On Jan. 7, President Donald J. Trump announced on social media that he wants to stop big corporations from purchasing single-family homes.
"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. People live in homes, not corporations," Trump wrote.
Why the Ban?
CNN Business explains why many will welcome the proposed ban. "No investor owned 1,000 or more single-family rental homes as of 2011, according to the Government Accountability Office [GAO]. However, by 2015, institutional investors collectively owned up to 300,000 homes.
"In Atlanta, Jacksonville, Florida, and Charlotte, North Carolina, large investors controlled more than 15% of the market for single-family homes as of 2022, according to the GAO," continued CNN.
During the housing boom triggered by the pandemic, more than 20% of all home sales in markets such as Houston, Miami, Phoenix and Las Vegas had large corporate buyers, according to The Wall Street Journal.
And that GAO report suggests that 25% of all rental homes in Atlanta, GA, were owned by companies with at least 1,000 single-family homes each in their portfolios.
American Homes 4 Rent, Blackstone, Invitation Homes and JPMorgan Chase are among the better-known institutional investors with significant holdings of single-family properties.
"Investor purchases have also made it harder for some first-time buyers to compete with Wall Street-backed investment firms, with their all-cash offers. Institutions don’t always offer more money, but they are able to close a deal quickly and rarely quibble over worn flooring or dated bathrooms," says The Journal.
There is no suggestion of forcing such companies to sell their existing stocks of homes. If successful, the ban would merely stop them from buying more.
Pros and Cons of Banning Institutional Investors
As The Journal suggested, the president's plan could even the playing field for first-time buyers. But it's not without its downsides.
Single-family homes don't disappear when they're bought by institutional investors. They're typically restored or refreshed and then rented out to consumers.
And that extra supply of quality rental properties can have a beneficial effect on the local market's tenants. The extra supply can moderate rents, and the improved homes are nicer places to live.
Both those benefits can be good for all renters, including aspiring home buyers, who are saving for down payments and don't want to live in run-down properties while they're doing so.
As we often say, though, the only sure way to truly fix the housing crisis is to build millions more homes in the places people want to live.
Possible Stumbling Blocks
The article found grounds for "claims under the Due Process Clause, Equal Protection Clause, Takings Clause, and Commerce Clause. Each of these legal theories represents a distinct avenue through which opponents might challenge the proposed legislation."
So, we're a long way from the president's proposal changing this aspect of the housing crisis. But it's good to know that politicians are beginning to focus more on the challenges American homeowners and renters face.
