At face value, the recent announcement from the Trump administration regarding a ban on large institutional home purchases seems to be a breath of fresh air for first-time buyers and the housing market as a whole. Wall Street firms have taken their share of blame for rising prices and boxing out competitive offers from American families.
The underlying economic reality is more nuanced. At Cotality, we’ve analyzed the data to determine what a ban would actually mean for homeowners, renters, and the construction industry.
The "Wall Street" myth vs. reality
The primary argument for the ban is that corporate behemoths are outbidding families and locking them out of homeownership. However, the data reveals a different landscape.
While institutional investors (those owning 1,000+ homes) are highly visible, in reality, they represent a small slice of the market—historically controlling roughly 1–3% of all single-family rentals. The vast majority of investor-owned homes belong to small-scale investment buyers who own between one and ten properties. Atlanta stands out as the only major market where institutional investors account for more than 10% of all purchases.
Because of this, any ban targeting only institutional players will likely have a modest effect on national home prices. The supply that would theoretically be "returned" to the market would not be nearly enough to catch supply up to demand.
The unintended consequences for renters
Housing is a connected ecosystem. While removing institutional demand from the market could help buyers, it could also impact supply in the rental market.
By limiting the ability of large firms to acquire and manage rental portfolios, the available supply of single-family rentals could tighten. This is particularly concerning for families who want a yard, need extra bedrooms, or prefer a certain school district but are not yet in a financial position to buy.
A decline in new construction
One of the most overlooked risks of the proposal is its impact on the build-to-rent pipeline. In recent years, institutional investors have shifted toward funding the construction of entire new-home communities specifically for renters.
If this demand is tampered, developers may slow down new projects, inadvertently offsetting downward pressure on prices by further restricting the total supply of new homes—the very thing the housing market needs most to stabilize.
Would forcing investors to sell be a better path forward?
Finally, the current proposal is a ban on future purchases, not a mandate for investors to sell their existing portfolios. Investors keep what they have and simply can no longer add to the pile.
Legislation that forces divestment or a mass sell-off would have bigger impact on the housing market. According to the Urban Institute, that would inject the housing marketing with approximately 550,000 available homes. That additional supply could open doors for first-time homebuyers and bring about more affordability. Those homes could also end up in the hands of smaller investors, which would keep more single-family rentals on the market.
The bottom line
The proposed ban on institutional home purchases is a significant political statement, and a welcome message for many Americans. But it will not solve the root cause of the housing crisis: a lack of supply. It may provide some relief in specific hotspots like Atlanta, for most of the country, the dream of homeownership will still depend on building more homes instead of limiting who can buy them.
