America’s housing market is failing a growing share of households. Prices and rents are at record highs, and homeownership is steadily slipping out of reach for younger generations. In response to the housing crisis, Trump has turned to politically convenient gestures—targeting institutional investors and leaning on government-backed mortgage agencies to lower borrowing costs. Neither approach addresses the core constraint in the housing market: too few homes in the places where demand is strongest. Without addressing policies that inflate demand and restrict supply, affordability remains out of reach—regardless of whom policymakers choose to blame.
Banning Institutional Investors Won’t Make Housing Affordable
By early 2026, U.S. housing reached historically high prices. The national median home sold for about $415,000—around five times the typical household income—while nearly half of renters devoted more than 30 percent of their earnings to housing. Not surprisingly, politics looks for someone to blame. Simple narratives take hold: Wall Street becomes the villain, and politicians cast themselves as the saviors. Trump’s call to ban purchases by large institutional investors fits perfectly into that narrative—particularly in a midterm election year—projecting decisive action while leaving the structural roots of the crisis untouched.
Empirical evidence reinforces this point. A 2025 study finds that Atlanta rents would be 2.4% higher without institutional investment, and other research shows rents fall about 0.7% for every 1% increase in the institutional investor share. Far from driving the crisis, these investors appear to modestly ease pressure in supply-constrained markets.
There is also a social dimension often overlooked in the backlash against institutional investors. Single-family rentals can reduce segregation by giving working-class households—many of whom cannot qualify for mortgages—access to safer suburbs and better schools. In communities long zoned almost entirely for owners, institutional rentals have opened doors that were effectively closed to non-owners, allowing lower-income families to move into higher-opportunity neighborhoods—changes that research links to stronger long-term educational and income outcomes for children.
Trump’s second housing proposal—ordering roughly $200 billion in government purchases of mortgage-backed securities to push down rates—misdiagnoses the problem and would do little to address affordability. At best, mortgage rates might drop by a few tenths of a point, an effect many economists expect to be limited, temporary, or already priced in. With supply constrained, lower interest rates mainly increase buyers’ borrowing power, fueling competition for the same homes and eventually pushing prices up instead of improving affordability.
What’s Behind the U.S. Housing Crisis—and How It’s Solved
Trump’s proposals expose a deeper unwillingness to confront the real sources of today’s housing unaffordability. The crisis is not driven by institutional investors or market failure, but by decades of policy that inflated demand through cheap credit and mortgage guarantees while restricting supply through outdated zoning rules and complex permitting. Those distortions have been worsened by Trump’s own policies—tariffs that raise construction costs and immigration restrictions that shrink the building workforce—producing housing scarcity, soaring prices, and stagnant homeownership.
Perhaps the most powerful—and least discussed—driver of housing unaffordability has been monetary policy. Years of easy money and falling interest rates allowed buyers to bid up prices without increasing the number of homes, since cheaper credit boosts purchasing power rather than supply. After 2008, the FED entrenched this dynamic by buying trillions of dollars in mortgage-backed securities to prevent prices from falling. At the same time, a weaker dollar pushed households and investors toward real estate as a store of value—turning homes into protected financial assets and making price declines politically unacceptable.
Resistance to falling home prices is reinforced by powerful interests and electoral incentives. When the FED began raising interest rates and reducing its mortgage holdings in 2023, major housing industry groups quickly pushed back, urging it to halt rate hikes and stop selling mortgage-backed securities to prevent a drop in home prices. At the same time, older homeowners—who vote at much higher rates and account for more than half of all homebuyers—have similar incentives to oppose price declines. Together, they form a durable coalition that resists policies capable of restoring genuine housing affordability.
If policymakers were serious about restoring affordability, they would have to undo the policies that inflate home prices—scaling back demand subsidies, rolling back zoning and rules that block new construction, ending central bank support for mortgage markets, and letting interest rates reflect market conditions. These steps would likely lower prices and improve affordability for younger households, but they remain politically taboo because they threaten a system that rewards powerful interests and treats rising home values as a goal rather than a problem.
Photo by Ali Rizwan Saghar
