I & I Editorial BoardPresident Donald Trump said last week that he was “immediately taking steps to ban large institutional investors from buying more single-family homes” and “will be calling on Congress to codify” the proposal. His advisers need to show him why that’s a bad idea.
Trump promised to “discuss this topic, including further housing and affordability proposals, and more, at my speech in Davos in two weeks.” So there is time to present clear arguments that should convince him to quietly drop the plan.
If we had an audience with the president, we’d first remind him that the government in a free country has no authority to determine who is allowed to buy homes and who isn’t. Of course the principle of limited government has been violated for much of our republic’s history, but that doesn’t make state intervention in private affairs right.
If the Trump administration can block institutional investors from participating in the free market, imagine what a Democratic administration would do using it as a precedent. Would a Democratic president balk for even one moment at issuing an executive order limiting the economic freedom of a political opponent, say white Christian conservatives?
Not if doing so fit the narrative and punished a group of Americans that the elites have designated as hostiles.
We’d further point out that institutional investors are hardly even minor players in the single-family home ownership game. An Urban Institute report from 2023 said they own only about 600,000 single-family homes across the country, less the 4% of the total.
Some estimates we’ve seen are higher, but they include “mom-and-pop” investors who own from three to nine properties. It’s misleading to lump them in with true institutional investors, such as private equity company BlackRock, which has been accused of “plundering the future” by “buying up tons of real estate” even though it doesn’t buy single-family homes. (Blackstone, however, does invest in single-family homes, but owns only 0.5% of all single-family homes in the U.S. and has cut its purchases by 90% since 2022.)
The true portion of single-family homes owned by these “plunderers,” those holding 1,000 or more properties, is in reality much lower than 4%. They “make up just 2% of all investor-owned homes,” says CNBC. Ninety percent of the market is actually under the ownership of small investors who have “10 properties or less.”
We’d also tell the president that when institutional investors buy single-family homes, they improve the neighborhood. They often purchase “distressed properties that no one else would buy and in fact put a floor on the market,” says Laurie Goodman, vice president for housing finance policy at the Urban Institute. These buyers provide “a very, very valuable service and they” have “basically cleaned up the distressed market, a lot of which required repairs.”
Goodman co-authored a report that noted that due to their “operational and financing advantages, these institutional investors can repair these properties more quickly and efficiently than an owner-occupant generally can.”
The Urban Institute also shows us that the “spillover effect” can extend “a quarter mile (roughly five blocks),” with homes selling at a value of “1.4% higher than properties a quarter- to a half-mile farther.” In the most distressed areas, the value grows by 7.4%.
Excluding large institutional investors from the single-family home market has a populist appeal. But it is poor public policy for a number of reasons, any one of which should be enough to change the president’s mind. We hope someone in the administration will show him our editorial.
— Written by the I&I Editorial Board
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