It’s Economics 101 vs. Political Policy.
While President Donald Trump touted his new Executive Order restricting institutional home buying at Davos, investors are warning of a potential backfire. The consensus from fund managers? The U.S. has a supply problem, not a demand problem—and demand-side fixes often fuel inflation.
📉 THE INVESTOR THESIS:
- The “Supply” Reality: David Wagner (Aptus Capital) and Michael Rosen (Angeles Investments) argue that cutting out Wall Street doesn’t build more houses. Since supply is constrained by local zoning (not federal levers), restricting one class of buyer does little to solve the shortage.
- The “Demand” Juice: The Administration is simultaneously planning to allow 401(k) funds to be used for down payments. Investors warn that boosting buyer liquidity (401ks) while capping supply is a recipe for higher asset prices, not affordability.
🏗️ THE CONSTRUCTION RISK: Jim Tobin (National Association of Home Builders) points out a critical nuance: Corporate investment is a major driver of new home construction (specifically Build-to-Rent).
- The Risk: If regulations choke off capital to the Build-to-Rent sector, the pipeline of new housing could slow down, exacerbating the very shortage the policy aims to fix.
- The Stat: Despite the narrative, institutional investors own only ~3% of single-family rentals.
📈 MARKET REACTION: Despite the regulatory headwinds, the Philadelphia Housing Sector Index (.HGX) is up 8.15% YTD, suggesting the market sees potential opportunity—or perhaps doubts the efficacy of the curbs.
💡 ANALYST TAKEAWAY: The political target is “Wall Street,” but the economic reality is “Zoning.” As Blackstone notes, they have been net sellers recently, yet prices remain high (up ~75% since 2016). For Real Estate investors, the watch item isn’t the ban on buying existing homes, but whether these policies will inadvertently kill the financing for new housing developments.
👇 Real Estate GPs: Does removing institutional capital from the equation actually help the first-time homebuyer, or does it just freeze new supply?