Why the Bipartisan War on Housing Investors Won’t Make Housing More Affordable

In March, the U.S. Senate passed a bill full of tweaks to federal grant programs and regulations. Although nearly all of the bill’s provisions are aimed at increasing the housing supply, one would undermine that goal.

That provision, inserted at the last minute, bans investors from owning more than 350 single-family rental homes. Investors could still acquire homes built as rentals, but they would have to be sold off within seven years. Because of these restrictions, the Senate bill, which otherwise could be expected to have a modest positive impact on the housing supply, probably would reduce yearly home construction.

Proponents of the large-investor ban argue that it’s necessary to preserve owner-occupied homes. “An overwhelming majority of Americans across party lines want to stop private equity from snapping up single-family homes,” Sen. Elizabeth Warren (D–Mass.) said on the Senate floor after the bill’s passage. “This bill does exactly that.”

Warren is correct about the popularity of a ban on corporate purchases of single-family homes. A poll from the left-leaning groups Groundwork Collaborative and Data for Progress found 73 percent of likely voters supported such a policy. Politicians on the left and right are increasingly blaming large investors for raising home prices. It was one of the few things that J.D. Vance and Tim Walz could agree on during the 2024 vice presidential debate.

In January, President Donald Trump issued an executive order directing federal agencies to limit home purchases by large institutional investors. He also urged Congress to codify a more sweeping ban.

Despite their bipartisan appeal, such restrictions work against the goals of increasing home construction and making housing more affordable. In recent years, new single-family communities built as rental housing have made up anywhere from 3 percent to 10 percent of new homes. There are currently 160,000 such units in the development pipeline nationwide.

If investors are forced to sell off their build-to-rent communities, they probably will decide not to build them at all. Far from making more homes available to families, the edict would result in fewer homes. The ban would especially hurt people who can’t qualify for a mortgage or don’t want one.

The claim that large investors are making housing more expensive does not stand up to scrutiny. Large investors own just 0.7 percent of the country’s single-family homes. And in recent years, they have been net sellers of those homes.

For all the negative attention they have received, these large investors can’t possibly be responsible for a general rise in home prices, given their very small share of the market. A more plausible explanation is regulatory restrictions on new home construction.

The Senate’s housing bill does try to address that problem by repealing federal regulations on manufactured housing, exempting new housing from federal environmental reviews, and redistributing grant dollars to communities that actually build new housing. But it combines those wonky yet welcome reforms with populist-inspired meddling that would have the opposite effect.