Trump’s Latest Target: Corporate Landlords

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Buying a home in America is getting harder and harder, and President Donald Trump has been throwing a lot of ideas at the wall to address the country's persistent housing affordability crisis.

The President says he's directing the federal government to buy two hundred billion dollars in mortgage bonds working on a fifty year mortgage for home buyers, calling it a complete game changer.

Trump is also considered declaring a national housing emergency due to high prices and low availability.

But his latest idea came as a bit of a surprise, taking on corporate landlords. Just last week, Trump posted on truth Social that he would be quote taking steps to ban institutional investors from buying more single family homes, in other words, getting Wall Street out of the housing market.

Lawmakers advocates on both the left and right have identified this new phenomenon as a culprit in the greater housing affordability problem.

Kristen Capps covers housing for Bloomberg City Lab.

However, it's not something that President Trump or the White House has talked about very much in this term, and in fact, this same week, the Trump administration also approved a big merger of two large real estate companies.

Trump is famously a real estate guy, and some of his biggest donors are in the very sector that his proposal would target. But as housing costs become a major political issue, his administration has been looking for ways to bring them down, and banning big investors from the housing market is a policy idea that's actually circulated for a while among both Republicans and Democrats. Here's Patrick Clark, who covers real estate for Bloomberg.

In talking to people over the last week, there's definitely a sense that one the administration wanted to do something meaningful on housing affordability, and going after these companies is something that plays well.

But Trump hasn't revealed much about how a policy like this would actually work.

Trump said he's going to announce more details at Davos, you know, the place that everyone goes to talk about housing affordability and inequality.

And whether cracking down on corporate landlords will make a meaningful difference is another question.

The number of homes that large landlords buy at any given year is very, very small, and I think it's difficult to really attach the greater affordability problem to you know those companies who do emerge as boogeymen on both the left and right.

Solder and this is the big take from Bloomberg News today on the show, How Wall Street bought up a slice of the US housing market, why Trump wants to stop it, and what impact that policy could have. The subprime mortgage crisis of the late two thousands led to a wave of foreclosures across the US. Millions of Americans lost their homes, and in the wreckage of that Great Recession period, private equity companies and Wall Street investors saw an opportunity.

Homes were very cheap, and number of Wall Street firms stepped in, sometimes buying homes with cash on the courthouse steps, and were able to start amassing pretty large portfolios.

Starting in twenty twelve, investors were scooping up thousands of homes a month at steep discounts. By the start of twenty thirteen, investment firm Blackstone had spent over two and a half billion dollars buying up homes to manage his rentals.

It's all PTSD from the Great Financial Crisis and the foreclosure crisis, or at least a lot of it is that was really a terrible time in the economy and many people, you know, in different walks of life were affected by it, and there was a sense that these were the guys who came in and bought at a discount and made money out of that turmoil.

And after years of Wall Street firms buying homes, another inflection point came in twenty twenty post.

COVID when interest rates were cheap, when you know, Sun Belt migration was the theme that everyone wanted to bet on, you know, a lot, a lot more money.

Came into this investment firms had a leg up in the post pandemic housing market when home prices and rents were bouncing back up but interest rates were low, they could outbid the competition with all cash offers. Since then, institutional investors have continued to buy multi family properties and single family homes and rent them out to families across the US. It can be a lucrative business.

The US housing market is this is a huge market, right, There's trillions of dollars worth of homes, so it's a big market you can invest in like you can tailor portfolios in the way that you won't because it's so big, and because there's different types of assets, so there's opportunities

One twenty twenty four working paper from the Federal Reserve Bank of Philadelphia found that large financial firms went from owning almost no single family rental properties in twenty ten to almost four hundred thousand by twenty twenty one, but when interests went up in the middle of twenty twenty two,

Overall, it's somewhere between five hundred and six hundred thousand homes. Those are estimates, but it's three or four percent of the total rental homes in the US. You know, the total single family housing stock owner occupied or renter occupied is it's less than one percent of that. And these are the numbers of industries I always liked to put out there and to say, listen, we're not why are you guys targeting as we're a very small part of the housing market.

In a statement to Bloomberg, Blackstone said its ownership of single family homes in the US represents zero point five percent of the overall firm and that it's been a net seller of homes over the last decade, with the company's holdings down more than a fifth. But housing reporter Kristen Capps notes that in some parts of the country, institutional investors own a larger concentration of rental properties, and Atlanta is the starkest example of Wall streets hold on housing.

Atlanta was hit harder than most metros during the Great Financial Crisis, but it's also grown more than many metros since then, so that's provided both the opportunity and incentive for institutional buyers to invest. And now in Metro Atlanta, more than thirty percent of the area's single family rental properties are owned by large corporations. Charlotte and Jacksonville come close as areas with maybe twenty five percent ownership share by large corporations.

In those areas especially, it can be hard for regular home buyers to compete with institutional buyers, who usually have more cash and sometimes use sophisticated algorithms to generate offers for homes.

One reason that home buyers complain about institutional buyers is that algorithmic buying really locks out potential home buyers for institutional investors. As soon as something hits the multiple listing service database for new homes that lines up with their area of specialization, these corporations can submit and all cash offer with no contingencies, no inspections over asking price. You know, there's no household that can or would buy a home in that way.

Here's Bloomberg's Patrick Clark.

Again, you find yourself biting against a company that can move more quickly, and that making buying decisions like in a way that has no relation to the way you're thinking about it. You know, what is this home going to yield on a yearly basis? And that's why that's why people don't like them, That's why they've become popular or can targets.

Patrick says, some firms argue that by turning these homes into rental properties, they're playing an important role in the housing ecosystem.

Some of their arguments are fair, right, It's like they at least particularly initially, but even you know, even still, if they buy an existing home, it's very often a home that needs some repair. They'll invest, you know, thousands or tens of thousands of dollars into fixing up the

The research on how corporate landlords impact rental prices is mixed. Research from places like the Federal Reserve Bank of Philadelphia have shown that larger landlords do drive higher rents, though there's disagreement about how significant those effects are on the market. Another working paper from Quney Baruch suggests that by increasing rental supply, larger landlords can put downward pressure on rents, but investment firms entering real estate markets have other effects too.

It's not necessarily the case that large landlords are worse than small landlords, but in the areas where they have been most active, there are fewer tenant protections in local or state law that afford tenants certain rights, certain ability to challenge landlord practices, and tenants in those places say that corporate landlords take advantage of these laws to raise rents, to provide substandard housing, and to affect many households across the metro areas.

Trump's proposal to cut those landlords out is hitting at a really pivotal time. Housing feels increasingly out of reach for renters and buyers alike, and some Americans want someone to blame.

Affordability is the political issue of our of the moment. Right. It feels unfair if you want to buy a house and you lose to a company. And it's just been red meat politically for years.

So could Trump be teeing himself up for a political win ahead of midterm elections this year? And would a band provide meaningful change to the housing affordability picture that's coming up? Targeting private equity for its role in America's housing crisis has been, as Bloomberg's Patrick Clark called it, political red meat for a while now. It's an idea that politicians on both sides of the aisle have gotten behind.

Private equity firms and other Wall Street investors were busy scooping up homes and communities across the country, even in the middle of an historic housing shortage.

Democratic Senator Elizabeth Warren has been trying to regulate corporate landlords for years, says Bloomberg's Christen caps.

It's also something that former Vice President Kamal Harris advanced on the campaign trail.

We will make.

Sure those homes actually go to working and middle class Americans, not just investors.

Current Vice President JD. Vance has weighed into here. He is on Columbus, Ohio's ABC six in twenty twenty three.

They have access to lower interest rates, they have access to cheaper money, and they completely crowd out the availability of home for people who want to, you know, just buy it by a piece.

Of their community.

But it wasn't a given that Trump would take this on politically. It's worth noting Trump's donor base includes Steven Schwartzman, the CEO of Blackstone. He's given generously to Trump's re election campaign and his pack, and after Trump's truth social post, Blackstone's shares fell by as much as nine point three percent before pairing some losses.

I think the selloff in Blackstone shares doesn't make much sense. As Blackstone said on the day, you know, single family rentals are a very small piece of Blackstone business in Blackstone has probably more important matters in front of the federal government.

And Patrick says many of the people he's spoken to in the single family rental industry have brushed off Trump's proposal as all talk.

Say, this is just Trump being Trump. Half the stuff he says, doesn't go anywhere. People have been talking about this forever and it's always just grant standing and we don't have anything to worry about. There are so few details, you know, that the President has.

Provided all about what it could potentially look like, what it would mean for there to be, you know, a ban is that a ban on purchasing? Is that a ban on ownership? Is that legal? I don't think that these questions have been fully played out.

There's at least five or six states that have proposed some version of this in the past, and they go at it a little differently. Sometimes they'll set a limit, you know, if you own more than a thousand homes or more than two thousand homes, you can't buy anymore. I think there have been some bills that have approached the tax status of owners and in fact, Treasury Secretary Scott Besson said recently at the Economic Club of Minnesota

Own bygones or bygones. We're not going to have a force sale here.

Besson's remarks also raise questions about which institutional investors this ban might apply to. Would it be targeted at the large firms who own thousands of homes or even smaller investors who own more like twelve.

So we will decide what the correct level is. Is it a dozen homes? Is two dozen? What makes you an aggregator?

With the policy idea now on the table and Trump teasing more information to come at the World Economic Forum meeting in Davos next week, some major players are taking potential regulation seriously.

The industry is in bargaining mode. They're talking amongst themselves and trying to come up with things that they can offer the administration and a potential deal. And they're hopeful that this is a transactional administration and there's something that can get done.

Because if legislation to ban institutional investors from the housing market makes its way through Washington, Patrick says it could have real bipartisan support and momentum behind it.

I think it's very likely that someone will introduce a bill. I think there's a pretty decent chair as it will pass, and I think that'll leave the landlords in the position of challenging the constitutionality.

Of a band.

But the other big question is whether tackling this issue will actually make it easier for people to buy and rent homes.

I would say, in terms of sort of more mainline research, as I take it in, this is pretty low priority.

There's not many macro economics who are going to point to institutional buyers as a major factor in America's problems with housing affordability. Those you know, major factors continue to be a lack of supply, a lack of good options in particular geographies. You know, when it comes to home ownership, high interest rates are still, you know, the principal problem that buyers are struggling with.

Congress has proposed ways to address some of these other factors, like housing supply legislation, like its Road to Housing Act, which passed the Senate last year with bipartisan support, but was stripped from the Defense spending bill that Trump signed in December. Now, lawmakers and the House Financial Services Committee are trying to push forward another bipartisan housing package.

What Senator Elizabeth Warren told me is that the Trump administration has taken no moves to try to move the needle on the housing bill, the major housing bill that's been before Congress, and she said that she does not think that you astray somewhat isolated post on social media really moves the ball or indicates that the Trump administration is focused on this issue.

For now, Wall Street investors may just need to wait and see what Trump says next.

It's historically been an industry that likes to keep its head down and try to avoid attention. I think what's happening now is forcing it at least some of the companies to step out and try to argue for themselves. And being such a small share of the housing market cuts both ways for these companies. On the one hand, they've often said, why are you guys worried about us? We're tiny? But as a potential band gained some momentum, or if it gains momentum, you can kind of turn

This is the Big Take from Bloomberg News. I'm Sarah Holder. To get more from the Big Take and unlimited access to all of Bloomberg dot com, subscribe today at Bloomberg dot com slash Podcast offer, thanks for listening. We'll be back tomorrow