Trump renews his call to ban institutional homebuyers as Democrats offer a competing crackdown

President Trump renewed his call to ban institutional investors from buying single-family homes during his State of the Union address on Tuesday, the same day Democrats offered their own proposal to crack down on the practice. But experts say neither plan is likely to do much to make homes more affordable.

Mr. Trump first floated the idea last month in a social media post, proposing to bar institutional investors that own 100 or more homes from buying single-family properties and writing that “people live in homes, not corporations.” Democrats, for their part, introduced a bill that would limit certain tax deductions for large-scale homebuyers.

While both approaches aim to improve housing affordability, experts say they fall short of addressing the core driver of rising prices: a shortage of homes. Homebuilding cratered after the Great Recession of 2008-09 and has yet to catch up with demand.

The U.S. would need to build as many as 4 million additional homes beyond the normal pace of construction to significantly reduce the housing shortage, according to a Goldman Sachs estimate.

“The core problem is that we don’t have enough supply, and neither proposal really solves this core issue,” Alex Blackwood, CEO of Mogul, a real estate investment startup, told CBS News. 

Where Trump’s proposal might help

In his State of the Union speech, Mr. Trump touted his January executive order to ban institutional investors from buying homes, blaming such firms for driving up home prices. He pointed to Raysall Wiggins, whom he described as a mom of two from Houston who had been stymied in her efforts to buy a home.

“She placed bids on 20 homes and lost all of those bids to gigantic investment firms that bypassed inspection,” Mr. Trump said in the speech. “Paid all cash and turned those houses into rentals, stealing away her American dream.”

He added, “And now I’m asking Congress to make that ban permanent, because homes for people — really, that’s what we want. We want homes for people, not for corporations.”

Reached for comment, the White House referred to Mr. Trump’s remarks on housing affordability during his State of the Union speech.

To be sure, Mr. Trump’s proposal could have a greater impact in cities where institutional investors have a large footprint, which include Wiggins’ home city of Houston, as well as Atlanta and Charlotte, North Carolina, experts said. 

Large institutional investors own about 3.8% of all single-family rental homes nationwide, according to a 2023 Urban Institute analysis. In Atlanta, however, investors own about 28% of such homes, compared with 20% in Charlotte and 9% in Houston.

“It would make a significant difference in these places, where it’s an outsized issue,” Collin Allen, executive director of the American Property Owners’ Alliance, a homeowners’ advocacy group, told CBS News. “But they own a small share of homes overall.”

Thom Malone, principal economist at Cotality, a provider of housing market insights, said the push to limit investors reflects frustration among homebuyers competing with deep-pocketed institutions.

“If you’re up against an investor, you’re going to have a hard time putting together a more competitive bid,” he told CBS News. 

A Democratic proposal

Meanwhile, Democratic Sens. Elizabeth Warren of Massachusetts and Jeff Merkley of Oregon on Tuesday introduced legislation to prevent entities that own 50 or more homes from deducting depreciation and mortgage interest tied to those properties.

The bill would also ban investors from buying foreclosed homes sold by federal agencies. 

“This bill will take on predatory landlords while making investments to increase housing supply and boost homeownership for Americans,” Warren said in a statement.

Both Republicans and Democrats contend that Wall Street is exacerbating the nation’s housing crisis by limiting housing supply and driving up costs for Americans. 

While limiting investors’ ability to snap up homes could be part of a multi-pronged approach to addressing housing affordability, targeting them alone won’t solve the issue, according to Allen. 

“We have to build more homes, and look at policies that allow us to expand supply,” he said. 

Edward Pinto, co-director of the AEI Housing Center at the American Enterprise Institute, a Washington, D.C.-based think tank, told CBS News that a more effective proposal would meet three criteria: It would reduce land costs, allow homes to be built on smaller parcels and bring down construction costs. 

Limiting institutional investors’ ability to purchase homes, by contrast, “is not going to have much of an impact — if any — on making homes more affordable,” Pinto said. “It just gives the impression of doing something positive, and so it may have some attractiveness on both sides of the aisle, but it’s not going to solve any problems.”