A good idea — even one that emanates from one of the darkest places in the universe — is still a good idea. On Jan. 20, the White House released an 861-word executive order from the president entitled: “Stopping Wall Street From Competing With Main Street Homebuyers.”
“Buying and owning a home has long been considered the pinnacle of the American dream,” the order begins, “and a way for families to invest and build lifetime wealth … That American dream has been increasingly out of reach for too many of our citizens, especially first-time homebuyers … a growing share of single-family homes … have been purchased by large Wall Street investors, crowding out families seeking to buy homes.”
“Hardworking young families cannot effectively compete for starter homes with Wall Street firms and their vast resources,” the executive order continues. “Neighborhoods and communities once controlled by middle-class American families are now run by faraway corporate interests. People live in homes, not corporations.”
Private equity firms and real estate investment trusts have built up impressive portfolios of single-family homes that are converted into rentals. This has lowered supply and ratcheted up home prices. An article in CounterPunch suggests “since the global financial crisis of 2007-2009, major financial institutions have invested heavily in U.S. single-family housing, acquiring anywhere up to 300,000 houses, and then letting them out.” Mortgage giant Fannie Mae sold thousands of foreclosed homes in bulk to investors. Fannie Mae and Freddie Mac offered institutional buyers favorable financing and lower interest rates.
Blackstone, one of the largest private equity firms, became a pioneer in large-scale housing acquisitions by launching Invitation Homes, the biggest lessor of single-family rentals in America. Real Estate Investment Trusts (REITS) are dominated by major institutional firms like BlackRock and Vanguard. Corporate home buying continues to skyrocket. Institutional investors bought 27% of U.S. homes for sale by 2025.
Large investment firms enjoy several structural advantages. They access cheaper institutional financing, often pay in cash, and benefit from early access to listings and local policy influence. Firms can use creative financing tools, like combining many homes into a single investment package, and using the expected rent payments as collateral to borrow more money. Individual homeowners often sell for financial reasons, but institutional landlords can hold assets for years and sell only when market conditions are favorable. Corporate buyers can defer capital gains taxes by reinvesting profits into similar properties. Large rental property owners can deduct part of a building’s value each year, reducing their taxes over time. “Algorithmic pricing software” allows corporate landlords to act like a cartel with coordinated “rent-setting.”
Trump says his administration will act decisively “to stop Wall Street from treating America’s neighborhoods like a trading floor and empower American families to own their homes.” The goal of Trump’s order is to “preserve the supply of single-family homes for American families and increase the paths to homeownership.” Massachusetts housing policy has encouraged corporate landlords to buy-up single-family homes, convert them to a duplex or triplex, and add an ADU in their backyard “by right” — no owner-occupant required. By contrast, Trump says “large institutional investors should not buy single-family homes that could otherwise be purchased by families.”
Treasury Secretary Scott Bessent in February will develop definitions of “large institutional investor” and “single-family home” to implement this order. In March, the order will impose restrictions on the sale of single-family homes by the federal government, and prevent agencies from “facilitating the acquisition by a large institutional investor of a single-family home that could otherwise be purchased by an individual owner-occupant.”
The federal attorney general and the Federal Trade Commission will review “series of acquisitions by large institutional investors of single-family homes in local single-family housing markets for anti-competitive effects.” The Secretary of HUD will require owners and managing agents of single-family home rentals participating in federal housing programs to disclose direct or indirect owners, and managers to determine any involvement of large institutional investors. The White House also will draft legislative recommendations to codify these new policies into federal statute, “so that large institutional investors do not acquire single-family homes that could otherwise be purchased by families.”
It has been suggested in the news media that Trump is using this executive order to respond to the housing affordability issue as midterm elections draw near. In 2023, Blackstone told its investors: “The on-going affordability housing crisis and the lack of new construction … has resulted in pricing power for rental housing assets.” Massachusetts home buyers and renters will benefit if the federal government pushes corporate investors out of the single-family market.
Al Norman’s Pushback column is published in the Recorder the first and third Wednesday of each month.