New Research Strengthens the Case for More Homes on the Market

The United States is often described as a nation where roughly two-thirds of households own their homes. According to the U.S. Census Bureau, the national homeownership rate currently stands at 65.3%. New research from the Federal Reserve Bank of Minneapolis shows that the 65.3% figure does not accurately represent the share of American adults who own homes. The Minneapolis Fed has introduced a new measurement called the Homeowners-to-Population Ratio (HPOP), which measures the share of American adults who own and occupy their own homes. By that standard, the national homeownership rate falls to just 53.2%.

The difference between the two figures is more than a statistical curiosity. It highlights a growing affordability challenge and reinforces the need for policies that expand the supply of homes available for purchase.

Measuring People Instead of Housing Units

The U.S. Census Bureau's homeownership rate measures occupied housing units. If a home is occupied by its owner, it counts as owner occupied regardless of how many adults live there.

That approach made sense when household formation followed more traditional patterns. Today, however, increasing numbers of adult children live with parents who own their homes, while many other adults share housing because purchasing a home has become increasingly difficult.

The Minneapolis Fed's HPOP addresses that reality by asking a different question: what percentage of American adults actually own the homes where they live?

Under that measure, the homeownership rate is more than 12 percentage points lower than the traditional Census figure. The largest reason for the gap is adults living with homeowner parents, a reflection of both changing demographics and rising housing costs.

The research does not suggest the Census Bureau's measure is incorrect. Instead, it demonstrates that measuring homeownership by people provides a clearer picture of how broadly homeownership is shared across the adult population.

The Bigger Story Is Housing Affordability

Whether policymakers cite 65% or 53%, both measures point to the same underlying challenge. Millions of American adults who would like to own a home have not yet been able to do so.

The Minneapolis Fed's research helps quantify that reality. The more important question is how to close the gap.

For conservatives, the answer begins with increasing the supply of homes available for purchase rather than expanding government subsidies or creating new federal housing programs.

When more homes enter the market, buyers have more options, competition eases, and prices become more affordable over time. That is particularly important for first-time buyers and growing families seeking larger homes in communities where inventory remains tight.

Increasing supply does not solve every affordability challenge, but it addresses one of the primary reasons home prices have remained elevated in many parts of the country.

Tax Policy Has Become Part of the Problem

One reason existing homes remain in short supply is the federal tax code.

Current law allows homeowners to exclude up to $250,000 in capital gains from the sale of a primary residence, or $500,000 for married couples filing jointly. Those thresholds have remained unchanged since 1997 despite decades of home price appreciation and inflation.

As a result, many longtime homeowners who would otherwise downsize or relocate face significant tax consequences if they sell. Rather than incur those taxes, many remain in homes that no longer meet their needs, reducing the number of family-sized homes available for younger buyers.

That creates a ripple effect throughout the housing market. Fewer homes change hands, inventory remains constrained, and prospective buyers face higher prices and fewer choices.

A Market-Oriented Reform to Expand Homeownership

The Center for a Free Economy recently led a coalition of 40 conservative organizations urging Congress to pass H.R. 1340, the "More Homes on the Market Act," which would modernize the capital gains exclusion for the sale of a primary residence. The legislation would update exclusion thresholds that have remained frozen for nearly three decades despite rising home values and inflation.

The proposal would not create a new housing subsidy or expand the federal government's role in the housing market. Instead, it would remove a tax barrier that discourages homeowners from selling homes they would otherwise place on the market.

As more homeowners choose to sell, more family-sized homes become available for purchase. Increased inventory gives buyers more opportunities to purchase homes while helping ease upward pressure on prices.

No single reform will solve America's housing affordability challenges. Local zoning, permitting delays, construction costs, and interest rates all influence housing markets. Even so, removing federal tax barriers that unnecessarily reduce housing supply represents a practical step toward expanding homeownership opportunities.

The Minneapolis Fed's research demonstrates that fewer American adults own homes than the traditional homeownership rate suggests. Increasing the number of homes available for purchase is one of the most direct ways to help close that gap.

CFE Takeaway

The Minneapolis Fed has provided policymakers with a useful new way to measure homeownership. More importantly, the research reinforces a challenge that many Americans already experience firsthand: too few adults can afford to own the homes where they live. Conservatives have advanced a practical solution by supporting policies that increase the supply of family-sized homes rather than expanding government intervention. Updating the tax code through H.R. 1340, the "More Homes on the Market Act," would help put more homes on the market and give more Americans the opportunity to become homeowners.