Trump’s housing plan, which vilifies Wall Street, may be misguided. Here’s why.
New York —
President Donald Trump, like any politician whose polling is in the gutter, is desperate for a villain to blame for America’s affordability woes. Wall Street has become his latest target.
With his second term in office nearing its end, Trump is seeking to shift the blame for rising housing costs away from his own administration and towards Wall Street. This week, he introduced two new proposals aimed at addressing the issue of housing affordability, a core concern for many Americans.
The first proposal involves a ban on large institutional investors buying single-family homes, a move reminiscent of progressive Democratic policies. The second proposal suggests the government should purchase $200 billion in mortgage bonds to lower interest rates and monthly payments.
However, these proposals may not be as effective as Trump hopes.
According to Goldman Sachs Research, America needs approximately 4 million more homes to restore affordable housing levels. The lack of supply is the primary driver of rising home prices, not Wall Street investors.
Jake Krimmel, a senior economist at Realtor.com, points out that while institutional investors are often portrayed as villains, they are not the main culprit. He argues that the actual shortages and affordability issues are more closely tied to the actions of large institutional landlords, who own hundreds of thousands of properties across the country.
It's important to note that institutional investors represent a small fraction of the overall market. In 2025, they accounted for only 1-3% of home purchases, and this figure has been decreasing as interest rates rise. The majority of real estate investment purchases are made by so-called 'mom-and-pop' landlords, who own one or two additional homes for rental income.
In certain markets, particularly Sun Belt cities, institutional investors play a more significant role. However, even if all institutional ownership were to cease, it's unlikely to make a substantial difference, as inventory in these cities is already increasing, keeping prices stable.
Trump's second proposal, which involves the federal government buying mortgage bonds, is also flawed. While this could help lower mortgage rates, it does not address the fundamental issue of housing supply. It may also have the unintended consequence of preventing people from selling their current homes and moving to more affordable options, a phenomenon known as the 'lock-in effect'.
Historically, mortgage rates around 6% are not unusual, and the chronic shortage of supply has driven median home prices to nearly $410,000, a 30% increase since 2020. To truly address affordability, Krimmel suggests that the federal government should focus on creating incentives for state and local governments to increase housing supply. This could involve setting standardization and guidelines for streamlining permitting or increasing zone capacity, allowing for more dense housing development.
While these solutions may be more effective, they lack the populist appeal of blaming Wall Street. Trump's plan may not be the best approach to solving America's housing affordability crisis.
