Some analysts say it could help buyers – but others believe it’s the wrong approach
The Trump administration threw an unexpected housing market curveball this week with the president’s Truth Social post stating his intention to ban institutional investors from buying up single-family homes across the country.
Trump wrote on Wednesday that he would be “calling on Congress to codify” that plan and teased further announcements on housing and affordability in the weeks ahead.
The unexpected move arrived amid a growing trend of investors gobbling up American homes: in 2024, both large and small investors accounted for about 25% of all US residential single-family home purchases, a share that jumped to about a third by the second quarter of last year.
However, the share owned by large institutions is reportedly much smaller – about 0.5%, according to Blackstone.
Institutional investors: a big part of the problem?
Details of what the ban might entail are currently thin on the ground, and Trump hasn’t mentioned it since that post in the early afternoon of January 7.
But housing and mortgage market watchers appear divided on whether the move would have a significant impact in bringing affordability back within reach for many American homebuyers.
Eli Mongold (pictured top), chief executive officer at the Ohio-based NEO Innovative Consulting, told Mortgage Professional America he sees both sides of the argument.
“I actually can agree with the fact that companies that have assets under management of $500 million or more shouldn’t be in the single-family market, just to protect first-time homebuyers,” he said, “because that’s in line with the American dream of purchasing your first home.
“And when you have these guys that can zip in and grab all these properties in cash, I think they can kind of stop people from doing that.”
Still, Mongold also said larger asset management companies purchasing homes and gentrifying densely populated areas has in some ways been “very helpful” for first-time homebuyers, claiming that buyers benefit in the long run from higher-quality products on the market.
“The big benefit of these institutional investors, and I’ve done loans for a fair amount of them, is that they’re not aiming to hold these properties for all 30 years of their note,” he said. “They have a five-, seven-, 10-year plan that they’re holding these things for and then they’re going to offload them to pay their investors back. And what are they going to be offloading?
“They’re going to be offloading properties that they had the capability of significantly renovating and rehabilitating. But the [price] appreciation is not going to be aggressive enough because of the nature of the neighborhoods that they’re in. If in 2020 it was worth $95,000, now it’s worth $115,000. It increases the first-time homebuyer’s downpayment by maybe $1,000, but now this property has a new roof, new siding, new flooring, new HVAC, new plumbing. It saves them a lot as well.”
Lawmakers speak out on new proposal
Trump’s proposal could stand a good chance of winning bipartisan support among lawmakers in Washington. Republican senators Bernie Moreno and Josh Hawley said they would push ahead with a bill, while Massachusetts senator Elizabeth Warren torched Republicans in a statement but indicated she had long called for a similar measure.
“Donald Trump has not yet lifted a finger to bring down housing costs for Americans,” she said. “I’ve been advocating for years to limit Wall Street from buying up America’s homes.
“Enough talk – Trump should start with getting his own party in the House to support a bipartisan bill to bring down housing costs that passed the Senate unanimously. And Congress should work on legislation to stop corporate investors from buying up homes.”
Redfin’s chief economist Daryl Fairweather said in a LinkedIn post that Trump’s proposed investor ban was “misguided,” and referred to her 2024 Forbes opinion piece indicating that taxing landlord profits, not shutting out certain landlord types, was the right approach.
The debate is likely to rumble on in the weeks ahead – even with no clear indication yet of how quickly legislation on the issue could move forward.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
