s analysis cites volatility from tariffs as a headwind that could constrain the market in spring 2025. Tariffs on building materials, including wood and steel, could increase construction costs and go in the opposite direction of savings HUD’s report projects.
what’s next
According to Realtor.com, closings reached their highest level since 2022 in the first four months of 2026, up 2.9% year over year. Krimmel said the data suggested there could be a significant jump in closings in May and June, but cautioned that geopolitical uncertainty and movements in mortgage rates are key variables and the market is “not out of the woods yet.”
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