Key Points
- U.S. President Trump has signed an executive order to ban large institutional investors from buying single-family homes.
- Experts are skeptical that the ban will have a major impact, as large investors account for only 1-2% of home purchases.
- The real problem, many argue, is a severe housing shortage driven by high mortgage rates and restrictive local building regulations.
- The executive order is a bold but likely insufficient step to solve the housing affordability crisis.
President Trump has launched a new effort to tackle America’s housing crisis, signing an executive order that aims to block large investment companies from buying up single-family homes. The move is designed to level the playing field for first-time homebuyers who are struggling to compete with Wall Street firms.
“Hardworking young families cannot effectively compete for starter homes with Wall Street firms and their vast resources,” the order said. “Neighborhoods and communities once controlled by middle-class American families are now run by faraway corporate interests.”
The executive order directs government agencies to define what a “large institutional investor” is and then to stop facilitating their acquisition of single-family homes. This would include blocking federal agencies and government-sponsored enterprises like Fannie Mae and Freddie Mac from insuring or guaranteeing their loans.
However, many experts are skeptical that the ban will have a major impact. They point out that large institutional investors only account for a small fraction of home purchases, around 1% to 2%. The overwhelming majority of investor-owned homes are in the hands of small, “mom-and-pop” investors who own less than 11 properties.
“Large corporate ownership is a red herring in the broader supply debate,” said one senior economist.
Many argue that the real problem is a severe housing shortage, driven by a combination of high mortgage rates and restrictive local building regulations. Research has shown that in many parts of the country, particularly in the Sunbelt, local governments are making it very difficult and expensive for homebuilders to construct new housing.
While Trump’s executive order is a bold move, it’s unlikely to be a silver bullet for the housing crisis. Solving the affordability problem will require a multifaceted approach that addresses both the demand and supply sides of the equation.
