President Donald Trump‘s plan to ban institutional investors from purchasing single-family homes faces skepticism from many in the industry and among free-market economists.
Trump announced the policy change in a surprise announcement on Wednesday. Proponents of banning firms like Blackstone from buying single-family homes, many of whom are on the Left and populist Right, argue that those investors are crowding out the market for homebuyers. Others in the housing space, though, say that is not the case and that the policy could backfire by making housing more expensive for some.
“It won’t get to the root of the government-induced housing shortage, it will make things worse,” John Berlau, a senior fellow and director of finance policy at the libertarian Competitive Enterprise Institute, told the Washington Examiner.
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At the heart of the matter is some major institutional investors such as Blackstone have made headlines for purchasing up large numbers of single-family homes and renting them out as an investment strategy.
Given that housing affordability has become a campaign topic in recent election cycles, the investments by these major firms have prompted lawmakers — particularly on the Left — to explore ways to stop, or at least dissuade, them from doing so.
The president indicated in a message on social media that he believes major institutional investors are making the home affordability situation worse by investing in such real estate.
“It is for that reason, and much more, that I am immediately taking steps to ban large institutional investors from buying more single-family homes, and I will be calling on Congress to codify it,” he said. “People live in homes, not corporations. I will discuss this topic, including further Housing and Affordability proposals, and more, at my speech in Davos in two weeks.”
Critics of the proposal make the point that not only do these institutional investors purchase a very tiny percentage of the country’s total housing stock, but they might make it easier for people to rent homes that they might not have been able to receive a mortgage to buy.
Assessing Trump’s plan, though, is difficult because the administration has not provided any details as to how it would work.
White House spokesman Davis Ingle said in a statement to the Washington Examiner on Thursday that more on Trump’s plan to make homeownership more accessible would be previewed during a speech later this month.
“President Trump is committed to making it easier and more affordable to achieve the American Dream of homeownership by eliminating unnecessary red tape, increasing supply, and lowering costs,” Ingle said. “President Trump is working tirelessly to undue the severe damage the Biden Administration inflicted on the American people through high prices.”
Treasury Secretary Scott Bessent spoke further about the plan during remarks before the Economic Club of Minnesota on Thursday. He said the administration hasn’t settled on the “exact contours” of the move, but he indicated there would be no plans to force institutional investors into retroactive sales.
“The idea here is bygones are bygones,” Bessent said. “We’re not going to have a forced sale here.”
He also indicated that the administration is still toying with the thresholds involved in the plan.
“We want to keep families who rent out to their other family members,” he said. “So, we will decide what the correct level is. Is it a dozen homes? Is two dozen? What? What makes you an aggregator?”
But some economists argue that the move is not a necessary one.
“First, just in terms of the scale of ownership among large investors, it’s a small fraction of the stock of housing,” Kevin Erdmann, a senior affiliated scholar at the free-market Mercatus Center at George Mason University and housing expert, told the Washington Examiner.
While some on social media might contend that companies such as Blackstone are gobbling up real estate and making housing less affordable, institutional investors, those who own 100 or more homes, have purchased less than 2% of all homes.
Erdmann said that over the past decade, investor ownership of single-family homes has declined.
“It’s really homebuyers that are, on net, are outbidding the investors for single-family homes,” he added.
Jerome Famularo, a quantitative research associate at the libertarian Cato Institute, also said that many of the metropolitan areas with the most institutional investors are already more affordable metros — places that have high population growth, high income growth, and many new jobs.
Famularo also told the Washington Examiner it could hurt the sales market for homes because it cuts institutional investors from the pool of possible homebuyers.
“Usually, private capital infusions into any industry is a pretty good thing,” he added. “If you take a neighborhood that has some houses that are dilapidated, smaller mom-and-pop investors, they might say, ‘Eh, that doesn’t look like a good investment opportunity.’ The larger investor might say it does look like a good opportunity.”
Famularo said that increasing the supply of rental homes could, all else equal, bring the price of rent down and help affordability.
Joel Griffith, a senior fellow at Advancing American Freedom, a group founded by former Vice President Mike Pence, also argued that the president doesn’t have the power to impose such a ban through executive order to begin with.
Republicans on Capitol Hill have been in a wait-and-see mode when it comes to the plan.
“I look forward to reading what the administration puts out on that, and I’ll let you know once I read it,” Rep. French Hill (R-AK), chairman of the House Financial Services Committee, said at a news conference on Wednesday.
Likewise, Rep. Mike Flood (R-NE), who leads housing for the committee, also deferred to the White House.
“I want to see what the president’s proposal is, and the good thing here is that our nation’s chief executive is identifying housing as one of the big issues of this Congress,” Flood said.
Still, some lawmakers are backing the push, even if the fine print isn’t readily available. Shortly after the Wednesday announcement, Sen. Bernie Moreno (R-OH) said he would introduce legislation in the Senate that would codify the push, and Sen. Josh Hawley (R-MO) suggested he might, too.
The idea of preventing institutional investors such as Blackstone from dabbling in the single-family housing market has more often been popular among Democrats. For instance, the End Hedge Fund Control of American Homes Act, which was cosponsored by a number of House Democrats, would have imposed an excise tax on hedge funds that own a number of single-family homes over a specified amount.
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Sen. John Fetterman (D-PA) is one Democrat who seemed intrigued by Trump’s latest push.
“I think, overall, that’s a positive development,” Fetterman told the Washington Examiner on Thursday. “It seems to me like quite a positive thing, because obviously we’re willing to find all the different kinds of ways to address the housing situation.”
