Trump Targets Corporate Home Buyers

Back in 2020, Ashley and her husband were looking to buy their first home. They claim to have looked at over 80 homes in the Indianapolis area over two months. That’s more than a home a day, during Covid. Call me doubtful. With three children, they were forced to move because their landlord was selling their rental. No mention of why they couldn’t stay with a new landlord.

She says they would pull up to a house and the agent would tell them there were ten additional offers; sight unseen, all cash. Ignoring the typical sales tactic, she took that to mean ‘corporate investors’, though that's how I bought my present home. The good news is they eventually found a place. However, she believes it would have been a lot easier if not for institutional investors buying up homes.

Six years later, it's an issue President Trump vows to take on. In a recent social media post, he said he wants to "ban large institutional investors from buying more single-family homes," to help bring down housing costs. Democrats agree. However, limiting such purchases may not pass legal, or economic muster.

A cap on investor rentals just took effect in Fishers, IN, a suburb of Indianapolis. The Republican Mayor, Scott Fadness, was surprised that some of the neighborhoods are nearing 35% investment owned properties. Last year, he proposed capping rentals at 10% per neighborhood to protect local home ownership. He also states difficulty in dealing with code enforcement, and other issues, when the property owner is an out-of-state owner/corporation. As I often attend my small town’s council meetings, I have seen that last argument as a fact.

However, realtor groups oppose a cap, arguing it infringes on private property rights and could deprive sellers of the highest bid. The City Council did not care. They backed the plan unanimously. As a potential buyer, it’s wishful thinking. As a homeowner, and a potential seller myself some day, I want the maximum price someone is willing to offer. Limits are just more government interference, which, more often than not, do little to solve the actual problem – in this case, affordability.

Economists say large investors are not the biggest factor driving home prices; they just make an easy to blame target. While prices do go up where investors buy, it’s mostly because the places they choose are already growing, and they often buy serious fixer-uppers. That’s a skill most people don’t have today, and low-end buyers usually don’t qualify for major repair financing.

Nationally, the largest companies own about 3% of the single-family rental market, and the institutional buying spree has cooled from its peak in 2022, due to high interest rates. At just 3% ownership, that sounds like a solution in need of a problem.

The fix isn’t to limit who can buy a house and screwing sellers out of a nice profit. Old people downsizing to afford retirement, or a family needing more bedrooms, need maximum profit. The fix is to eliminate costly barriers so builders can afford to build houses buyers can afford to buy.

Source used: Jennifer Ludden, NPR