As policymakers continue to debate the role of Wall Street investors in the residential real estate market, an analysis confirms what many housing observers have argued for some time: Institutional investors make up a small — even shrinking — share of home purchases.
A report released March 13 by Realtor.com economists found that investors who have purchased more than 350 single-family homes since 2015 account for only 1% of total purchases nationwide. Furthermore, their purchasing activity has been on a steady decline since peaking in 2021.
“Large corporate investors are often viewed as the primary drivers of today’s housing affordability challenges, but the data shows that their footprint is relatively small,” said Danielle Hale, chief economist at Realtor.com, in a release accompanying the report.
The report was released a day after the U.S. Senate passed the 21st Century Road to Housing Act, the first comprehensive bipartisan housing legislation in more than a decade. One of the provisions of the bill is to restrict the purchase of new single-family homes by large institutional investors who directly or indirectly own at least 350 single-family homes.
According to a summary from the Bipartisan Policy Center, it provides exemptions, “specifically for large institutional investors wishing to buy or build new single-family homes for the rental market, but requires these properties to be sold to an individual homeowner after seven years.”
Executive action versus supply-side solutions
In January, President Donald Trump signed an executive order titled “Preventing Wall Street from Competing with Main Street Homebuyers”, stating, “It is the policy of my Administration that large institutional investors should not purchase single-family homes that could otherwise be purchased by families.”
Although many Americans would likely agree with this sentiment, focusing on this in the quest for more available and affordable housing may be the wrong thing to do.
“Policies focused on boosting housing supply are likely to have a far greater impact on affordability and homeownership than limiting a small segment of buyers,” Hale said in a March 13 report. Most other analyzes agree.
Security withdrawn under new administration
But perhaps just as importantly, the Department of Housing and Urban Development implemented several policies during the Biden administration to encourage owner-occupiers into the market.
But in the past year, HUD has rolled back many of those protections, said Sarah Adelman, who helped develop some of those policies in her role at the Federal Housing Administration. Edelman, who is now at the nonprofit National Community Stabilization Trust, spoke to USA TODAY in January when Trump first floated plans to ban home buying on Wall Street.
While other consumer advocates have also pointed out that the institutional investor footprint is disproportionately strong in some metros, making it harder for residents in those areas to enter the housing market, the Realtor analysis puts it in perspective.
In Memphis, the area most heavily purchased by corporate interests, only 4.4% of homes were purchased by corporate owners in the last decade.
This article originally appeared on USA TODAY: Is Wall Street the real villain of the housing market?
Reporting by Andrea Rickier, USA TODAY/USA TODAY
USA TODAY Network via Reuters Connect