Why Trump's plan to shut out institutional investors could raise housing costs

Core Viewpoint - The rising cost of housing in the U.S. has become a significant issue, with home prices increasing over 150% since 2019 and mortgage rates rising from approximately 3.7% to 6.2%, making home ownership unattainable for many Americans, particularly first-time buyers [2][3] Group 1: Housing Affordability Crisis - The affordability crisis is primarily driven by skyrocketing home prices and increasing mortgage rates, which have made home ownership an aspiration for three in four U.S. households [2][3] - President Trump has proposed banning institutional investors from purchasing single-family homes, which he believes are driving up prices and making home ownership less accessible [3][4] - The initiative has garnered bipartisan support, with various political figures acknowledging the negative impact of treating housing as a corporate strategy [3][4] Group 2: Institutional Investors' Role - Critics argue that institutional investors are reducing the inventory of homes available for sale, thereby driving up prices for regular buyers [4][5] - However, experts like Ed Pinto contend that institutional buyers are not the cause of rising prices but rather a symptom of deeper issues, such as restrictive zoning laws and a lack of new construction [5][14] - Institutional investors have historically played a role in stabilizing the housing market during downturns, such as the Great Financial Crisis and the post-pandemic recovery [7][13] Group 3: Market Dynamics and Misconceptions - Data shows that institutional investors account for only 1% of the total single-family housing stock, with small, mom-and-pop businesses dominating the market [9][14] - Recent trends indicate that large institutional investors have been net sellers rather than net buyers, contradicting claims that they are monopolizing the market [10][13] - Pinto's research highlights that there is no correlation between institutional ownership levels and housing price increases in various markets, suggesting that other factors are at play [13][14] Group 4: Potential Consequences of Policy Changes - Banning institutional investors from acquiring homes could have unintended negative consequences, such as reducing the availability of rental options for low-income families and hindering the repair and renovation of distressed properties [15] - The absence of institutional investors during economic downturns could exacerbate housing market volatility and limit options for aspiring homebuyers [15]