Is Wall Street the Real Villain of the Housing Market?
As policymakers continue to debate the role of Wall Street investors in the housing market, another analysis confirms what many housing watchers have argued for a long time: Institutional investors make up a small – even shrinking – portion of home purchases.
The report, released March 13 by economists at Realtor.com, found that investors who bought more than 350 single-family homes since 2015 made up just 1% of total purchases nationwide. In addition, their purchasing activity has been on a slow decline since peaking in 2021.
“Large corporate investors are often blamed for today’s housing affordability crisis, but data shows their footprint is relatively small,” said Danielle Hale, chief economist at Realtor.com, in a statement accompanying the report.
The report was released one day after the US Senate passed the 21st Century ROAD to Housing Act, the first comprehensive housing legislation in a decade. Among the bill’s provisions is one that limits the purchase of new single-family homes by large institutional investors who directly or indirectly own at least 350 single-family homes.
It provides an exemption, “including for large institutional investors looking to buy or build new single-family homes primarily for the rental market, but requires these properties to be sold to individual homeowners after seven years,” according to a brief from the Bipartisan Policy Center.
Maximum action against supply-side solutions
In January, President Donald Trump signed an executive order called “Stopping Wall Street from Competing with Main Street Homebuyers,” which stated, “It is the policy of my administration that large institutional investors should not purchase single-family homes that are likely to be purchased by families.”
While many Americans may agree with that idea, it may be wrong to focus on pushing for more available and affordable housing.
“Policies focused on improving housing construction are likely to have a far greater impact on home buying and ownership than restricting a small portion of buyers,” Hale said in a March 13 report. Many other analyzes agree.
Protection has been restored under the new administration
But perhaps most importantly, the Department of Housing and Urban Development implemented a number of policies to encourage homeownership during the Biden administration.
But in the past year, HUD has rolled back many of those protections, said Sarah Edelman, who helped develop some of those policies in her role at the Federal Housing Administration. Edelman, who is now at the nonprofit National Community Stabilization Trust, spoke to USA TODAY in January, when Trump first explored preventing Wall Street from buying homes.
Although some consumer advocates have also pointed out that the area of institutional investors is equally strong in other metros, making it difficult for residents of those areas to enter the housing market, Realtor’s analysis puts that into perspective.
The area most purchased by corporate interests, Memphis, saw only 4.4% of home purchases by corporate owners over the decade.
This article first appeared in USA TODAY: Is Wall Street the real villain of the housing market?
Reporting by Andrea Riquier, USA TODAY / USA TODAY
USA TODAY Network via Reuters Connect
