Trump’s approach to housing blames Wall Street as the culprit. But he’s targeting the wrong party.

The Real Challenge in Housing: Not Wall Street, But Limited Supply

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As President Donald Trump faces low approval ratings, he, like many politicians in similar situations, is searching for a scapegoat to blame for the country’s affordability crisis. This time, he’s set his sights on Wall Street.

With nearly a year into his second term, Trump appears to realize that blaming Joe Biden has lost its impact. His previous target, Federal Reserve Chair Jerome Powell, is nearing the end of his tenure. With midterm elections approaching, Republican strategists are urging Trump to focus on articulating his economic vision and to maintain a consistent message.

This week, Trump—who once dismissed affordability concerns as a Democratic fabrication—unveiled two new, vaguely outlined proposals centered on housing costs. He placed the blame on Wall Street investors, accusing them of making homeownership unattainable for everyday Americans.

But is Wall Street truly to blame?

On Wednesday, Trump announced via social media his intention to prohibit large institutional investors from purchasing additional single-family homes, echoing ideas often championed by progressive Democrats. The following day, he suggested the government should acquire $200 billion in mortgage bonds to lower interest rates and monthly payments. He promised to share more specifics later this month.

However, most experts agree that these proposals overlook the primary factor driving up home prices: a severe shortage of available homes. According to Goldman Sachs Research, the U.S. needs roughly 4 million additional homes to restore affordability.

Are Institutional Investors the Culprit?

Jake Krimmel, a senior economist at Realtor.com, commented that banning Wall Street investors from buying single-family homes is unlikely to significantly improve affordability. While these large landlords often make headlines, they are not the root cause of the ongoing housing shortage or affordability issues that have persisted for over a decade.

When Trump refers to “institutional investors,” he means major investment firms, including some run by his own billionaire supporters, such as Blackstone. These companies own vast numbers of apartment buildings, mobile home parks, and single-family homes nationwide.

Since the 2008 housing crash, real estate has become a profitable sector for institutional investors. Financial firms bought up undervalued properties in desirable neighborhoods and began renting them out. Estimates vary, but a study found that between 2012 and 2019, institutional investors owned about 240,000 single-family homes. This made them a frequent target for criticism, with some arguing that their activity pushed up prices and made it harder for first-time buyers to enter the market.

Despite the attention, these large investors represent only a small fraction of the housing market. According to Krimmel, institutional investors owning more than 1,000 properties accounted for just 1% to 3% of home purchases in 2025—a share that has been declining as interest rates rise. Most investment properties are actually owned by small-scale “mom-and-pop” landlords who rent out one or two extra homes for supplemental income.

In certain markets, especially in the Sun Belt, institutional investors do have a larger presence. A 2024 Government Accountability Office report found that big investors owned 25% of rentals in Atlanta, 18% in Charlotte, and 14% in Phoenix. Still, even eliminating institutional ownership entirely would likely have minimal impact, as inventory in these cities is already increasing, helping to stabilize prices.

Trump’s Mortgage Bond Proposal

Trump’s second housing initiative takes a more technical approach. He announced plans for the government to purchase $200 billion in mortgage-backed securities, aiming to reduce mortgage rates and monthly payments, thereby making homeownership more affordable.

This strategy would involve federal agencies like Fannie Mae and Freddie Mac buying large quantities of mortgage bonds—a tactic the Federal Reserve has used during economic crises to prevent interest rates from spiking. (Fannie Mae and Freddie Mac largely exited this market after the 2008 financial crisis, when the government intervened to prevent their collapse.)

Many economists agree that such a move could help lower mortgage rates and provide some relief to buyers. However, it does nothing to address the underlying shortage of homes for sale.

Additionally, this approach is unlikely to encourage current homeowners to sell and move, a phenomenon known as the “lock-in effect.” Daryl Fairweather, chief economist at Redfin, told the Associated Press that this plan is more of a temporary fix and probably wouldn’t reduce rates enough to overcome the lock-in effect.

Historically, mortgage rates around 6% are not unusual. The real issue is the persistent lack of housing supply, which has driven the median home price to approximately $410,000—a nearly 30% increase since 2020.

Addressing the Root of the Problem

So, is there anything Trump or Congress could do to truly improve housing affordability?

According to Krimmel, solutions do exist, but they lack the populist appeal of blaming Wall Street. The housing crisis is a complex, deeply rooted issue that has only worsened over time. The federal government could help by incentivizing state and local governments to increase housing supply, such as by streamlining permitting processes or allowing for denser development through zoning reforms.

These are practical, effective measures—though admittedly less catchy than campaign slogans.

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