President Donald Trump’s speech at the World Economic Forum in Davos Wednesday largely focused on diplomatic tensions, but he also turned at points to the U.S. economy—including his new plans to rein in institutional investors in the single-family home market.
“In recent years, Wall Street giants and institutional investment firms, many of you are here, many of you are good friends of mine, many of you are supporters. I’m sorry to do this. I’m so sorry. But you’ve driven up housing prices by purchasing hundreds of thousands of single-family homes,” Trump said during the speech.
“America will not become a nation of renters. We’re not going to do that,” Trump continued, saying he is acting to “bring back (the) bedrock of the American Dream” that is homeownership.
After his statement on Truth Social Jan. 7, Trump subsequently signed an executive order on Jan. 20 (the day before his Davos address). The order’s title, “Stopping Wall Street From Competing With Main Street Homebuyers,” reflects the criticisms that institutional investors, as large financial entities, have an unfair advantage over individual buyers by being able to buy up lots of residential housing stock quickly. “People live in homes, not corporations,” the order read, phrasing Trump also used during his Davos speech.
The intent of the order is “to ensure that large institutional investors do not buy single-family homes that could otherwise be purchased by families.” However, the order does not explicitly define what counts as an “institutional investor” or a “single-family home,” and in fact, orders the Secretary of the Treasury to create the relevant definitions within 30 days.
Certain government agencies, including the Department of Housing and Urban Development (HUD), are explicitly directed to prevent the approval of home sales to institutional investors or the insuring or securitizing of those homes. Agencies are also directed to use first-look policies to give individuals a chance to buy foreclosed properties before investors can.
The Secretary of the Treasury is also ordered to review rules and guidance on institutional investors buying and owning single-family homes, while the Attorney General and Federal Trade Commission are directed to review institutional investors’ home-buying for anticompetitive practices. The HUD Secretary is also directed to investigate whether institutional investors might be receiving federal housing assistance by demanding disclosure of ownership in single-family rentals.
The order does include, though, “narrowly tailored exceptions” to its directives of preventing institutional investors from buying and holding single-family homes—specifically, “for build-to-rent properties that are planned, permitted, financed, and constructed as rental communities.”
Jake Krimmel, senior economist at Realtor.com®, praised this exception as a “key positive” in a public statement: “The carve-out for build-to-rent activity helps ensure the policy does not discourage new single-family construction. That’s critical, because new housing supply, whether it’s built for rent or to be owned, is what meaningfully improves affordability over time.”
The order also directs the White House to prepare legislative recommendations to codify policies preventing institutional investors from owning single-family homes. Trump said in his initial Truth Social post that he was calling on Congress to restrict institutional investors. Senator Bernie Moreno (R-Ohio, a state with a sizable amount of institutional investor-owned homes) told the Wall Street Journal that his office is in the early phases of drafting such legislation—“I would never want to go ahead of the president,” Moreno said.
Whether restricting institutional investors would actually impact the housing market or make it more affordable has been a debated subject well before Trump’s proposals. In a statement to RISMedia about Trump’s executive order, Bright MLS Chief Economist Lisa Sturtevant said that the proposal would have “modest, if any, impacts on the housing market,” and that banning institutional investors from buying single-family homes would not make a tangible impact on affordability.
“Banning institutional investors could, in fact, reduce the supply of housing available for rent or purchase if the ban discourages large investors from purchasing and renovating homes that are at risk of leaving the housing stock altogether as a result of disrepair or neglect,” Sturtevant said, adding that truly large institutional investors only account for about 2%-3% of single-family homebuyers. The majority of institutional investors own 10 homes or less, and the lack of definition of what “institutional investor” is in the executive order means it’s unclear if they would meet the threshold.
Krimmel added in his own statement that a ban, because it only restricts investors from future purchases rather than making them shed their current owned properties, would likely bring only an “inventory trickle, and likely only in select Sun Belt metros where inventory has already risen sharply due to market forces. In the supply-constrained Northeast, corporate investor activity is minimal, so the policy would have little to no impact on inventory.”
“With housing affordability at near record lows, it is tempting to try to find one ‘bad guy’ to blame, and often people point to large investors. But the fact is that large investors only account for a tiny share of homebuyers,” Sturtevant said.
