States Shouldn’t Copy Congress’s Housing Mistakes

Originally published at National Review. 

Washington's 21st Century ROAD to Housing Act went into law on July 11 without President Trump’s signature. The benefits of that bill are questionable, and Trump hoped to incentivize Congress to also pass the SAVE America Act, which didn’t happen. This federal housing bill gives governors and state lawmakers an opportunity to think before copying one of Congress’s worst ideas.

The newly passed bill gets some things right. It would ease some federal environmental reviews, improve manufactured-housing rules, and encourage local governments to remove other barriers that discourage building housing in Opportunity Zones and other areas. Those steps could help because America needs more homes, and we need them soon.

But Congress also targeted large institutional investors that own at least 350 single-family homes. That sounds simple. It is bad economics.

Milton Friedman often reminded people to look beyond good intentions and ask what incentives a policy creates. Restricting one group of buyers does not build a single new home. It can mean less investment, fewer rentals, slower repairs, more uncertainty, and higher prices than we would otherwise have.

Housing affordability mostly comes down to supply. When more people want homes than the market can provide, prices rise. Politicians can blame Wall Street, landlords, out-of-state buyers, or anyone else — but the real issue is still scarcity.

Government helped create that scarcity. Zoning rules limit where homes can be built. Minimum lot sizes force families to buy more land than they need. Parking mandates add costs. Permitting delays slow construction and raise financing costs. Impact fees increase home prices. Property taxes push up ownership and rental costs every year.

Blaming investors after blocking supply is like blaming umbrellas for rain. The data do not support the panic. In particular, institutional investors buy a very small share of housing. 

A recent report found that, “Institutions, defined by the proposed legislation as entities with 350+ homes in a portfolio, own ~0.7 percent of the 92 million US single-family homes and institutional investors of this size have been scaling back acquisitions — accounting for just 1 percent of all U.S. home purchases, down from a 4 percent peak in 2022.”

⁠Realtor.com likewise found institutional investors accounted for about 1 percent of national single-family home sales over the past decade, and their purchases have fallen since the 2021 peak. Most investor activity comes from smaller landlords. ⁠Realtor.com reported that investors bought 11.3 percent of homes in 2025, but mom-and-pop investors led the activity. Separately, the ⁠Mercatus Center at George Mason University found that large institutional owners have never accounted for more than 2 percent to 5 percent of purchases in any quarter.

​What’s more, even forcing every institutionally owned single-family rental into owner-occupancy would barely change the market. ⁠Brookings estimates available owner-occupied homes would rise only about 1 percent to 2 percent. That is not an affordability plan; it is a talking point.

Bad landlords exist. So do bad tenants, homeowners, builders, lenders, and politicians. Handle real misconduct with contracts, fraud laws, property standards, and local accountability. Broad ownership restrictions punish investment and reduce options.

Single-family rentals serve real families. Some households want a yard, more space, and neighborhood stability without buying right away. Others cannot qualify for a mortgage or want flexibility. Build-to-rent communities and professionally managed rentals help meet those needs.

A simple question cuts through politics: Compared with what?

If an investor cannot buy and repair a home, who fixes it? If a build-to-rent project is discouraged, where do those families live? If capital leaves because lawmakers threaten ownership limits, how does that create more homes? It does not.

Lawmakers should move the other way: Avoid special taxes on institutional owners, reject purchase caps, protect build-to-rent communities, and skip restrictive reporting rules. Real and effective reforms include legalizing more housing, shortening permitting timelines, limiting excessive fees, restraining government spending, and limiting property taxes before increasing budgets become a response to rising housing costs. States should also protect property rights when Washington tells people whom they may buy from, sell to, or rent from. Model legislation, legal challenges, and market-access protections would do better than anti-investor grandstanding.

None of this is about defending Wall Street. The issue is supply, competition, and choice. Prices send signals. High housing prices tell us homes are too scarce. Punishing buyers will not fix that.

Congress already made the investor mistake. Governors and state legislators should not make it worse. Housing needs more homes, not more scapegoats.