Could Trump lower housing costs by prohibiting Wall Street from owning homes?

Trump Proposes Ban on Institutional Investors to Address Housing Affordability

This week, former President Donald Trump unveiled a bold plan targeting Wall Street in an attempt to make homes more affordable and bring down housing costs. His proposal aims to restrict large investment firms from purchasing additional single-family homes, a move he believes will help everyday Americans compete in the real estate market.

In a recent social media statement, Trump accused major financial institutions of acquiring significant numbers of homes, thereby making it harder for regular buyers to enter the market. He called on Congress to turn this policy into law, emphasizing, “Homes are for people, not corporations.”

However, several experts interviewed by ABC News expressed doubts about the effectiveness of Trump’s plan in significantly lowering home prices nationwide. They pointed out that institutional investors own only a small portion of single-family homes, many of which are occupied by renters. As a result, they argue that such a ban would do little to resolve the underlying shortage of available homes that drives up prices.

“When you look at the big picture, institutional investors control a relatively small number of homes,” said Marc Norman, associate dean at NYU’s Schack Institute of Real Estate.

According to the National Association of Realtors, the median price for an existing home in November was $409,200, marking a 24% increase over the past five years. Meanwhile, Freddie Mac reports that the average 30-year fixed mortgage rate is currently 6.16%, near a 15-month low but still much higher than the sub-3% rates seen in 2021.

Trump’s strategy is to limit institutional buyers in the single-family home market, hoping this will ease the imbalance between supply and demand and put downward pressure on prices.

“I am taking immediate action to prevent large institutional investors from acquiring more single-family homes, and I urge Congress to make this policy law,” Trump reiterated online. However, he did not provide specifics on how he plans to implement this ban, and the White House has not yet commented on the proposal.

Senator Bernie Moreno of Ohio announced that he intends to introduce legislation to support Trump’s initiative. Congress has previously considered similar measures, including a 2023 bill from Democratic lawmakers that would have taxed hedge funds owning large numbers of single-family homes.

Market Reaction and Industry Response

Following Trump’s announcement, shares of major real estate firms such as Blackstone, Invitation Homes, and American Homes for Rent dropped by 4% to 6% on Wednesday.

The National Rental Home Council (NRHC), which represents the single-family rental industry, welcomed the administration’s focus on expanding housing options for Americans. “We look forward to working with the White House and policymakers on this important issue,” the group stated.

How Much Do Institutional Investors Own?

Analysts note that institutional investors make up only a small segment of the market. According to a 2022 study by the U.S. Government Accountability Office (GAO), these investors own about 450,000 homes, or roughly 3% of all single-family properties.

“The real question is whether large institutional investors are preventing individuals from buying homes,” said Jake Krimmel, senior economist at realtor.com. “The answer is no.”

While institutional ownership is limited overall, it is more concentrated in certain areas. The GAO found that institutions own 21% of homes in Jacksonville, Florida, 18% in Charlotte, North Carolina, and as many as one in four homes in Atlanta.

Experts are divided on whether restricting institutional buyers would lower prices in these high-concentration markets. Some believe that reducing demand from big investors could help bring prices down, while others argue that increased housing supply in these regions has already eased price pressures.

“In certain markets, this policy could have some impact,” said Stijn Van Nieuwerburgh, a real estate professor at Columbia Business School. “But overall, it’s not a game-changer.”