The move to ban institutional investors from buying single-family homes is a step in the right direction, but it won’t fix the major housing affordability crisis we face right now.
While walking through a very Midwest USA mid-tier neighborhood in an outer suburb last summer, a young couple passing by with two young children told me they were admiring all the “beautiful houses.” The father was a union worker and did jobs on the side to earn more. The mother stayed with the small children. They lived in an apartment.
There are many young American families like this — doing everything right, but still, unless given money from parents for a down payment, priced out of home ownership. Home prices relative to incomes have soared since the market bottomed in 2012, especially since the 2020 Covid panic. From 2022-2023, even as home prices relative to incomes continued to climb higher, mortgage rates doubled and remain at this higher level today. Obviously, mortgage rates have been much higher in the past. But the toxic combination is the high price of homes relative to incomes, paired with these higher mortgage rates.
That’s why it’s encouraging that President Trump is moving to make homes more affordable. Last week, Trump announced he is “taking steps to ban large institutional investors from buying more single-family homes.” Trump specifically mentioned young Americans struggling with housing affordability and said the administration would launch more proposals in the next several weeks to make housing more affordable. The White House’s proposals need to be hard-hitting and not tinker around the edges of a major problem.
A Moral Crisis
The nation’s housing affordability crisis is no less than a moral issue. Today, the average first-time buyer is almost 40 years old, compared to the historical range of 29 to 33. The unaffordability of owning a house directly affects the birth rate. Single-family homes and a yard, no matter how small, are for children. Young couples, even though married, statistically postpone having their first child or bearing additional children until they can afford a home. So the unaffordability of homes directly relates to the small number of children born in 2025.
If America doesn’t fix the home affordability crisis, the native-born population will continue to have fewer children. Regardless of the GDP or the stock market, is a country really successful and wealthy if its young people can’t afford to get married, buy a small home, and have children?
Pundits such as Ben Shapiro (who live in multimillion-dollar homes in posh neighborhoods) have brushed aside the issue. If Americans can’t afford a home where they live, just move. Aside from smacking of elitism, this view lacks common sense. Young people have family and networks where they grow up, and these family bonds are essential to helping with children, pursuing a better job, or dealing with other life events and struggles. Viewing humans as economic computers both ignores this real-world common sense and leads to bad policy outcomes.