President Donald Trump announced on Wednesday’s Truth Social show that he wants to ban large institutional investors from buying single-family homes, arguing that “people live in homes, not businesses.”
The proposal appears aimed at improving housing affordability, but large institutional investors make up a small portion of the market. Companies that own 100 or more single-family homes control about 2% of the nation’s single-family home inventory, according to John Barnes Research and Consulting, raising questions about how much of an impact such a ban would have.
President Trump has not said exactly how the policy will be implemented or how broadly it will apply.
In an interview with CNBC on Thursday, Bill Pelt, President Trump’s nominee to head the Federal Housing Finance Agency, criticized institutional investors for “buying a ton of homes” directly from builders, suggesting the proposal could extend to new single-family homes as well as existing homes.
Proponents of the regulation argue that institutional investors often outbid potential homeowners competing for the same home, especially in fast-growing markets.
But housing analysts say the influence of institutional investors is overstated and that years of housing shortages are the main reason housing is becoming increasingly unaffordable.
“The real problem is that we’ve created far more homeowners than we’ve built single-family homes,” Jay Parsons, an analyst who tracks rental housing and development trends, told CNBC Make It. “It’s all a matter of supply and demand.”
What President Trump is aiming for
The ban targets large institutional investors, including private equity-backed companies and publicly traded landlords that own hundreds or thousands of single-family homes. Institutional investors typically buy single-family homes and rent them out, often concentrated in suburban areas around metropolitan areas, according to the Richmond Fed.
In theory, widespread corporate buying of homes could increase prices and make it more difficult for families to enter a competitive housing market. But the share of home purchases by institutional investors has fallen from the peak of the pandemic, falling from about 3% to nearly 1%, as rising interest rates dampened investor activity, according to data from John Barnes Research & Consulting.
Institutional ownership is highly concentrated geographically in companies that own 100 or more single-family homes. About 80% of these homes are in just 5% of the U.S. counties, most of them in fast-growing Sunbelt metropolitan areas, according to an analysis by the American Enterprise Institute.
Critics often argue that institutional investors are driving up home prices and rents in the most active markets. But Parsons’ 2024 analysis found that many of the most investor-saturated markets had rent growth below the U.S. average, a pattern he linked to high levels of home construction.
“The idea that institutional investors are holding back homeownership is rooted in a widely held myth,” Parsons said.
Why won’t bans improve affordability?
Analysts at Goldman Sachs Research said limiting investor demand would not add new homes to the market and improving affordability would require at least 3 million additional units above current construction levels, but without adding supply, lower mortgage rates would likely push prices higher.
“Institutional investors are not the main drivers of markets,” said Scott Linthicome, vice president of general economics and trade at the Cato Institute. “This is primarily a supply issue,” he said, describing the proposal as “populism 101.”
According to the National Association of Realtors, long-term supply constraints remain a major factor shaping housing affordability.
Construction conditions remain difficult, and many builders are withdrawing from new housing construction rather than starting construction due to soaring construction costs and rising borrowing rates.
Single-family housing starts rose to a seasonally adjusted annual rate of 874,000 units in October, but remain below historical norms, according to U.S. Census Bureau data.
“Continued home affordability challenges, including persistently high mortgage rates, a skilled labor shortage and excessive regulatory costs, mean single-family home production continues to operate at depressed levels,” National Association of Home Builders President Buddy Hughes said at a conference earlier this year.
“If we really want to lower housing costs, we need to address the barriers that make it harder and more expensive to build,” Linthicome says. “These include tariffs that raise construction costs and immigration restrictions that limit the construction workforce.”
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