Why an Institutional-Buyer Ban Could Make Housing Less Affordable

A presidential proposal to ban large institutional investors from purchasing single-family homes sounds simple: stop corporations from scooping up houses and make homeownership more affordable. The reality is more complicated. A ban aimed at “Wall Street” buyers risks reducing supply, discouraging large-scale development, and unintentionally making housing less affordable for the people it intends to help.

What the proposal would target

The focus is on large private equity funds and pooled-investor vehicles that buy single-family homes in bulk, manage them professionally, and return distributions to their investors. Definitions vary: some proposals treat 50 to 100 properties as the threshold, others set it at a much higher number. The core idea is to prevent deep-pocketed firms from dominating single-family inventory.

Past attempts and why they failed

Nearly identical measures have been introduced before and stalled for predictable reasons:

• Legal and constitutional hurdles — Banning an entire investor class invites major court challenges.
• Enforcement difficulties — Corporations can use shell LLCs or complex ownership structures to evade straightforward limits.
• Unintended market effects — Cities and countries that tried similar restrictions experienced stalled development, weaker rental supply, or higher prices.

Examples include the proposed 2023 End Hedge Fund Control of American Homes Act and the 2022 Stop Wall Street Landlords Act. Local policies in Atlanta, Canada, the Netherlands, Denmark, and New Zealand produced mixed or adverse outcomes: development slowed in some places, rental inventories tightened in others, and affordability did not meaningfully improve.

How much influence do institutional buyers actually have?

Numbers matter. Broad labels like “investor” conceal important differences:

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• About three quarters of buyers are owner-occupants competing for homes.
• Of the roughly 26 percent of transactions labeled “investor,” about half are mom-and-pop landlords owning fewer than nine units.
• Large institutional owners represent a small slice — studies found private equity firms accounted for roughly 1.6 percent of single-family rental homes and only a small percentage of overall purchases in any given year.

Because institutional ownership is statistically small compared with the total market, a narrow ban may have little effect on headline affordability while triggering broad economic side effects.

Why a ban could make affordability worse

Three key mechanisms explain how a well-meaning ban could backfire:

• Less rental inventory — Developers may stop building purpose-built rental communities if they cannot sell to institutional buyers. That reduces available rental stock and puts upward pressure on rents.
• Lower incentives to build at scale — Large buyers help finance and monetize large developments. Remove that exit market and builders face more risk and higher costs, which can slow construction.
• Supply-side consequences — Restrictions that reduce developer demand for land or financing can lower new supply, increasing competition for existing homes and keeping prices elevated.

The real drivers of high home prices

Affordability stems from a combination of systemic factors, not a single villain:

• Interest rate history — Years of very low mortgage rates locked many homeowners into cheap financing, reducing turnover.
• Restrictive zoning — Single-family zoning and density limits block the addition of new housing where demand is strongest.
• Regulatory friction and fees — Complex permitting, high inspection or permit fees, and inconsistent rules increase the cost and time to build.
• High consumer debt — Elevated student loans, auto debt, and other obligations limit buyer purchasing power.
• Government mortgage incentives — Policies that expand access to credit without expanding supply can increase demand at the same time supply is constrained.

Practical policy ideas that would actually unlock affordability

Rather than pursuing an investor ban, reforms that increase supply and reduce friction tend to produce measurable results. Key proposals include:

1. Streamline permitting and inspections — Clear, consistent permit requirements and interoperable departments reduce build time and cost.
2. Cut excessive fees — Lowering routine permit costs helps make small renovations and infill projects viable.
3. Raise the capital gains exclusion — Indexing the exclusion for inflation and increasing the threshold would encourage more homeowners to move, unlocking starter homes.
4. Allow mortgage portability — Letting homeowners transfer their mortgage rate to a new home when trading up would reduce the lock-in effect caused by low-rate loans.
5. Expand deductible mortgage interest limits — Increasing the deductible mortgage interest threshold would incentivize voluntary seller movement and free up lower-priced inventory.
6. Support modular and denser housing — Reducing parking mandates and approving modular or multifamily construction in high-demand areas increases usable housing supply quickly. The example of Austin shows how removing parking minimums can increase availability and reduce costs.
7. Offer targeted tax incentives to builders — Time-limited abatements for projects that deliver affordable units and jobs can make development feasible in challenging markets.

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What this means for buyers, renters, and sellers in Utah

Local conditions matter. In Utah, where population growth and constrained supply combine to push prices higher, policies that accelerate construction and simplify the buying and selling process have more impact than restrictions on institutional buyers.

Homebuyers and sellers should focus on actionable steps:

• Understand local permitting timelines and costs before planning renovations or new construction.
• Consider mortgage strategies if planning to trade up; policy changes like mortgage portability could be game changing if adopted.
• Watch for modular and denser developments near major job centers — those projects tend to expand practical inventory sooner than traditional subdivisions.

For Utah market context and ongoing data, consult local market reports and guides. Example resources include monthly St. George market reports and analyses of how interest rates affect local markets. See code references for Utah resources: For national housing policy context, refer to industry authority sites such as https://www.nar.realtor.

Bottom line

A ban on institutional purchasers sounds appealing politically, but it is unlikely to materially lower home prices. Institutional firms own a small share of single-family housing; the larger, durable causes of unaffordability are supply constraints, zoning, permitting friction, and capital-market dynamics. Policies that reduce red tape, encourage building, and unlock inventory produce real results.

Recommended next steps for policymakers

• Prioritize zoning reform and permit streamlining over ownership bans.
• Design incentives that directly increase production of starter and workforce housing.
• Implement pilot programs for mortgage portability and modular housing to test impacts before scaling.