A bold proposal to address the affordable housing crisis through strategic public-private partnership, funded by $200-400 billion from Fannie Mae and Freddie Mac restructuring.
The Crisis Facing Young Americans
Then vs. Now
A generation ago, the median home price was just 3 times the median household income. Today, that ratio has skyrocketed to 7 times in many markets, effectively pricing millennials and Gen Z out of the American Dream.
High interest rates averaging 6.2% for 30-year mortgages, combined with a locked-up construction market plagued by supply shortages and regulatory delays, have created unprecedented barriers to homeownership.
The Human Impact
This isn't just a statistic—it's a crisis of opportunity, stability, and trust in our economic system. Young families face crushing debt burdens just to secure safe housing, sacrificing their financial futures and delaying major life milestones.
The shortage has reached 7.1 million affordable homes for extremely low-income renters, with construction remaining below historical averages and only 20% of new homes under 1,800 square feet.
The Magnitude of the Challenge
Housing Shortage
Affordable homes needed for extremely low-income renters nationwide
Income Multiple
Median home prices compared to household income, up from 3x a generation ago
Mortgage Rates
Average interest rate for 30-year fixed mortgages as of October 2025
Small Homes
Percentage of new homes under 1,800 sq ft, down from 37% in 1999
GSEs IPO -A Strategic Path Forward
The solution lies in a transformative restructuring of Fannie Mae and Freddie Mac, combined with a bold public-private partnership that leverages both government resources and private sector innovation.
Address Capital Structure
Exercise warrants and set 2.5% capital standards under ERCF. Remove unnecessary buffers. Fannie Mae can exit the conservatorship with $111B equity and Freddie Mac with $86B (2.5% of $4,443B Adjusted Total Assets at Fannie Mae, and $3,468B at Freddie Mac). With $105.5B on the books, Fannie Mae should reach $111B next quarter!
Deem Senior Preferred Stock repaid. Treasury earned an 11%+ IRR on the seniors.
ERCF sufficiency
In the past five years, Fannie Mae and Freddie Mac have required zero starting capital to pass their Dodd-Frank stress tests; indeed, they produced an average return of 13 basis points on total assets even in those adverse scenarios. Accordingly, imposing a 2.5% capital mandate would remain highly cautious while still enabling the firms to set economically viable fees for their credit guarantees.
Market Listing Strategy
List the GSEs on NYSE, initiate 2% common dividend, and activate junior preferred dividends.
Generate Capital
Execute staggered sales of government stake to raise $200-400B, beginning with $30-50B IPO tranche.
Fannie Mae and Freddie Mac are monoline insurers that, unlike banks, do not take interest rate risk. If the unnecessary buffers are kept in place outside of conservatorship, they will force the GSEs to increase guarantee fees, driven by ROE requirements (10-12% utility businesses). These duplicative buffers do not represent Fannie Mae's (and Freddie Mac's) true risk adjusted business model.
Why This GSE Strategy Works
Market Efficiency
Setting capital standards at 2.5% with 10x stress test coverage optimizes returns without unnecessarily elevating mortgage rates. Higher capital requirements would force guarantee fees to rise, deviating from capitalist principles and harming affordability.
Government Returns
A 10-12% ROE for public utility-type companies paying dividends maximizes value for government shares trading alongside other investors. This approach generates substantial returns while maintaining market discipline.
Funding Mechanism
Enhanced market value enables staggered sales generating $200-400B in capital. This creates a dedicated funding source for housing initiatives without new taxpayer burden or budget appropriations.
The $200-400 Billion Solution
With capital raised from GSE restructuring, we can incentivize the construction of 7 million affordable homes through a revolutionary public-private partnership model.
Total Building Cost
National average: $282,520 per home (1,161 sq ft at $245/sq ft)
Total for 7M homes: $1.98 trillion
Public Incentive
Average 10-20% of building cost per home
Range: $28,252-$56,504 per home
Total: $200-400 billion
Private Investment
Developers cover remaining 80-90% of costs
Leverages private capital and expertise for maximum efficiency
This incentive structure makes affordable housing projects financially viable for private developers while ensuring responsible use of public funds. The partnership model combines the best of both sectors: public oversight with private innovation.
Allocation by Population
Homes are allocated to each state based on 2025 population share, ensuring fair distribution of resources across the nation. State-specific building costs and incentives vary based on updated construction data, with higher-cost states receiving larger per-home incentives to maintain affordability.
California
810,177 homes (11.6% of U.S. population)
Building cost: $341,164 per home
Incentive: $51,748 per home
Texas
650,649 homes (9.3% of U.S. population)
Building cost: $270,657 per home
Incentive: $41,068 per home
Florida
486,950 homes (7.0% of U.S. population)
Building cost: $261,838 per home
Incentive: $39,721 per home
Regional Cost Variations
Construction costs vary significantly by state, reflecting local labor markets, material costs, and regulatory environments. Our allocation model accounts for these differences to ensure support across all regions.
Higher-cost states receive proportionally larger incentives to maintain affordability targets, while lower-cost states benefit from greater purchasing power per incentive dollar.
Sample State Breakdown: Alabama
Allocation Details
Population: 5,197,720 (1.52% of U.S.)
Allocated Homes: 106,169
Home Size: 1,058 sq ft (3 bed/1.5 bath)
Building Cost: $222,197 per home
Cost per Sq Ft: $210
Incentive Structure
Incentive per Home: $22,414-$44,828 (10-20% range)
Mid-range Incentive: $33,707 per home
Total State Incentive: $2.38-4.76 billion
Total Building Cost: $23.6 billion
This demonstrates how the model adapts to state-specific conditions while maintaining consistent affordability standards.
Private Sector Partnership
Success depends on partnering with industry leaders who bring expertise, efficiency, and proven track records in large-scale residential development.
D.R. Horton
America's largest homebuilder by volume, with expertise in affordable entry-level homes and efficient construction processes across multiple markets
Lennar Corporation
Leader in innovative home design and technology integration, with strong focus on first-time homebuyers and sustainable building practices
Pulte Homes
Extensive experience in diverse markets with emphasis on quality construction and customer satisfaction in the affordable segment
Toll Brothers
Premium builder bringing quality standards and design excellence to ensure affordable homes meet high construction standards
These partnerships leverage private innovation and expertise to maximize efficiency, minimize waste, and ensure quality outcomes at scale.
Addressing the Trust Deficit
We recognize that skepticism about government initiatives is real and fair. Too often, Americans question how money will be spent and whether it will truly make a difference. This partnership breaks the mold through three core principles:
Transparency
Real-time public dashboards tracking every dollar, every project, and every outcome—similar to DOGE visualization tools. Citizens can monitor progress in their state at any time.
Accountability
Custom oversight frameworks with clear metrics, milestones, and consequences. Public-private partnership structure ensures mutual accountability and performance standards.
Results Focus
Every step tracked, every outcome measured. Not government as usual—a new way forward designed to earn trust through tangible action and delivered homes.
Rapid Execution Timeline
This plan is designed for quick execution, with concrete milestones starting within 12 months of approval.
Months 1-3: Foundation
Secure initial funding through first $30-50B tranche from GSE IPO
Establish oversight frameworks and transparency dashboards
Finalize partnership agreements with major developers
Months 4-6: Preparation
Issue RFPs to private developers with pre-approved designs
Streamline permitting processes at state and local levels
Identify priority sites in high-need states
Months 7-12: Launch
Disburse initial incentives to qualified developers
Break ground on pilot projects in multiple states
Activate real-time tracking and reporting systems
Year 2+: Scale
Expand construction nationwide based on pilot learnings
Release additional funding tranches as milestones are met
Continuously optimize processes and share best practices
Affordability by Design
Every home is designed to ensure housing costs remain at or below 30% of median household income, the standard measure of affordability. Our methodology carefully balances size, cost, and livability.
Size Optimization
Square footage is calculated to maintain affordability while providing functional living space:
- Under 1,000 sq ft: 2 bed/1 bath configuration
- 1,000-1,199 sq ft: 3 bed/1.5 bath configuration
- 1,200+ sq ft: 3 bed/2 bath configuration
Range of 900-1,500 sq ft aligns with entry-level trends and Habitat for Humanity models, reflecting industry movement toward smaller, more affordable footprints.
Financial Structure
Sale prices derived from:
- Monthly payment at 30% of median household income
- 6.2% mortgage rate for 30-year fixed loan
- 20% down payment requirement
- Building cost at 70% of sale price (industry standard)
This ensures homes are genuinely affordable for target income levels while maintaining quality construction standards.
Top 10 States by Total Investment
These ten states represent over 60% of total investment, reflecting their large populations and significant housing needs. The allocation ensures resources flow to areas with the greatest demand.
Complete State-by-State Allocation
The following table shows the comprehensive allocation of homes and incentives across all 50 states and territories, demonstrating the nationwide scope and equitable distribution of this initiative.
Note: Complete data for all 50 states available in detailed appendix tables, showing population-proportional allocation ensuring equity nationwide.
Economic Multiplier Effects
Beyond providing homes, this initiative generates substantial economic benefits through job creation, local spending, and community development.
Job Creation
Construction of 7 million homes creates millions of direct jobs in construction, manufacturing, and related trades, plus indirect employment in supporting industries
Local Economic Impact
Each home built generates local spending on materials, services, and labor, multiplying the economic benefit throughout communities
Community Revitalization
New affordable housing stabilizes neighborhoods, supports local businesses, and increases property tax revenues for public services
Long-term Growth
Homeownership builds wealth for families, strengthens communities, and creates stable foundation for economic mobility across generations
Why Private Partnership Succeeds
Expertise & Efficiency
Private developers bring decades of experience in large-scale construction, supply chain management, and cost optimization that government agencies cannot match
Innovation & Speed
Market competition drives innovation in design, materials, and construction methods, accelerating delivery while maintaining quality standards
Risk Sharing
Private capital covers 80-90% of costs, limiting taxpayer exposure while ensuring developers have skin in the game for project success
Scalability
Established developer networks enable rapid scaling across multiple markets simultaneously, impossible with government-only approach
This model combines the best of both sectors: public resources and oversight with private sector efficiency and innovation. It's not government doing the work—it's government enabling the private sector to do what it does best.
Measuring Success
Clear metrics ensure accountability and enable continuous improvement throughout the initiative's lifecycle.
Transparency
All projects tracked on public dashboards with real-time updates
Affordability Target
Housing costs at or below 30% of median household income
Homes Delivered
Total affordable homes constructed over program lifetime
Month Timeline
From funding to breaking ground on initial projects
Additional metrics include: construction quality standards, on-time delivery rates, cost efficiency versus projections, homeowner satisfaction scores, and long-term community impact assessments. Regular reporting ensures stakeholders can track progress and hold all parties accountable.
The Opportunity Before Us
As Director of the Federal Housing Finance Agency, you are uniquely positioned to lead a transformative initiative that addresses one of America's most pressing challenges. This isn't just about building houses—it's about restoring faith in the American Dream for an entire generation.
"Imagine a future where young families can afford a safe home without sacrificing their futures to crushing debt. The solution is within reach."
This proposal offers a clear path forward: restructure the GSEs to generate $200-400 billion, partner with proven private developers, allocate resources equitably across all states, and execute with unprecedented transparency and accountability. The economic case is sound, the timeline is achievable, and the need is urgent.
We're not asking for new taxpayer dollars or budget appropriations. We're proposing to unlock value that already exists, deploy it strategically through public-private partnership, and deliver tangible results that will change millions of lives.
The Time to Act Is Now
Unite Resources
Combine public capital with private expertise for maximum impact
Execute Boldly
Move from planning to action within 12 months, delivering real homes to real families
Restore Trust
Demonstrate that government can deliver results through transparency and accountability
Change Lives
Give young Americans the opportunity to achieve homeownership and build wealth
This isn't government business as usual—it's a results-driven model that restores trust by delivering tangible outcomes. With your leadership, we can build more than homes; we can rebuild faith in the system for young Americans who deserve a fair shot.
Let's unite public resources with private ingenuity to change lives. The time to act is now.
Transforming America's Housing Future