President Donald Trump’s proposal to prohibit institutional investors from owning single-family homes represents a deeply misguided attempt to address America’s housing affordability crisis. While framed as a measure to protect families from corporate competition, the policy risks triggering significant unintended consequences that could ultimately harm homeowners, renters, and local housing markets alike.
The United States faces a housing shortage, not an ownership crisis. Decades of regulatory expansion, restrictive zoning, permitting delays, inflationary policy, and rising construction costs have constrained housing development nationwide. A recent National Bureau of Economic Research analysis estimates that if housing construction between 2000 and 2020 had matched the growth rate seen between 1980 and 2000, the country would have roughly 15 million additional housing units today. No ownership restrictions can compensate for a deficit of that magnitude.
Yet, rather than addressing burdensome regulations, multiple housing proposals have been introduced seeking to codify a ban on institutional ownership of homes. A proposed federal prohibition, particularly the reported ownership threshold that limits institutional investors to 100 homes, would disrupt the market rather than reduce costs for Americans. If enacted, investors exceeding the cap would face powerful incentives to rapidly divest properties to comply with federal law. Such forced divestment risks triggering localized fire-sale conditions as large portfolios are liquidated simultaneously.
As policymakers continue to debate the details of various housing proposals, they should consider an exemption allowing institutional investors to sell single-family homes to other institutional investors to prevent disorderly liquidation. This carve-out is an essential safeguard to preserve rental housing supply, maintain market stability, and reduce downward pressure on neighborhood property values.
Because such transactions do not place homes into direct competition with owner-occupant buyers, the exemption would mitigate some of the most harmful economic effects of the proposed ban. Orderly portfolio transitions would allow markets to adjust gradually rather than through destabilizing forced sales.
While this exemption cannot fully correct the structural flaws of an ownership prohibition, it represents a necessary step to protect homeowners, renters, and local housing markets from avoidable damage.
While media portrays institutional investors as dominant actors in the housing market, institutional investors account for less than 1 percent of single-family housing nationwide and typically do not compete directly with traditional homebuyers. Recent analysis shows investors purchased homes at an average price of $449,981 in the third quarter of 2025, well below the national average home price of $512,800, suggesting that investors tend to acquire distressed housing stock requiring rehabilitation rather than move-in-ready homes sought by families.
What’s more, large institutional investors have been net sellers for seven consecutive quarters, selling 5,798 homes while purchasing only 4,663 in Q3 2025 alone. Importantly, approximately 60 percent of investor home sales ultimately return properties to traditional owner-occupants, replenishing homeownership supply rather than restricting it.
Institutional participation has instead served as a stabilizing force in constrained markets. With elevated mortgage rates and financing increasingly inaccessible for many households, investors provide liquidity that prevents housing markets from freezing entirely. Without this participation, transaction volume would decline sharply, increasing volatility and limiting mobility for both buyers and sellers.
Housing markets rely heavily on comparable sales to determine valuation. A sudden influx of discounted properties would not merely reduce the value of institutional holdings but would depress surrounding home prices across entire neighborhoods. Families living near these properties would experience declining home equity through no fault of their own, undermining household wealth accumulation and potentially destabilizing local tax bases.
At the same time, renters would face reduced housing options. Single-family rentals play a critical role for Americans unable to purchase homes due to affordability constraints. For many working families, renting remains the only viable pathway to accessing high-opportunity neighborhoods while saving for future ownership.
Private capital has increasingly shifted toward build-to-rent communities: new construction specifically designed to expand housing supply rather than compete for existing homes. Evidence shows that institutional investors are deploying capital into these developments precisely because they add inventory that would not otherwise exist. Policies that force institutional withdrawal risk halting these investments and leaving aging housing stock undermaintained.
America cannot solve a supply shortage by restricting ownership. The durable solution to housing affordability lies in expanding construction, streamlining permitting, reducing regulatory barriers, and encouraging long-term investment in housing of all types. Policies that prohibit capital investments in housing markets risk fewer homes, higher rents, and declining property values for the very families lawmakers seek to protect.
If Congress proceeds with institutional ownership limits, a robust exemption permitting investor-to-investor transactions is essential to prevent fire-sale dynamics and safeguard housing stability nationwide.