Additional reporting by Erin Nicks
Last week, President Donald Trump announced that he's moving to ban large institutional investors from purchasing single-family homes.
"People live in homes, not corporations," Trump wrote on Truth Social, framing the policy as a path back to affordable homeownership for everyday Americans.
The announcement sent shockwaves through the housing sector, with Blackstone shares dropping more than 5%. But the bigger question remains about what this could actually mean for potential homebuyers.
How large investors play a role in the housing market
Part of the frustration driving this proposal traces back to the pandemic-era buying frenzy, when big investors routinely outbid families trying to purchase their first home.
"Limiting institutional investor demand prevents what we saw in 2021, when local families got priced and bid out of the market by full cash offers that weren't constrained by appraisal values," said Marisa Simonetti of Sell House Fast MN. "In conjunction with decreased interest rates, limiting institutional investors has the potential to make the American dream of homeownership possible again."
Which buyers benefit most from a ban?
1. Entry-level buyers. Entry-level homes have seen some of the heaviest investor competition in recent years. If institutional money pulls back from that segment, first-time buyers could find themselves with fewer bidding wars and more negotiating power.
"We know that investors of all sizes have been highly active in the entry-level segment. If this activity dries up, local demand could certainly soften," says Zonda and NewHomeSource chief economist Ali Wolf. "Conversely, we might see 'missing' traditional buyers, those who have been sidelined by competition, re-enter the market once they feel they have a less crowded path to homeownership."
2. Buyers in investor-heavy markets. Buyers in Sun Belt metros like Tampa, Phoenix, and Las Vegas would likely feel the effects more than most. Institutional investors have concentrated heavily in these markets, controlling up to 25% of single-family rentals in some areas.
A ban could lead to more multifamily construction
One potential upside is that institutional money might instead flow into other beneficial types of construction.
"If large investors are banned or disincentivized from playing in the single-family market, they might be encouraged to focus instead on multifamily ," said Johana Williams, Regional Manager at Utopia Management. "This might help the market a little bit by increasing supply on the multifamily side, which might result in the lowering of rents and reduce the demand for single-family homes among those who are currently priced out."
Will it work?
The proposal has not yet clarified how “large institutional investors” would be defined, leaving uncertainty around scope and enforcement. Regardless, enforcing this potential ban could prove tricky. Without clear rules around beneficial ownership, investors might simply restructure.
Ken Johnson, Christie Kirkland Walker Chair of Real Estate and Professor of Finance at the University of Mississippi, says the entire premise misunderstands how housing markets function.
"The proposal to remove professional investors from the U.S. housing market is a monumentally bad idea," Johnson said.
His concern centers on how homes get priced. Professional investors bring capital and sophisticated analysis that helps the market accurately value properties and account for risk. Without that, he argues, pricing becomes less efficient and potentially more volatile.
"I do not see how restricting professional investors from the housing market benefits anyone but for local investors that have more access to local housing information than others," Johnson said. "Real estate brokers will oppose this type of legislation as they are in the position to have proprietary information flow across their desks first. This is a great environment for them as they will not have to compete against Wall Street investors."
"The details of enforcement matter," said Levi Rodgers, Co-Founder at VA Loan Network. "If beneficial ownership and control are not clearly addressed, capital is likely to shift to affiliates, smaller LLCs, or joint ventures."
And, of course, even if implemented, such a policy will take time to materially affect inventory or pricing.
The bottom line
Large institutional investors own somewhere between 1% and 4% of single-family homes nationally, depending on how you define "large." That's a relatively small slice of the market. Solving the affordability crisis will require more than addressing roughly 5% of for-sale activity.
Housing supply remains historically tight, with Goldman Sachs estimating the U.S. needs 3 to 4 million additional homes to stabilize prices. Mortgage rates remain above 6%, and home sales have stayed modest across the country, not just in areas with heavy investor activity.
This policy will be worth watching as it develops. For buyers weighing their options, local inventory levels and personal financial readiness will be more beneficial than waiting on national policy shifts.
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