Housing in the United States is too expensive. For most Americans, it is their single biggest expense, and today, it is less affordable than at any time in the last 40 years: The median household needs to devote a whopping 40% of its income to afford the median-priced home.
Policymakers at the local, state, and federal levels have become acutely aware of this crisis. But in their search for solutions, lawmakers across the political spectrum have converged on a politically unsympathetic scapegoat: institutional investors — often described interchangeably as “hedge funds” or “Wall Street.” President Trump recently announced he is “immediately taking steps to ban large institutional investors from buying more single-family homes,” promising to call on Congress to codify the measure. Similar legislation has been introduced in at least 28 states over the past two years.
It is worthwhile to take seriously how frustrated Americans are about housing affordability, but it is also necessary to point out how badly targeted this solution would be. Institutional investors — defined as entities owning 1,000 or more properties — own less than 1% of all single-family homes nationwide.5 Even when examining metro areas with the highest concentrations of institutional ownership, there is no evidence that prices have increased more rapidly in these markets compared to areas with minimal institutional presence. This isn’t to say that market concentration can never be an issue in the housing market. But at the present moment, the proposed bans represent a misapplication of political capital, and a fundamental misdiagnosis of the housing crisis.
If policymakers are genuinely concerned about housing costs, they should pursue a diverse set of policies, including loosening exclusionary zoning restrictions and streamlining permitting requirements. Working-class Americans recognize this. A Progressive Policy Institute/YouGov poll of non-college-educated voters in 2024 found that 64% agreed that “we should cut unnecessary zoning regulations so we can build more multifamily housing and drive down the costs of housing for working families.”6 Targeting institutional investors may be politically expedient, but it will do little to address the underlying regulation-induced supply constraints that are the true drivers of housing unaffordability.
