In his latest housing affordability initiative, President Donald Trump announced this week that he is taking steps to ban large institutional investors from purchasing single-family homes. "People live in homes, not corporations," Trump wrote in his announcement, blaming corporate landlords for making the American Dream of homeownership "increasingly out of reach."
The announcement immediately tanked shares of major rental home operators. Invitation Homes and American Homes 4 Rent each dropped more than 9 percent, while Blackstone—which has major exposure to residential real estate through various investments—fell sharply as well. But beyond the market reaction, a more fundamental question emerges: Would banning institutional buyers actually make homes more affordable?
The Scale of Institutional Ownership
The data suggests the impact might be more limited than the rhetoric implies. According to John Burns Research and Consulting, firms that own 100 or more single-family homes control approximately 2 percent of the nation's single-family housing stock. Even including smaller institutional investors, the total share of single-family homes owned by business entities tops out around 3-4 percent.
For comparison, roughly 65 percent of occupied housing units are owner-occupied, with the remaining rental stock split between small landlords (often individuals owning one to four properties), medium-sized operators, and the large institutions that would be targeted by a ban.
"Institutional investors make an easy scapegoat, but the math doesn't support the idea that they're the primary driver of affordability problems. You're talking about 2 percent of the market. Even if you completely eliminated that demand, the impact on home prices would be minimal."
— Daryl Fairweather, Chief Economist at Redfin
Why Institutional Buying Matters—And Doesn't
While the aggregate market share is small, institutional buying is concentrated in specific markets and property types. Sun Belt cities like Atlanta, Phoenix, Dallas, and Charlotte have seen disproportionate institutional activity. In some neighborhoods, institutional buyers have purchased 20-30 percent of available homes, creating localized competitive pressure.
Institutional buyers also tend to pay cash, close quickly, and purchase homes at or above asking price—behaviors that individual buyers, often dependent on mortgage financing and inspections, struggle to match. In hot markets with limited inventory, this competitive advantage can be decisive.
However, the broader housing affordability crisis has deeper roots than institutional buying:
- Supply constraints: The U.S. is estimated to be 4-7 million homes short of demand, a deficit built up over a decade of under-construction following the 2008 financial crisis.
- Zoning restrictions: Local regulations limit where and what type of housing can be built, particularly in high-demand metros.
- Construction costs: Labor shortages, material costs, and regulatory requirements have pushed the cost of new construction higher.
- Mortgage rates: At around 6 percent, rates remain elevated compared to the 3-4 percent levels that prevailed during the pandemic-era housing boom.
Implementation Questions
Trump stated he is "immediately taking steps" toward a ban and would call on Congress to codify it, but details remain sparse. Several implementation questions are unresolved:
Who Would Be Banned?
The announcement referenced "large institutional investors" without defining the term. Would a ban apply to any corporation owning homes? Investors above a certain portfolio size? Private equity firms specifically? Each approach would have different impacts.
What About Existing Holdings?
It's unclear whether a ban would be prospective only (blocking future purchases) or require divestiture of current holdings. Forced selling could actually increase supply and lower prices, but would face significant legal challenges.
Enforcement Mechanisms
Without clear legal authority, implementation would likely require legislation. While housing affordability enjoys bipartisan concern, the specific mechanics of an investor ban could divide lawmakers along regulatory philosophy lines.
Industry and Investor Response
The rental housing industry argues that institutional landlords provide a valuable service—professionally managed rental housing for families who cannot or choose not to buy. They point to maintenance standards, tenant protections, and capital investment that small landlords may not provide.
From an investor perspective, the proposal adds regulatory risk to an already challenging sector. Rising insurance costs, property taxes, and maintenance expenses have pressured rental housing returns. Adding uncertainty about the ability to expand portfolios could accelerate the exit of institutional capital from housing—potentially reducing new construction and renovation investment.
What Would Actually Help
Housing economists generally agree that addressing the affordability crisis requires attacking the supply side. Policies that could move the needle include:
- Zoning reform: Allowing more density, particularly near transit and employment centers.
- Streamlined permitting: Reducing the time and cost to approve new construction.
- Incentives for builders: Tax credits, reduced fees, or other measures to encourage construction of starter homes.
- Infrastructure investment: Opening new areas for development through transportation and utility investments.
Trump's concurrent initiative directing Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities to lower rates may have more direct impact on affordability—though it too faces implementation hurdles.
For now, the institutional investor ban proposal joins a growing list of housing initiatives that generate headlines but have uncertain paths to implementation. Prospective homebuyers should focus on factors within their control: improving credit, saving for down payments, and remaining patient in a market that, regardless of policy changes, is unlikely to become dramatically more affordable overnight.
