A common-sense approach to housing affordability
Our elected leaders have a unique opportunity to strengthen small businesses, sustain critical industries, combat inflation in the housing market and make homeownership more accessible for millions of Americans.
Today’s housing market remains trapped in a cycle of limited supply and elevated costs. A central challenge is homeowners’ reluctance to sell—driven largely by the financial shock of trading a historically low mortgage rate for one that remains above 6%. Mortgage rates have stayed above that threshold since 2022, fundamentally reshaping market behavior.
The mortgage rate lock-in effect
As a result, the so-called “lock-in effect” continues to constrain inventory. As of late 2025, just over 50% of outstanding mortgages still carry rates at or below 4%, meaning millions of homeowners are financially disincentivized from moving. Even more striking, the typical homeowner would face nearly a $1,000 increase in monthly payments if they sold and purchased another home at current prices and rates.
This dynamic has real consequences: Americans are now staying in their homes longer than at any point in decades, and housing supply remains structurally constrained. The U.S. housing shortage has grown to over 4 million homes, underscoring how far supply has fallen behind demand.
This issue is particularly pronounced among older homeowners. A large share of Americans over 65 own their homes outright or carry very low-rate mortgages, making them especially sensitive to replacement costs. While many would consider downsizing, today’s financing environment often makes doing so financially irrational. Thoughtful policy—such as portable mortgage benefits, targeted tax incentives or federally backed transition financing—could help unlock this segment of inventory.
How outdated capital gains exemptions deter mobility
Beyond mortgage rates, capital gains taxes continue to deter mobility. The longstanding federal exemption—$250,000 for individuals and $500,000 for married couples—has not been meaningfully updated in decades, despite substantial home price appreciation. As a result, a growing share of homeowners now exceeds these thresholds, particularly in high-cost markets, further discouraging sales and limiting supply turnover.
Despite ongoing policy discussions, it is time for a fresh, common-sense approach. Rather than penalizing long-term homeowners, policymakers should incentivize housing turnover. Reducing or modernizing capital gains taxes on primary residences and offering targeted tax credits for sales to owner-occupants would help increase inventory organically—without heavy-handed market intervention.
Creating pathways from renting to owning
At the same time, demand-side realities cannot be ignored. The U.S. homeownership rate remains around 65–66%, leaving roughly one-third of households renting. A significant portion of renters—millions of whom live in single-family homes—are effectively “pre-qualified” homeowners who lack only a viable path to purchase.
Encouraging small landlords to sell to existing tenants could provide that path. Such policies would expand homeownership, stabilize neighborhoods and strengthen communities—while preserving the role of small-scale property owners rather than displacing them.
Restoring balance to the housing market
Homeownership remains the most powerful tool for building generational wealth in America. But without addressing the structural barriers that limit housing supply—particularly the lock-in effect and tax disincentives—we will continue to fall short of that promise.
By implementing policies that encourage mobility, unlock inventory and support first-time buyers, we can create lasting economic opportunity and restore balance to the housing market.
Jesse Brewer is a local county commissioner in Boone County, Kentucky, and has been serving his constituents for 8 years.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: zeb@hwmedia.com.