Powell: restoring price stability best long‑term route to fix housing; rates mainly affect demand

Several members used the hearing to press the Federal Reserve on the relationship between high interest rates and the U.S. housing shortage. Chair Jerome Powell told lawmakers the Fed’s policy primarily affects housing demand in the short run and that restoring price stability is the best way to bring down financing costs in the medium term.

Powell told Representative Rashida Tlaib and others that higher interest rates are “interest‑sensitive” and weigh on housing activity, adding: “The best thing we can do for the housing market, the absolute best thing, is to restore price stability so that rates come down.” He also said there is a longer‑run shortage of housing supply that monetary policy cannot directly fix.

Members highlighted data on eviction, homebuilding at five‑year lows, and the disproportionate effects on Black homeownership in some states. Powell acknowledged the housing sector’s importance and said the Fed monitors owner’s equivalent rent and rental measures that have been a “sticky” component of inflation but now show signs of moderating.

The chair said tending to price stability would, over time, permit lower interest rates and improved housing affordability, but he stressed that supply constraints — permitting, zoning, construction costs and labor — also require legislative and local actions beyond the Fed’s remit.

Lawmakers pressed whether prolonged high rates could reduce future housing supply. Powell replied that monetary policy does not drive long‑run housing supply, though it affects activity in interest‑sensitive sectors and that restoring price stability “in the long run” is the Fed’s contribution to better affordability.