On Wednesday, President Donald Trump said the U.S. would bar large institutional investors from buying single-family homes in an effort to boost affordability. The announcement in a Truth Social post spurred surprised and concerned reactions from some in the industry.
“While the legality and ultimate timeline for enforcement remains uncertain, we believe it proposes a clear risk to the SFR sector's business model and growth prospects,” investment bank Mizuho Americas said in a Jan. 7 analyst note.
The president’s announcement comes as voters continue to name housing and rent costs as key contributors to the affordability crisis. Nearly half of surveyed voters say investors using housing for profit is a primary driver of high prices, the democratic think tank Searchlight Institute found last year.
“For a very long time, buying and owning a home was considered the pinnacle of the American Dream,” Trump said in the post. But now, “that American Dream is increasingly out of reach for far too many people, especially younger Americans.
“It is for that reason, and much more, that I am immediately taking steps to ban large institutional investors from buying more single-family homes, and I will be calling on Congress to codify it. People live in homes, not corporations,” he said.
Although the announcement was scarce on details, the president said he plans to further discuss the proposal, as well as other housing and affordable housing measures, at the World Economic Forum in Davos, Switzerland, later this month. He may also talk about it during the State of the Union on Jan. 24.
Housing economist Jay Parsons said in a Wednesday LinkedIn post that the move is “not a huge surprise” because Vice President J.D. Vance has long championed this view, “but it is disappointing because it's in no way grounded in reality and will in no way improve housing affordability or availability.”
Questions remain
Following the announcement, shares in the country’s largest renter of single-family housing, Invitation Homes, tumbled 6%, CNBC reported. Shares in investing firm Blackstone dropped more than 5%, while shares in private equity firm Apollo Global Management declined over 5%.
For its part, Mizuho downgraded its outlook for Las Vegas-based REIT American Homes 4 Rent and Invitation Homes from “outperform” to “neutral.” Per Mizuho, “We expect the stocks to remain range-bound near-term and see better relative risk-adjusted opportunities elsewhere within Residential REITs (CPT, MAA) and REITs broadly with Storage REITs (EXR) a likely near-term beneficiary of the uncertainty.”
In a Wednesday analyst note, JPMorgan noted that large institutional investors likely own less than 10% of the country’s 14 million SFRs, which are dominated by “mom and pop” owners. Nonetheless, major multifamily companies like Camden Property Trust, American Landmark and TruAmerica have entered the SFR space in recent years.
Per JPMorgan, “if the president’s ban were to go through and be heavily restrictive, the business plans for SFR operators will be in question, and growing the portfolios would be off the table. This is clearly what the market is reacting to [Wednesday] with the stocks trading off, and it makes sense from a knee-jerk point of view.” Still, even in a “worst-case scenario” where investors had to sell off their SFRs, their underlying value is substantial.
Sen. Bernie Moreno (R-OH) said Wednesday he would introduce legislation to codify the move. However, it’s not clear whether Trump’s proposal would need the blessing of Congress and what the timeline for that would be.
“Previous attempts at similar legislation never found enough votes, as recently as a couple years ago,” Parsons said in his LinkedIn post.
Additional questions remain, such as what constitutes a large institutional investor, what happens to existing homes owned by institutional SFR platforms, what happens to build-to-rent developments currently underway and whether investors would be allowed to add to their portfolios via development. It’s also not clear whether institutions could manage rental homes on behalf of small homeowners.
Even if Trump’s proposal does advance, the law would likely be challenged in court, according to Mizuho.
There are other ongoing efforts to address housing access and affordability that have garnered widespread support. Although the bipartisan Road to Housing Act was excluded from the latest defense bill in December, the House is now mulling the Housing for the 21st Century Act, which contains many similar provisions. The legislation, favored by housing industry groups, aims to reduce the cost and complexity of development to stimulate production.
