The White House has announced a proposed ban on large institutional investors from buying single-family homes, with a cutoff of 100 homes for entities to be considered “large institutional investors”. This move is part of President Donald Trump’s plan to limit the federal government’s role in facilitating institutional purchases of single-family homes that could otherwise be bought by owner-occupants.
On January 7, President Trump announced that he would be taking steps to ban large institutional investors from buying more single-family homes, and on January 20, he outlined elements of the proposed “ban”. The order directed multiple federal agencies to issue guidance within 60 days limiting the federal government’s role in facilitating institutional purchases of single-family homes. The government-sponsored enterprises, Fannie Mae and Freddie Mac, would no longer be permitted to approve, insure, guarantee, or securitize single-family home purchases by “large institutional investors” within 60 days. The order also stated that build-to-rent transactions would be exempt, and large investors can continue to purchase homes in need of “significant repair”.
According to the Wall Street Journal, the proposal would not mandate large investors to liquidate existing holdings, and its prospects are uncertain, with passage still far from guaranteed. At the height of the Pandemic Housing Boom, large investors made up an all-time high of 3.1% of home purchases in Q2 2022, according to John Burns Research and Consulting. However, since mortgage rates spiked and capital markets shifted, their share has fallen to around 1.0% of transactions over the past three years. On a national level, “large investors” only own around 1% of total single-family housing stock, but in a handful of regional housing markets, such as Phoenix and Atlanta, institutional and large single-family landlords have a much larger presence.
The proposed ban is likely to have a significant impact on the housing market, particularly in regions with a high presence of institutional investors. While the measure still needs congressional approval, it has the potential to shape the future of single-family home purchases and the role of large institutional investors in the market. As the proposal moves forward, it will be important to monitor its progress and potential effects on the housing market, including the potential impact on Invitation Homes, Progress Residential, and AMH, which have built sizable portfolios in these metros.
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