Housing Needs Supply, Not Scapegoats

Originally published on Substack.

Washington is doing that thing again where it mistakes a slogan for a solution. The latest proof is the White House’s new executive order, “Stopping Wall Street from Competing with Main Street Homebuyers”, paired with a growing bipartisan push to “ban Wall Street” from buying homes.

It sounds pro-family. It feels decisive. It is mostly politics, not economics.

Even some Republicans are following the herd. Senators Hawley and Merkley’s bipartisan bill would prohibit large institutional investors from purchasing single-family homes, townhouses, and condos.

Senate Democrats just rolled out the American Homeownership Act, which targets “Wall Street landlords” by stripping key tax benefits and reinvesting the savings elsewhere.

Here’s the hard truth: if your diagnosis is wrong, your treatment will fail.

Institutional investors are not the cause of unaffordable housing. The core cause is a housing shortage created and protected by government.

The housing crisis is a supply crisis

America did not build enough homes for decades. A widely cited estimate from the National Bureau of Economic Research finds that if housing growth from 2000–2020 had matched the pace from 1980–2000, the U.S. would have roughly 15 million more housing units. That is the real missing ingredient: supply.

And the biggest barriers to new supply are not on Wall Street. They’re at City Hall.

Local governments control zoning, density, parking minimums, minimum lot sizes, height limits, and endless neighborhood veto points. Those rules make it illegal or financially impossible to build the kind of housing families need, where they need it.

You cannot fix government-created scarcity with more government restrictions. That is doubling down on failure.

Investors are not “taking over” housing

The narrative says families are being “outbid” by institutional investors everywhere. The evidence says something very different.

The American Enterprise Institute finds institutional investors’ market share is less than 1% nationally, with only 22 counties reaching 5–10%.

The Mercatus Center reports large institutional owners have never exceeded 2.5% of home purchases in any quarter.
Most investor-owned inventory is held by small mom-and-pop landlords. And more importantly, much of the institutional activity is shifting away from buying existing homes and toward building new rental communities.

This matters because the policy proposals are aimed at a tiny slice of the market, while ignoring the actual constraint: not enough homes.

Single-family rentals help families, not “Wall Street”

Here’s what gets lost in the political shouting.

Single-family rentals are a pressure valve for families who are not ready to buy, cannot save a large down payment, or are priced out by interest rates. When supply is tight, rentals in good neighborhoods can be a lifeline.

That is not theory. Research by Tom Mayock finds that increased single-family rental supply can help economically disadvantaged children access higher-performing schools.

And the broader research on neighborhoods is clear: Raj Chetty’s work shows that moving to lower-poverty, higher-opportunity neighborhoods improves long-run outcomes for children, especially when they move young.

So when lawmakers talk about “helping families” by shrinking the single-family rental industry, they are playing with real lives. Less rental supply means higher rents, fewer options near good schools, and less mobility for working families.

If Congress meddles anyway, the least-bad guardrails matter

I don’t like carveouts. But if Congress insists on intervening, then write the bill to avoid detonating the single-family rental market.

Two provisions are now being debated that matter a lot:

1) Preemption over the states.

If a federal bill moves, preemption can prevent a patchwork of state bans, including a unilateral ban from California. A 50-state mess of restrictions is how you guarantee uncertainty, reduced investment, and fewer homes built.

2) An investor-to-investor sales exemption.

This is the other key fix under discussion: allowing institutional investors to sell homes to one another. That does not compete with families and it helps preserve single-family rentals. It also avoids forced liquidations that can trigger fire sales, displace renters, and depress neighborhood values.

I still prefer Congress not meddle at all. But if it does, these guardrails help reduce much of the collateral damage.

The Rotterdam warning: bans raise rents

If lawmakers want a real-world test case, look at the Netherlands. A study of the Dutch “buy-to-let” restrictions finds the ban increased rental prices, consistent with reduced rental supply.

That is what happens when government tries to outlaw a category of buyer instead of fixing supply. Scarcity wins.

What policymakers should do instead

If you actually want affordability, do the boring work that matters:

• Legalize more housing types locally: duplexes, ADUs, lot splits, and modest density
• Streamline permitting and end open-ended delays
• Cut fees and mandates that raise construction costs
• Stop treating property taxes as a harmless funding source. They punish ownership and investment, year after year
• Encourage building, including build-to-rent, to expand options for families

The best evidence for this approach is painfully simple: when supply rises, housing prices and rents fall.

Call to action

If you want to help families, stop chasing applause lines and start focusing on increasing housing supply.

Tell your city council and county commissioners: reform zoning, speed up permits, and allow builders to build. Tell Congress: don’t scapegoat a tiny share of the market, and don’t double down on government failure with more government.

And if you want a deeper dive, see my writings and the full breakdown on this issue at vanceginn.com.

Government failures broke housing. Markets kept it functioning. The solution is less government and more building, mostly at the local level.
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