Trump Hits at Institutional Investors in Single-Family Homes

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2:02Carol Massar:All right. So what does this all mean? We know that President Trump, as you said, said he would move to ban institutional investors from buying single-family homes to address housing affordability. So let's see what Jeff Langbaum has to say about that. He's Bloomberg Intelligence senior REITs and commercial real estate analyst. He joins us from BI headquarters in Princeton. Happy New Year, Jeff. Good to have you back here on Bloomberg Businessweek Daily. Thank you. Good to you. Yeah, what's your initial take off of what we got from the president? Not a lot of details. We'll see where it lands, but your initial thoughts.

2:35Well, my initial thought was that I assumed that once he posted something separate about the defense companies that this would already be out of the news cycle, but I guess that's not the case. You know, it remains to be seen what exactly he can do and then really what the impact of that will be. You know, I don't think that he can just outright ban companies from, you know, private market business, but he certainly can, you know, push Congress to try and do something. He can push the regulators to try and do something. He can push the DOJ to investigate business practices. I mean, there's a lot I was going to say to make life uncomfortable.

3:14I was just going to say he can't maybe he can't ban private companies from doing a certain business, but he can make it very difficult for them to exist through a series of things. I mean, we've seen this happen with with certain individuals, too, that have come to the administration's ire or been the administration's ire. So talk a little bit about what would happen to a company such as Invitation Homes. I mean, we're not talking at this point about that company no longer being able to do what it does, which is buy and manage rental homes for people around the country. Well, you know, all we have right now to go on is the language of the True Social Post, which specifically said would ban them from buying more homes.

3:54So the portfolios that they have now theoretically wouldn't be touched. The questions revolve around whether you can build homes, whether you can buy portfolios of homes that were built specifically for the intention of renting, as opposed to buying individual previously owned homes. But if at the end of the day, these companies that are largely grow by buying new rental homes, if they're prohibited from doing that, that takes away a big part of their growth engine. And then it raises the question of whether there's a viable business model there if the government is anti-institutional ownership of rental homes.

4:38Carol Massar:Yeah, and you just wonder then what's next? What might they not want institutional investors to buy next? But Jeff, institutional investors, how many homes do they really own? What percentage of the housing stock that's out there? It's a tiny part. I've seen somewhere along the lines of 2 % of the overall housing stock owned by large institutions. And the two REITs you mentioned, Invitation Homes and AMH, where that's their sole business is owning rental homes. They're a small part of that. So another way to look at it is Blackstone obviously got beat up a lot today. They were very early in the business.

5:17They still have an investment in it. But not only is it a small part of the overall housing stock, it's a tiny part of their overall business. So it's not nearly as big a problem as you would think based on this being the proposed solution. But clearly, there are political points to be won by talking about improving home affordability and going after the big private equity guys.

5:47Carol Massar:Well, Jeff, that's what I want to ask you, because when we talk about, you know, we can tell now we've got midterms, right? And to be fair, we should be talking, many would argue, about affordability. For a lot of Americans that are having a really tough time and cannot afford a home, what is the real reason that Americans can't afford a home? I mean, I'm just curious if you've come across anything in terms of your research. Well, mortgage rates are still high, and that has a compounding effect. Obviously, it increases the cost to buy any home, but it also precludes people who have a low mortgage from selling their home because then they're going to have to roll it into a higher one.

6:25And so, you know, inventories of for sale housing are, you know, the stuff's not selling. And and prices need to come. Mortgage rates are going to be the primary driver of that if rates come down. But this solution wouldn't even necessarily do what he wants it to do because just like in some cases rent control, rent caps, while it sounds good and it sounds like it's going to reduce pricing, part of it is ciphers new construction. And you can see that happening here depending on how exactly it shakes out. AMH, American Homes, their sole expansion business right now is building new homes for rent.

7:08If they're precluded from owning those types of properties, you're going to have less construction and less supply means, you know, doesn't necessarily mean lower pricing. I just want to go to some data points here. Mike McKee sent me this earlier, sent me this report from the American Enterprise Institute. They argue that the market share of institutional investors is less than one percent nationally, though there are 22 counties, which is seven tenths of one percent of counties that have a percentage as high as five to 10 percent. I wonder if the concern from the people have, and again, this politically seems like a populist, a very populist thing to do and thing to say, conflates the idea of institutional investor with the idea of a landlord who's also an investor.

7:54Because it does say that 25 % of homes in the first quarter of 2024 were actually purchased by investors of all sizes. So it's sort of a narrative issue here. It's definitely a narrative issue, but there's a bunch of different components of it. We talked about how the large institutions don't own a lot of these homes. They have been a large buyer of homes over the last couple of years, but recently they haven't been because homes aren't for sale. The pricing doesn't work for somebody who's an economic buyer where you need to get in at the right price and be able to charge a rent to generate a return.

8:34And the pricing hasn't been there. And then the transaction activity has actually been pretty low. So, you know, there's there's a lot of different angles where you can look at this and and, you know, wonder whether or not actually would accomplish what it sets out to accomplish. But it does sell, you know, it sells the point of working for the, you know, someone who's looking to buy a home but can't afford it at the expense of the, you know, the big institutions with all the money. And, you know, it's that inequality issue that I think is trying to earn political points.

9:12Carol Massar:Jeff, just to be fair, and just got about 20 seconds, is it safe to say that investor money, also institutional money, provides funds to build homes? Just quickly. Sure. And it's unclear whether his post didn't address that, but it's unclear whether the target will go towards institutions building in addition to buying. All right. Good stuff. So glad we could check in with you. Jeff Langbaum, he is Bloomberg Intelligence Senior REITs and Commercial Real Estate Analyst. Joining us from BI headquarters in Princeton. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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12:12Carol Massar:Or watch us live on YouTube. We turn to Bloomberg News. Corporate and economic statecraft senior reporter Joe Doe right here in studio. The seizing of the sanctioned oil tankers, the U.S. energy quarantine of Venezuela, that along with the U.S. planning to control future sales of oil from the country, and then taking in the money and splitting it between the U.S. and Venezuela. What is that about? What is the kind of end goal here? Who benefits by all of this? It's unclear. You have an extraordinary action taken by the United States of America as a direction by President Donald Trump to remove President Maduro from Venezuela, quite literally, remove him.

13:00which in normal times would seemingly leave some sort of a vacuum. But we did quickly see the vice president step in and take over.

13:07Carol Massar:A friend to the oil industry, as we know. Right. And the question has been, what do we do with the oil? What do we do with the natural resources? The real question is, what about the oil? Right. And we've seen all the actions that you saw play out. What we've seen in the four or five days since is a lot of here are the ideas that we have over how we're going to handle the infrastructure of the oil. And we've been talking to oil majors like ConocoPhillips and Exxon and Chevron, but it's a lot of talk. It's not a lot of clear action. How does it typically work when it comes to natural resources?

13:43You've spent years covering metals and mining, for example. How does a split typically work when it comes to natural resources when a company that is maybe from another country goes and extracts those natural resources from a different country. There's all sorts of different things. There's like you have taxes. So like, okay, you have to pay a certain amount of tax, like nickel in Indonesia, for example. Years ago, it used to be the Chinese would just take, extract nickel out of Indonesia, bring it back to China and process it. The government got smart, call it 12 years ago and said, okay, well, the value add is the processing.

14:17So you can continue to extract, but you also have to process within the nation. And so there are certain fees or taxes that go along with that so that the state can actually say to its taxpayers, to its citizens, we are making money off of this as well, even though it is an extractive industry. Thinking of it this way is a fair way to think of how different nations work with foreign corporations that are in big extractive industries. Well, let me ask the question in a more extreme way, because I think there would be some people who perhaps are watching or listening right now saying, OK, well, if this is Venezuela's if this oil is in Venezuela.

14:52Yeah. It belongs to Venezuela and its people. What right does the United States have to take that oil? Right. I think there are a lot of fair legal philosophical arguments that are probably ahead of us. I think that's a really important thing to point out. Like this is uncharted territory. and while it seems like a plan is being developed by the united states and by venezuela and by others uh it is not clear what that plan is uh obviously we hear the energy secretary saying today well it's going to be split and it's going to go into u.s accounts and we'll kind of oversee those accounts and make sure the money gets to who rightly has should be getting that money but

15:33Carol Massar:like how are they going to execute that so that 2.8 billion dollars at current market price of of the 30 to 50 million barrels of oil from Venezuela to the U.S. We're not saying like half of it goes to the U.S. government. I mean, doesn't Chevron own it? Or who gets that money? Because it sounds, that's where I think people are saying, is this transactional by the U.S. government? Chevron is the only oil major actively operating in Venezuela right now. Correct. The reporting that we had today was that there are talks to try to get ConocoPhillips and Exxon back into the country to also help develop the oil deposits.

16:07It's they're talking about everything from developing to infrastructure. I mean, we have quoted one of the Rice University professors who says to do this, we're talking like 10 billion dollars a year that has to be spent to build this out. And then your question is, OK, say it happens. Who's getting the money? Well, it's hard to understand if the energy secretary is saying it's going to be split. There are obvious questions in the market that you are asking right now. How does it get split? What do those accounts look like? Who actually controls them? Like the question I have is the United States president currently has a golden share over United States steel.

16:47He has shown that he will on certain things have direct say one individual. And so does he he said, I will take these accounts. So will he? I don't know.

16:56Carol Massar:I want to roll into this Greenland because we did have the president talking about that. European leaders issuing a joint statement warning that President Trump needs to respect the territorial integrity of Greenland and Denmark. I do wonder, it almost feels like, is this kind of like the British empire that the U.S. is looking to be in terms of natural resources, or is that the wrong read on it? How do you see it? Again, and I go back to, is this transactional? The president wants one thing, going to get it, and then back off. Here's my read on Greenland. Greenland is part of the Western Hemisphere in our national security strategy.

17:34Venezuela is part of the Western Hemisphere in our national security strategy. Questions came up to the president over the weekend. If you're doing this with Venezuela, what about other things? And the president mentions Greenland. Greenland has not been discussed by the president of the United States since the summer. Right. It was striking that he brought up Greenland and we've seen all the news that's come out. The Danish officials who have said, whoa, whoa, whoa. The points that, hey, if the United States launched an attack on Greenland, that would effectively end NATO. I think we need to pump our brakes for a second.

18:04See what plays out. We do know that the president of the United States sometimes is a little bit loose with his words, but behind his words, there is some meaning. And I think the market's trying to find out what is that meaning. I think European officials are trying to figure out what is that meaning. and I do bring it back to connecting the dots. The president is not telling us directly why he's talking about Greenland, but there is a connection of this is part of the Western Hemisphere, and he just had, in his mind, a massive victory of extracting the president of Venezuela and apprehending him, bringing him back to the United States.

18:35So on some level, don't forget, Greenland has always been a priority for President Donald Trump. It's just that lately, it hasn't been at the top of the pile.

18:44Carol Massar:It's just fascinating, and I just want to say the news fast and furious. We do have a headline crossing, President Trump will not allow dividends buybacks for defense companies. So an interesting development there as well. And I'm just looking at Lockheed Martin, for example. It just dropped about 1 % here. So the defense sector now also on our radar. Jojo, thank you so much. I know we'll be coming back to you because this story certainly continues. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

19:19You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app.

19:30Carol Massar:Or watch us live on YouTube. Tim, we're going to stay in Venezuela. Yeah, and what's needed to make this country viable, if that's the goal of all this U.S. action? For that, we welcome Francisco Rodriguez, Senior Research Fellow at the Center for Economic and Policy Statecraft at the University of Denver's Joseph Korbel School of International Studies. He joins us from Denver. Professor, good to have you on the program. You write in Foreign Affairs about Venezuela after Maduro. The current government, it's still the former government of President Nicolas Maduro. The acting president is Delce Rodriguez, his vice president.

20:04Is this current government, is this current setup good for Venezuela and its people? Well, the question is what's the alternative and what was the U.S. willing or able to do? I mean, what we saw over the weekend was the extraction of Nicolás Maduro, but not a regime change. The regime remains in place. What would have been necessary to change the regime, that would have been a very different operation. The U.S. would have had to carry out a land invasion in Venezuela, would have had to occupy the country, would have needed to get involved in state building. And the U.S. clearly decided not to do that.

20:39So then it has to deal with the authorities that actually have control over the territory. What the U.S. is trying to do is to say, well, to those authorities, what you're going to do is going to be circumscribed by the pressure that we're putting on you. We'll allow you to sell your oil under certain conditions, but you have to comply with what we're asking you to do. For example, you can't sell the oil to China. You have to sell it to the U.S. or you have to transfer it to the U.S. in some way. Professor, is it notable to you that there aren't necessarily humanitarian elements that are tied to this?

21:17That's something in the past that we've heard about nation building, the idea of democracy, the idea of human rights, those sorts of things. We don't necessarily see that. Well, there's humanitarian and democracy. I mean, there's one problem in Venezuela is that this country has undergone a massive economic collapse. It suffered a contraction of 71 % of its GDP, the largest ever peacetime economic contraction in world history. And this country has been under a blockade of oil exports by the U.S., a total blockade, for approximately one month. And this country depends only on oil revenue. That's its only source of revenue to fund its economy.

21:55So we could be looking at a situation in which the economy suffers another major humanitarian crisis, another major economic crisis, and we have migration outflows, we have food shortages, we have quite possibly famine. Then there's another issue, which is the issue of human rights and democracy. The U.S. government has not talked about human rights. It hasn't talked about democracy. Secretary Rubio said on very vague terms, well, after we stabilize the economy, there's going to be a transition that can be done by the Venezuelan people. But this is very vague. There was an election. It was won by the opposition last year.