Trump’s Latest Target: Corporate Landlords

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1:02Bloomberg Audio Studios, podcasts, radio, news. Buying a home in America is getting harder and harder. And President Donald Trump has been throwing a lot of ideas at the wall to address the country's persistent housing affordability crisis. The president says he's directing the federal government to buy$200 billion in mortgage bonds. Working on a 50-year mortgage for homebuyers, calling it a complete game-changer. Trump is also considering declaring a national housing emergency due to high prices and low availability. But his latest idea came as a bit of a surprise. Taking on corporate landlords.

1:45Just last week, Trump posted on Truth Social that he would be, quote, taking steps to ban institutional investors from buying more single-family homes. In other words, getting Wall Street out of the housing market. Lawmakers, advocates on both the left and right have identified this new phenomenon as a culprit in the greater housing affordability problem. Kristen Kapps covers housing for Bloomberg City Lab. However, it's not something that President Trump or the White House has talked about very much in this term. And in fact, this same week, the Trump administration also approved a big merger of two large real estate companies.

2:32Trump is famously a real estate guy. And some of his biggest donors are in the very sector that his proposal would target. But as housing costs become a major political issue, his administration has been looking for ways to bring them down. And banning big investors from the housing market is a policy idea that's actually circulated for a while among both Republicans and Democrats. Here's Patrick Clark, who covers real estate for Bloomberg. In talking to people over the last week, there's definitely a sense that, one, the administration wanted to do something meaningful on housing affordability.

3:09And going after these companies is something that plays well. But Trump hasn't revealed much about how a policy like this would actually work. Trump said he's going to announce more details at Davos, you know, the place that everyone goes to talk about housing affordability and inequality. And whether cracking down on corporate landlords will make a meaningful difference is another question. The number of homes that large landlords buy in any given year is very, very small. And I think it's difficult to really attach this greater affordability problem to, you know, those companies who do emerge as boogeymen on both the left and right.

3:59I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, how Wall Street bought up a slice of the U.S. housing market, why Trump wants to stop it, and what impact that policy could have.

4:16The subprime mortgage crisis of the late 2000s led to a wave of foreclosures across the U.S. Millions of Americans lost their homes. And in the wreckage of that Great Recession period, private equity companies and Wall Street investors saw an opportunity. Homes were very cheap, and a number of Wall Street firms stepped in, sometimes buying homes with cash on the courthouse steps, and were able to start amassing pretty large portfolios. Starting in 2012, investors were scooping up thousands of homes a month at steep discounts. By the start of 2013, investment firm Blackstone had spent over$2.5 billion buying up homes to manage his rentals.

5:00It's all PTSD from the great financial crisis and the foreclosure crisis, or at least a lot of it is. That was really a terrible time in the economy, and many people in different walks of life were affected by it. And there is a sense that these were the guys who came in and bought at a discount and made money out of that turmoil. And after years of Wall Street firms buying homes, another inflection point came in 2020. Post-COVID, when interest rates were cheap, when, you know, Sunbelt migration was the theme that everyone wanted to bet on, you know, a lot more money came into this. Investment firms had a leg up in the post-pandemic housing market, when home prices and rents were bouncing back up, but interest rates were low.

5:49They could outbid the competition with all-cash offers. Since then, institutional investors have continued to buy multifamily properties and single-family homes and rent them out to families across the U.S. It can be a lucrative business. The U.S. housing market is, this is a huge market, right? There's trillions of dollars worth of homes. So it's a big market you can invest in. Like you can tailor portfolios in the way that you want because it's so big and because there's different types of assets. So there's opportunities to diversify and sort of hedge risk. You know, if the economy in one city is, you know, is hurting and you're not collecting as much rent, you know, there in Birmingham, Alabama or something.

6:31But Indianapolis is thriving. You know, so there's some there's those kinds of opportunities. And it's a very liquid market. And if at some point you decide you want to sell homes, you feel very comfortable that there's a buyer, like probably more so than any other kind of real estate you can invest in. One 2024 working paper from the Federal Reserve Bank of Philadelphia found that large financial firms went from owning almost no single family rental properties in 2010 to almost 400 ,000 by 2021. But when interest rates went up in the middle of 2022, the industry's buying slowed. Last year, Blackstone's Tricon bought about 1 ,400 homes, and Predium bought less than 600, according to the real estate investment data firm SFR Analytics.

7:15And when you think about the 15 million single-family rental homes in the market, the share that's actually owned by these big players is pretty marginal overall. It's somewhere between 500 ,000 and 600 ,000 homes. Those are estimates, but it's 3 % or 4 % of the total rental homes in the U.S. The total single-family housing stock, owner-occupied or renter-occupied, it's less than 1 % of that. And these are the numbers that industry has always liked to put out there and to say, listen, why are you guys targeting us? We're a very small part of the housing market. In a statement to Bloomberg, Blackstone said its ownership of single-family homes in the U.S.

7:56represents 0.5 % of the overall firm, and that it's been a net seller of homes over the last decade, with the company's holdings down more than a fifth. But housing reporter Kristen Capps notes that in some parts of the country, institutional investors own a larger concentration of rental properties. And Atlanta is the starkest example of Wall Street's hold on housing. Atlanta was hit harder than most metros during the great financial crisis, But it's also grown more than many metros since then. So that's provided both the opportunity and incentive for institutional buyers to invest. And now in metro Atlanta, more than 30 % of the area's single family rental properties are owned by large corporations.

8:43Charlotte and Jacksonville come close as areas with maybe 25 percent ownership share by large corporations. In those areas especially, it can be hard for regular homebuyers to compete with institutional buyers, who usually have more cash and sometimes use sophisticated algorithms to generate offers for homes. One reason that homebuyers complain about institutional buyers is that algorithmic buying really locks out potential homebuyers. For institutional investors, as soon as something hits the multiple listing service database for new homes that lines up with their area of specialization, these corporations can submit an all-cash offer with no contingencies, no inspections, over asking price.

9:35You know, there's no household that can or would buy a home in that way. Here's Bloomberg's Patrick Clark again. You find yourself bidding against a company that can move more quickly and that's making buying decisions like in a way that has no relation to the way you're thinking about it. You know, what is this home going to yield on a yearly basis? And that's why people don't like them. That's why they've become popular or convenient targets. Patrick says some firms argue that by turning these homes into rental properties, they're playing an important role in the housing ecosystem. Some of their arguments are fair, right?

10:10It's like they at least particularly initially, but even, you know, even still, if they buy an existing home, it's very often a home that needs some repair. They'll invest, you know, thousands or tens of thousands of dollars into fixing up the home and making it nicer. And, you know, what they would say is that they are then, by doing that, giving, you know, a family that can't afford to buy access to a higher quality home in a better neighborhood with a better school district. The research on how corporate landlords impact rental prices is mixed. Research from places like the Federal Reserve Bank of Philadelphia have shown that larger landlords do drive higher rents.

10:52though there's disagreement about how significant those effects are on the market. Another working paper from CUNY Baruch suggests that by increasing rental supply, larger landlords can put downward pressure on rents. But investment firms entering real estate markets have other effects, too. Research compiled in a report by the Lincoln Institute of Land Policy and the Center for Geospatial Solutions from studies in Boston, Atlanta, and Kansas City found that corporate landlords were more likely to submit eviction filings than smaller landlords. In Memphis and Indianapolis, analyses show some corporate landlords had higher rates of code violations.

11:32It's not necessarily the case that large landlords are worse than small landlords. But in the areas where they have been most active, there are fewer tenant protections in local or state law that afford tenants certain rights, certain ability to challenge landlord practices. And tenants in those places say that corporate landlords take advantage of these laws to raise rents, to provide substandard housing, and to affect many households across the metro areas. Trump's proposal to cut those landlords out is hitting at a really pivotal time. Housing feels increasingly out of reach for renters and buyers alike, and some Americans want someone to blame.

12:18Affordability is the political issue of the moment, right? It feels unfair if you want to buy a house and you lose to a company. And it's just been red meat politically for years. So could Trump be teeing himself up for a political win ahead of midterm elections this year? And would a ban provide meaningful change to the housing affordability picture? That's coming up.

12:53Targeting private equity for its role in America's housing crisis has been, as Bloomberg's Patrick Clark called it, political red meat for a while now. It's an idea that politicians on both sides of the aisle have gotten behind. Private equity firms and other Wall Street investors were busy scooping up homes in communities across the country, even in the middle of an historic housing shortage. Democratic Senator Elizabeth Warren has been trying to regulate corporate landlords for years, says Bloomberg's Kristen Kapps. It's also something that former Vice President Kamala Harris advanced on the campaign trail.

13:32We will make sure those homes actually go to working and middle class Americans, not just investors. Current Vice President J.D. Vance has weighed in, too. Here he is on Columbus, Ohio's ABC6 in 2023. They have access to lower interest rates. They have access to cheaper money and they completely crowd out the availability of homes for people who want to just buy it by a piece of their community. But it wasn't a given that Trump would take this on politically. It's worth noting Trump's donor base includes Stephen Schwartzman, the CEO of Blackstone. He's given generously to Trump's reelection campaign and his PAC.

14:17And after Trump's Truth Social post, Blackstone's shares fell by as much as 9.3 percent before pairing some losses. I think the sell-off in Blackstone shares doesn't make much sense. As Blackstone said on the day, you know, single-family rentals are a very small piece of Blackstone's business. And Blackstone has probably more important matters in front of the federal government. And Patrick says many of the people he's spoken to in the single-family rental industry have brushed off Trump's proposal as all talk. Say, this is just Trump being Trump. Half the stuff he says doesn't go anywhere. People have been talking about this forever, and it's always just grandstanding, and we don't have anything to worry about.

14:59There are so few details that the president has provided about what it could potentially look like, what it would mean for there to be a ban. Is that a ban on purchasing? Is that a ban on ownership? Is that legal? I don't think that these questions have been fully played out. There's at least five or six states that have proposed some version of this in the past, and they go at it a little differently. Sometimes they'll set a limit. If you own more than 1 ,000 homes or more than 2 ,000 homes, you can't buy anymore. I think there have been some bills that have approached the tax status of owners.

15:33And in fact, Treasury Secretary Scott Besson said recently at the Economic Club of Minnesota that they're studying this. The thing that he said that people in the industry liked is that this is not a divestiture. They're not going to make companies sell homes they already own. Bygones are bygones. We're not going to have a forced sale here. Besson's remarks also raise questions about which institutional investors this ban might apply to. Would it be targeted at the large firms who own thousands of homes? Or even smaller investors who own more like 12? So we will decide what the correct level is.

16:10Is it a dozen homes? Is it two dozen? What makes you an aggregator? With the policy idea now on the table, and Trump teasing more information to come at the World Economic Forum meeting in Davos next week, some major players are taking potential regulation seriously. The industry is in bargaining mode. They're talking amongst themselves and trying to come up with things that they can offer the administration in a potential deal. And they're hopeful that this is a transactional administration and there's something that can get done. Because if legislation to ban institutional investors from the housing market makes its way through Washington, Patrick says it could have real bipartisan support and momentum behind it.

16:54I think it's very likely that someone will introduce a bill. I think there's a pretty decent chance it'll pass. And I think that'll leave the landlords in the position of challenging the constitutionality of a ban. But the other big question is whether tackling this issue will actually make it easier for people to buy and rent homes. I would say in terms of sort of more mainline research as I take it in, this is pretty low priority. There's not many macroeconomists who are going to point to institutional buyers as a major factor in America's problems with housing, affordability. Those major factors continue to be a lack of supply, a lack of good options in particular geographies.

17:44You know, when it comes to homeownership, high interest rates are still, you know, the principal problem that buyers are struggling with. Congress has proposed ways to address some of these other factors, like housing supply, in legislation like its Road to Housing Act, which passed the Senate last year with bipartisan support, but was stripped from the defense spending bill that Trump signed in December. Now, lawmakers in the House Financial Services Committee are trying to push forward another bipartisan housing package. What Senator Elizabeth Warren told me is that the Trump administration has taken no moves to try to move the needle on the housing bill, the major housing bill that's been before Congress.

18:27And she said that she does not think that, you know, a stray, somewhat isolated post on social media really moves the ball or indicates that the Trump administration is focused on this issue. For now, Wall Street investors may just need to wait and see what Trump says next. It's historically been an industry that likes to keep its head down and try to avoid attention. I think what's happening now is forcing at least some of the companies to step out and try to argue for themselves. And being such a small share of the housing market cuts both ways for these companies. On the one hand, they've often said, why are you guys worried about us?

19:12We're tiny. But as a potential ban gains some momentum or if it gains momentum, you can kind of turn that idea around. And on some level, I think there are lawmakers who will say, why should I pick a fight with the president? You're tiny.

19:35This is The Big Take from Bloomberg News. I'm Sarah Holder. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. Thanks for listening. We'll be back tomorrow. Thank you.