As policymakers continue to debate the role of Wall Street investors in the residential real estate market, one analysis confirms what many housing observers have argued for some 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 have bought more than 350 single-family homes since 2015 account for only 1% of total purchases nationwide. What’s more, their purchasing activity has been steadily declining since peaking in 2021.
“Large corporate investors are often viewed as a primary driver of today’s housing affordability challenges, but the data show their footprint is relatively small,” said Danielle Hale, chief economist at Realtor.com, in a release accompanying the report.
The report was released one day after the U.S. Senate passed the 21st Century ROAD to Housing Act, the first broad bipartisan housing legislation in over a decade. Among the bill’s provisions is one restricting the purchase of new single-family homes by large institutional investors that directly or indirectly own at least 350 single-family homes.
It does provide exemptions, “including for large institutional investors seeking to purchase or build new single-family homes specifically for the rental market, but requires these properties to be sold to an individual homeowner after seven years,” according to a summary from the Bipartisan Policy Center.
Executive action vs. supply-side solutions
In January, President Donald Trump signed an executive order called “Stopping Wall Street from Competing with Main Street Homebuyers,” which said, “It is the policy of my Administration that large institutional investors should not buy single-family homes that could otherwise be purchased by families.”
While many Americans would likely agree with that sentiment, it may be the wrong thing to focus on in the push for more housing that’s available and affordable.
“Policies focused on boosting housing supply are likely to have a far greater impact on affordability and homeownership than restricting a small segment of buyers,” said Hale in the March 13 report. Most other analyses agree.
Protections rolled back under new administration
But perhaps just as important is that the Department of Housing and Urban Development implemented many policies to encourage owner-occupants in the market during the Biden administration.
But over the past year, HUD has rolled back many of those protections, said Sarah Edelman, who helped develop some of those policies from her role at the Federal Housing Administration. Edelman, now at the nonprofit National Community Stabilization Trust, spoke with USA TODAY in January, when Trump first explored banning Wall Street from buying homes.
While other consumers advocates have also pointed out that the institutional investor footprint is disproportionately strong in some metros, making it hard for residents of those areas to break into the housing market, the Realtor analysis puts that into perspective.
The area with the most purchases by corporate interests, Memphis, saw just 4.4% of homes being bought by corporate owners over the decade.
This article originally appeared on 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
