It’s the first rule of economics. If you want lower prices, increase supply.
After years of restrictive land-use regulations, exclusionary zoning, wacky environmental policies, and rising construction costs, as well as tightened mortgage regulations after the 2008 financial crisis, states and the federal government have undermined access, supply, and affordability of housing.
Rather than dealing with these forces, President Donald Trump has apparently decided to adopt the preferred policy of socialists Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA): blaming the landlords.
This week, Trump promised to ban large investors from buying single-family homes and asked Congress to codify his plan. Holding faceless, greedy “institutional investors,” entities with 100 properties or more, responsible for the housing crisis is a populist placebo. For years, I have seen progressives and the New Right ranting about Blackstone (sometimes, erroneously, BlackRock) on social media. Yet, according to an American Enterprise Institute study, these investors hold approximately 1% of the total single-family housing stock in the country.
The evidence that institutional investors artificially drive up prices is tenuous, at best. In many areas that have experienced the biggest price spikes, such as California, institutional investors barely have any share of the housing market. In New York, where a new bill limits institutional investor purchases, institutional investors own around 0.1% of stock. In states such as Texas and Georgia (which have the highest share of institutional investors at 2.6%), prices have spiked comparatively less.
However, there is a clear correlation between rent and housing prices and supply. Cities that build more, such as Austin in recent years, are seeing easing.
Trump’s Truth Social post announcing the new housing directive, which lacked the usual random capitalizations, exclamation points, and convoluted prose, was obviously written by someone other than the president. Perhaps the author was Vice President JD Vance, the leading econ populist in the administration, who reposted a single line from Trump’s text: “People live in homes, not corporations.”
Doubtlessly, this kind of demagoguery excites some voters, but corporations don’t eat food either or sit on couches or fund life-saving drugs, yet they buy and sell food, furniture, and medicine. And because they can do these things on a larger scale, they create more affordability.
There’s a good argument that institutional investors benefit housing. Only big investors could have taken on the foreclosed homes from Fannie Mae’s portfolio, or mass-renovate single-family houses, or fund new developments. But even if institutional investors contribute to the problem, it’s a rounding error compared to other factors.
And if investors are the problem, why only target Wall Street “barons,” as the vice president might say? What about the smaller-scale “mom-and-pop” shops that own over 90% of all the investor-owned housing? They engage in the same activities as larger firms. I suppose attacking small business owners doesn’t really work politically for populists.
Then, of course, there is the little matter of asking where the president derives the legal authority to ban certain people from selling or buying homes. Even if Congress passes a law codifying his requests, which is not out of the question, considering progressives support the idea, the constitutionality would be dubious.
HOLLYWOOD BUTCHERS ANIMAL FARM
There are somewhere around 82 to 85 million single-family homes in the United States. And somewhere around 65% of Americans own them, which is well within the historic norm. But aging Americans are living longer and holding onto their homes. Residents of established cities are not inclined to build more. Call it NIMBY-ism, if you like, but you would not want your home values depreciating, either.
These are a lot thornier issues. If you want to make home ownership easier, open the market, don’t create new barriers.