On Tuesday, President Trump took a significant step by signing an executive order aimed at limiting Wall Street firms from purchasing single-family homes. He argues that this move will help make housing more affordable for families across America.
This order, which is called “Preventing Wall Street from Competing with Main Street Home Buyers,” instructs federal agencies to come up with new rules or modify existing ones concerning the purchases of single-family homes by institutional investors within 60 days.
In the order, President Trump stated, “To maintain the supply of single-family homes for American families and increase paths to homeownership, it is my administration’s policy that large institutional investors should not purchase single-family homes that families can afford.”
The President has also asked the Department of Justice and the Federal Trade Commission to investigate significant purchases of single-family homes for any potential antitrust issues.
Furthermore, authorities are being encouraged to focus on addressing “coordinated vacancy and pricing strategies” employed by large institutional investors within the rental market.
Trump’s administration is also looking to collaborate with lawmakers to create legislation that would enforce restrictions on these large investors, indicating a desire for any new regulations to extend beyond his presidency.
These proposed measures will require congressional approval, which could lead to some tension among lawmakers concerning the extent of federal oversight in the housing market.
As per legal experts from Clifton Larson Allen, a nationwide ban would necessitate action from Congress, as they note, “national acquisition restrictions require legal authority and cannot be implemented by executive action alone.”
The firm emphasizes that formal legislation would be needed to legitimize such a federal prohibition.
Post the 2008 financial crisis, major Wall Street companies like Blackstone, American Homes 4 Rent, and Progress Residential acquired thousands of single-family homes, transforming distressed properties into rental units.
While these institutional investors are often focal points in housing debates, they actually control a relatively small fraction of available single-family homes in the U.S.
For instance, in Japan, less than 1% of single-family residences are owned by investors managing more than 100 homes, according to insights from the American Enterprise Institute.
Moreover, while institutional investors currently grip about 27% of single-family homes in cities like Atlanta, they represent only 2-3% of overall rental housing.
Interestingly, their ownership tends to be quite concentrated. In rapidly growing markets, especially in the Sunbelt region, these large investors dominate certain metropolitan areas, even as their overall national presence is minimal.
In 22 specific counties across the U.S., institutional owners account for 5% to 10% of housing stock, primarily in urban centers such as Dallas, Houston, Atlanta, Phoenix, and Jacksonville, as well as Charlotte and Tampa, Florida, and Memphis, Tennessee.
In contrast, various investors, including individual homeowners, collectively own about 20% of all single-family homes and represented roughly one-third of home purchases in the second quarter of last year.
