President Trump has expressed understandable concern with the state of the single-family housing market that he inherited a year ago. During the Biden administration, home prices went up by 34% while wages went up 20%, which, combined with high general consumer price inflation and interest rates, has created an affordability gap.

On January 7, President Trump said he would move to ban institutional investors from buying single-family homes. While we applaud his effort to address housing affordability, the impact of such a proposal is likely to be limited, especially relative to potential unintended consequences.

Background: Based on Parcl Labs data, our August 2025 report found that institutional investors (those owning 100+ rental homes) were relatively minor players in the single-family housing market. An updated analysis of these data show that as of November 2025, institutional investors owned only 1.0% of the nation’s single-family housing stock, a level unchanged over the 21 months since March 2024.

Further, over the last 21 months, large institutional investors acquired 178,000 and sold 185,000 rental homes, resulting in a 7,000 home drop in their total portfolios. Homes they acquired totaled less than 2% of all single-family home sales over the period.

Source: Parcl Labs and AEI Housing Center

Homes in build-to-rent (BTR) communities in 2024 constituted an estimated 30% (33,000) of acquisitions by large institutional investors. While BTR communities are a relatively new phenomenon, these homes already account for 4% of total single-family rental stock. 

The risk of unintended consequences for housing supply/BTR.

It remains unclear whether new construction would be exempt from the ban.

• If the ban applies to both new and existing homes, this would be catastrophic to the BTR sector, where large institutional investors partner with homebuilders to create entire neighborhoods of single-family rental homes on raw or underutilized land.

BTR has been one of the fastest growing segments of single-family new construction in recent years and it is generally acknowledged that institutional investor demand has served to increase the level of new home construction.

Because these homes are built specifically to meet demand from large institutional investors, this volume is unlikely to fully shift to the for-sale market.

Further, a ban on large investor acquisitions may significantly reduce the number of homes they sell. Over the last 21 months, institutional investors have kept their portfolio sizes substantially constant, thus a ban on new acquisitions would likely force them to reduce, or even halt, property dispositions, which totaled 185,000 homes over that same period.

• A ban that exempts the acquisition of new constructions could also have unintended consequences. Since institutional investors are banned from purchasing existing homes, they would likely attempt to shift more of their activity toward new construction to keep portfolio sizes constant.

Unintended consequences, by their nature, are difficult to predict and weigh compared to alternative outcomes, as they are market driven responses to policy.

Given that BTR currently accounts for only around one-third of their acquisitions, efforts to grow BTR might place institutional investors in competition with the individual purchaser market for some portion of newly constructed homes.

It is unclear whether builders would expand their production to accommodate both institutional investors and individual purchasers (favorable for supply), or favor one over the other. As a result, despite comprising just 2% of all home purchases today, institutional investors could account for as much as 20% of new construction sales if their acquisitions become concentrated in that segment.

Even if ramping up new home purchases could eventually fill the existing home gap, these homes take time to build. As a result, institutional investors would likely hold onto their existing portfolios to keep portfolio size constant.

• The impact on those large institutional investors that acquire homes in need of rehabilitation.

For example, a sizable portion of The Amherst Group’s business is to rehabilitate single-family rental homes. These 1,650 square foot homes required an average of $40,000 in repairs, are family sized, and the renter has an average 653 credit score.

What would move the needle on housing affordability?

At the heart of the affordability crisis is a chronic and severe housing shortage. This shortage is no accident—it is the result of irresistible force meeting an immovable object. The immovable object has become many of the 33,000 state and local jurisdictions issuing land use regulations—keeping supply tight and prices high. The irresistible force is the federal government’s demand stoking efforts to make homes “affordable” with leverage and credit easing during good times and bad.

The Trump administration is pressing for lower interest rates and expecting strong economic growth. If gross domestic product were to grow at 3-4% and mortgage rates drop from 6.2% to say 4.5%, the result would be strong upward pressure on home prices. Unless there were supply-promoting policies to absorb this additional demand, we could again find ourselves in an affordability vice with home prices rising faster than incomes.

A Federal-State partnership to address the immovable object/irresistible force paradox

Incentivize states to make Starter Homes Great Again for Our Children and Grandchildren by loosening restrictions on building on smaller lots.

• Building homes on smaller lots can greatly add to supply and improve affordability, especially for working and middle class families.
• On a national basis, we estimate this could add hundreds of thousands of family sized homes per year that would sell for about 20% less than the median single-family detached home currently being built, thereby helping to ensure the nation’s economic future.
• The concept is simple—offer states a variety of $25,000 bounties tied to homes built on smaller lots, with the total bounty amount limited to $50,000.
• At an average bounty per lot of $37,500, $9 billion would fund 240,000 family-sized homes/year.
• Years 1 and 2 would be funded by repurposing $18 billion of discretionary federal funds towards this initiative. Years 3-10 would be funded by Congress repurposing existing funds for affordable housing subsidies.
• States would be free use the bounties as they see fit, and, to the extent funds were provided to localities, they could decide to supplement with their own funds.