Senate housing bill that takes aim at institutional investors may do little for homebuyers — and could even hurt renters

By Samantha Delouya, CNN

(CNN) — Banning mega investors from buying single-family homes has accomplished a rare feat in Washington: bipartisan consensus.

Many housing advocates blamed Wall Street firms buying up homes for a post-pandemic surge in housing costs. Now, with an executive order from President Donald Trump and a Senate bill advancing the idea, a ban may soon become reality.

Last month, the Senate passed a bill 89-10 aimed at improving housing affordability, following the House of Representatives’ passage of a narrower version earlier this year. The Senate’s version, backed by Republican Sen. Tim Scott and Democratic Sen. Elizabeth Warren, is designed to spur more home building and lower costs.

That includes a restriction on large institutional investors, defined as those owning 350 or more single-family homes, buying more single-family properties.

But banning mega investors from buying single-family homes may do little to lower prices, some economists say. Instead, the ban could reduce single-family rental options in neighborhoods where many people cannot afford to buy.

“Institutional investors make for a convenient boogeyman, but they don’t address the real issue,” said Jay Parsons, a rental housing economist.

These investors own only a small share of the country’s single-family housing stock. Just 0.7% of America’s 92 million single-family homes are owned by investors with more than 350 properties in their portfolios, according to John Burns Research and Consulting.

Most investor-owned homes, in fact, belong to smaller landlords. “Mom-and-pop” investors — those who own fewer than 10 properties — make up the vast majority, according to property intelligence firm Cotality.

Many of the homes that large investors give up would likely be bought by these smaller landlords, not first-time homebuyers, said Daryl Fairweather, Redfin’s chief economist.

“The reason that first-time homebuyers are not buying as large of a share of homes as they used to is not because of large investors. It’s because home ownership has gotten so unaffordable,” she added.

How do investors impact home prices?

Following the 2008 financial crisis, private equity firms such as Blackstone bought thousands of single-family homes at bargain prices and turned them into rentals.

In the years after the pandemic, when interest rates fell to historic lows, the housing market erupted. Bidding wars broke out among everyday buyers, and home prices surged. Institutional investors picked up the pace of buying in those years, as well.

The US housing market is currently short millions of homes. In a market with so few homes for sale, almost any additional competition could push prices higher.

A 2024 report from the Government Accountability Office found institutional investors may have contributed to rising home prices and rents after the financial crisis, though the report acknowledged that this is difficult to prove.

Investor activity also varies widely by city. Atlanta has the highest concentration of institutional single-family home ownership in the country, according to Realtor.com. Other Sun Belt cities such as Memphis, Dallas, Houston and Phoenix have attracted large numbers of investors as well.

Yet home price growth doesn’t always match investor activity. Atlanta and Dallas saw home values climb faster than the national average after the pandemic, while Memphis experienced slower growth, according to Zillow’s Home Value Index.

Many housing economists say broader forces likely drove prices. A report from Freddie Mac attributed much of the pandemic-era surge to record-low mortgage rates, years of underbuilding and a wave of first-time buyers entering the market.

“What may surprise you is that investors don’t make our list of top drivers,” said the report, which was released in June 2022.

Still, the concentrated presence of large investors in some cities has raised concerns about rent hikes. In 2024, the Department of Justice sued RealPage, alleging that the Texas-based rent-setting platform used nonpublic data to track competitors’ pricing and push rents higher nationwide. In November, the DOJ announced a settlement to resolve the allegations.

Last month, the Federal Trade Commission also announced a more than $47 million settlement with Invitation Homes, the nation’s largest single-family rental landlord, resolving allegations that the company charged undisclosed fees, withheld security deposits and used unfair eviction practices.

“The Senate just passed the biggest housing supply package in 30 years to build more housing and lower costs, while ensuring that more homes are owned by families instead of giant corporations,” a Senate Banking Committee spokesperson said in a statement to CNN. “Congress should be making it easier for families to buy their first home and harder for predatory landlords to snap up housing and drive up costs.”

Large investors flip to net sellers

Larger investors are already retreating from the single-family market. It’s unclear whether this selling is purely a business decision or a preemptive move ahead of a potential ban.

Institutional purchases of single-family homes are down more than 90% since 2022, according to Blackstone. Many major real estate investors, including Blackstone, have shifted from being net buyers to net sellers in recent years, according to housing data firm Parcl Labs.

Investor-owned homes are now hitting the market at a much larger scale than a few years ago. In many cities with a high concentration of investor-owned properties, these homes now make up nearly 20% of all for-sale listings. In Atlanta, for instance, investors now sell nearly two properties for every one they acquire, according to Parcl Labs.

Parsons, a rental housing economist opposed to the Senate bill, said the ban could shut out renters who don’t have enough savings for a down payment or who have lower credit scores. That could limit their access to single-family neighborhoods, which are often safer and may have better schools. He added that pushing these renters back into multifamily buildings could also drive rents higher across the board.

“Renters are people, too, and they want the same things as homeowners,” Parsons said. “They may want to have space for hosting kids’ birthday parties and having family over for dinner, having a backyard. I think it’s a pretty regressive mindset that those things should only be for homeowners.”

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