America’s housing affordability crisis has increasingly become a political drama in search of a convenient antagonist.
In his State of the Union address, President Donald Trump elevated institutional ownership of single-family homes to the center of the national housing debate, urging Congress to permanently ban large investment firms from purchasing homes and declaring that “homes are for people, not corporations.”
Policymakers across both parties have similarly blamed short-term rental platforms, institutional investors and private capital for rising home prices. Yet, as in many prior housing debates, the policy conversation risks mistaking visibility for causation and targeting market participants rather than confronting the structural forces driving scarcity.
The United States does not suffer from an investor ownership crisis. It suffers from a chronic housing shortage.
The nation remains short between 4 million and 5 million housing units, a deficit created not by institutional investment but by years of restrictive zoning, permitting delays, rising regulatory costs, infrastructure bottlenecks and policies that slowed construction while demand continued to grow.
National Bureau of Economic Research analysis finds that had housing construction between 2000 and 2020 matched the pace seen between 1980 and 2000, the United States would have 15 million additional homes today. No ownership prohibition can compensate for a supply deficit of that magnitude.
Housing affordability deteriorated not because innovation or investment moved too quickly, but because supply was immobilized while demand accelerated.
Federal housing finance policy expanded access to credit, encouraging homeownership aspirations even as construction lagged behind population and household formation. Monthly mortgage payments now routinely exceed $2,600, 37 percent of median household income, representing a 50 percent increase in inflation-adjusted housing cost burdens since 2008.
The most revealing indicator of strain is not who is buying homes, but who is absent from the market. First-time homebuyers now account for just 21 percent of purchases, the lowest level on record, while the median first-time buyer’s age has climbed to 40.
These trends predate institutional investor participation and instead reflect structural affordability constraints.
Yet institutional investors have increasingly been portrayed as dominant actors who crowd families out. Market evidence contradicts this narrative. According to the American Enterprise Institute, institutional investors account for less than 1 percent of single-family housing nationwide, with only 0.7 percent of counties reaching ownership levels of 5 percent to 10 percent. Research from the Mercatus Center similarly finds that large institutional owners have never accounted for more than 2.5 percent of home purchases in any quarter.
More than 90 percent of investor-owned homes remain in the hands of small “mom-and-pop” landlords. Ownership data shows 92 percent of investors own between one and five homes, while mega-investors controlling more than 1,000 properties represent just 2.17 percent of ownership tiers.
Institutional investors are also not purchasing the same homes that most families seek. BatchData reports investors paid an average of $449,981 for homes in the third quarter of 2025, well below the national average price of $512,800, reflecting a focus on aging or distressed housing stock requiring rehabilitation.
Rather than driving displacement, institutional participation has increasingly stabilized housing markets strained by elevated mortgage rates and constrained access to financing. Large institutional investors have been net sellers for seven consecutive quarters, with 60 percent of investor sales ultimately returning homes to owner-occupants.
The proposed federal prohibition, particularly the ownership threshold limiting institutional investors to 100 homes, would address a perceived villain rather than the underlying structural shortage. By forcing investors to rapidly divest properties, policymakers risk triggering localized fire-sale dynamics that would depress comparable home values across entire neighborhoods.
Housing markets price homes based on nearby transactions. A sudden wave of discounted institutional sales would not remain isolated to investor portfolios but would directly reduce the equity of surrounding family-owned homes. A policy intended to help households purchase homes could instead erode household wealth for existing homeowners.
Meanwhile, renters would bear immediate consequences. Single-family rentals provide access to neighborhoods, schools and employment centers for families unable to overcome today’s affordability barriers. Homeownership costs exceed renting by nearly 40 percent on average, while the median down payment nationwide approaches $67,500.
Institutional capital has increasingly shifted toward build-to-rent communities: new housing supply that would not otherwise exist. Policies that drive investment out of housing markets risk halting these developments while leaving aging housing stock undermaintained.
History suggests that housing markets worsen when policymakers target visible market participants rather than structural constraints. International evidence from Rotterdam shows that restrictions on institutional investors reduced rental supply and increased rents, reinforcing the idea that ownership bans can exacerbate affordability challenges.
At a minimum, policymakers should consider an exemption allowing institutional investors to sell properties to other institutional investors. This carve-out would serve as an essential stabilizing mechanism. Investor-to-investor transactions preserve rental supply and prevent disorderly liquidation that could cascade into neighborhood price declines.
America cannot regulate its way out of a housing shortage. The path to affordability lies in expanding supply, streamlining permitting, reducing regulatory barriers and encouraging long-term housing investment.
If Congress proceeds with institutional ownership limits, a robust exemption permitting investor-to-investor transactions is essential to prevent housing market disruptions and protect renters and homeowners from avoidable economic harm.
Patrick M. Brenner is the president of the Southwest Public Policy Institute. He wrote this for InsideSources.com.
