Senate Bill Targeting Housing Investors Could Backfire on Affordability Goals

The U.S. Senate passed a bill in March that includes several provisions aimed at increasing the housing supply. However, one last-minute addition threatens to undermine that goal: a ban on investors owning more than 350 single-family rental homes. Investors would still be allowed to acquire homes built as rentals but would be required to sell them off within seven years.

This restriction could reduce yearly home construction, despite the bill's otherwise modest positive impact on housing supply. Proponents of the ban, including Sen. Elizabeth Warren (D–Mass.), argue it is necessary to preserve owner-occupied homes. "An overwhelming majority of Americans across party lines want to stop private equity from snapping up single-family homes," Warren stated on the Senate floor after the bill's passage.

Public support for the ban appears strong. A poll by the left-leaning groups Groundwork Collaborative and Data for Progress found that 73 percent of likely voters supported policies restricting corporate purchases of single-family homes. Bipartisan criticism of large investors has grown, with figures like J.D. Vance and Tim Walz agreeing on the issue during the 2024 vice presidential debate. In January, President Donald Trump issued an executive order directing federal agencies to limit home purchases by large institutional investors and urged Congress to implement a broader ban.

Despite their bipartisan appeal, such restrictions conflict with efforts to increase home construction and improve affordability. In recent years, new single-family communities built as rental housing have accounted for 3 to 10 percent of new homes, with 160,000 such units currently in the development pipeline nationwide. Forcing investors to sell off these build-to-rent communities could deter future construction, resulting in fewer homes rather than more. The ban would disproportionately affect individuals who cannot qualify for a mortgage or prefer not to own.

Critics argue that large investors are not the primary driver of rising home prices. Data shows that large investors own just 0.7 percent of the country's single-family homes and have been net sellers in recent years. Their minimal market share makes it unlikely they are responsible for general price increases. Instead, regulatory restrictions on new home construction may play a larger role.

The Senate's housing bill does include some reforms to address construction barriers, such as repealing federal regulations on manufactured housing, exempting new housing from federal environmental reviews, and redistributing grant dollars to communities that build new housing. However, these positive changes are overshadowed by populist-inspired restrictions that could have the opposite effect on affordability.