The Housing Deficit: Can Federal Lands Close the Gap?

The federal government owns and manages approximately 650 million acres across the United States, nearly 28 percent of the nation's land mass and almost half the surface acreage across 11 contiguous western states. U.S. Bureau of Land Management

A new report from real estate brokerage Redfin says housing affordability did not worsen for the first time in four years. However, homeownership is still out of reach for many Americans.

Redfin economists concluded that homebuyers needed an annual income of $116,782 to limit their monthly housing payments to 30 percent of their earnings. This is an all-time high and $33,000 more than the typical household earns yearly.

The U.S. real estate market continues to wrestle with challenges, such as the golden handcuff effect of ultra-low mortgage rates and ballooning construction costs.

Industry experts conclude that a shortage of homes has contributed significantly to the deterioration of housing affordability.

How vast is the housing deficit? The estimates vary.

Assessing the Housing Gap

Zillow projects that the United States is short 4.5 million homes, while Realtor.com estimates it at 7.2 million.

Housing scarcity has accelerated home prices since the onset of the COVID-19 pandemic, with prices soaring by 32 percent. In the third quarter of 2024, the median sales price of houses reached $420,400.

“The simple fact is there are not enough homes in this country, and that’s pushing homeownership out of reach for too many families,” Orphe Divounguy, a senior economist at Zillow, said.

“The affordability crisis extends to renters as well, with nearly half of renter households being cost burdened. Filling the housing shortage is the long-term answer to making housing more affordable. We are in a big hole, and it is going to take more than the status quo to dig ourselves out of it.”

The housing crisis didn’t arise suddenly; it has developed over the years, and as the Congressional Research Service notes, it was worsened by a lack of home construction following the global financial crisis of 2008–2009.

After peaking in April 2022, new housing starts have declined and have failed to return to levels observed before the Great Recession.

Although the federal government possesses little power to resolve housing shortages, Washington has attempted to encourage local governments to address the problem.

The Biden administration has tried to address the nation’s housing supply by encouraging local governments, through federal grants, to reform their land use and zoning regulations, covering permitting and construction.

Although billions of dollars have been approved for cities nationwide, data suggest that housing inventories have changed little.

A Federal Lands Solution

One idea that has captured bipartisan support is to use surplus federal land for housing development. The federal government controls approximately 650 million acres of public land.

In summer 2024, the White House announced that various departments would examine their portfolio of properties and consider how they can contribute to repurposing public lands.

In October 2024, the Bureau of Land Management sold 20 acres of public land to Clark County, Nevada, for $2,000.

“Clark County has invested millions of dollars to foster development of affordable housing for working families and seniors on fixed income within our community,” Clark County Commissioner Justin Jones said. “Cactus Trails will be a first-of-its kind development in our community, aiming to offer affordable homeownership opportunities to working families.”

According to the Republican National Committee’s 2024 platform, the GOP wants to sell “limited portions” of federal land to developers for housing construction.

“We’re going to open up tracts of federal land for housing construction. We desperately need housing for people who can’t afford what’s going on now,” President-elect Donald Trump, a presidential candidate at the time, said at an August 2024 news conference.

This initiative would primarily consist of the U.S. government’s inviting developers to bid on parcels of land as long as they maintain a percentage of affordable units.

Neither idea is new, as economists and public policymakers have discussed the subject for a while.

In August 2022, Joint Economic Committee Republicans examined the Helping Open Underutilized Space to Ensure Shelter Act of 2022 (HOUSES Act), which was sponsored by Sen. Mike Lee (R-Utah) and would allow states to purchase specific public lands to build new housing within metropolitan areas.

“We estimate that the HOUSES Act would lead to the construction of 2.7 million more homes in the United States, alleviating 14 percent of the nation’s housing shortage,” the report stated.

According to the report, the bill could eliminate or significantly reduce housing shortages in Alaska, Arizona, Idaho, Nevada, New Mexico, and Wyoming.

Such a framework could bolster housing affordability in a state such as Utah. Officials estimate that the Bureau of Land Management and the U.S. Forest Service own 217,000 acres within the boundaries of cities. Homebuilders would have immense access to land to construct houses.

The Lincoln Institute of Land Policy projected that 1.9 million units nationwide could be unlocked if underused government land near transit were developed.

One critic says freeing up public land will not solve the affordability issue, particularly in the West.

Incentivizing density, affordability, and transit are housing policies that state and local governments can enact, according to Kate Groetzinger, communications manager for the Center for Western Priorities.

“Public land can also be utilized in a targeted manner to increase the supply of affordable housing. But this must be done thoughtfully,” Groetzinger said in a July 2024 report. “Simply selling off public land to developers without guardrails will lower the quality of life in the West, while doing nothing to solve the affordable housing shortage faced by many Westerners.”

Others note that a vast share of the land is unsuitable for housing development, with one-third of federal lands situated in Alaska.

However, regulators, developers, and other parties would thoroughly assess the environmental effects, essential infrastructure availability (roads and water), and local stakeholders, particularly indigenous groups.

One More Available Tool

This might not be an instant panacea for the housing crisis. However, it could be an additional tool to complement the incoming administration’s plans to reduce exorbitant home prices.

Trump, for example, has suggested cutting red tape, establishing low-tax areas on federal lands, and fighting inflation to lower interest rates.

He has said he could slash the costs of building a home by as much as 50 percent.

In the early days of the 2024 presidential campaign, Trump also floated the idea of constructing 10 “freedom cities” on federal lands that would “create a new American future.”

“We’ll actually build new cities in our country again,” Trump said in a four-minute video in March 2023. “These freedom cities will reopen the frontier, reignite American imagination, and give hundreds of thousands of young people and other people, all hardworking families, a new shot at home ownership and in fact, the American dream.”