Rising home prices have reached a breaking point that elected leaders can no longer ignore. But as so often happens, lawmakers have misdiagnosed the problem and identified solutions that would only make matters worse. That is exactly what has happened with professional housing providers, who have become culprits for rising housing costs.
The problem begins with a failure to understand who is investing in housing. Lawmakers repeatedly conflate different types of housing investors and subsequently introduce legislation that would worsen the housing crisis, not fix it. Federal, state, and local elected officials have all introduced legislation that would prohibitively tax professional housing providers’ home purchases or cap the overall number of homes that investors can own and make available in certain states, counties, or neighborhoods.
While lawmakers blame professional housing providers for the housing crisis, these so-called large investors hold only a small percentage of the overall housing supply and have little influence on the housing market. In fact, according to the Wall Street Journal, for the first half of 2025, “small investors made up about 25% of these home purchases while large investors accounted for about 5% on average.” Some professional housing providers are also selling more homes than they are buying, but still take the blame for unaffordable home prices driven by high mortgage rates, restrictive zoning, and other burdensome regulations that are limiting supply.
The minute amount of institutional investor concentration in the U.S. housing market is likely being conflated with smaller “mom-and-pop” investors. Recent data suggests that smaller investors have been more active in the housing market compared to professional housing providers. According to the data analytics firm Cotality, in the third quarter of 2024, mom-and-pop investors accounted for about 60% of all investor purchases. Additionally, John Burns Research & Consulting found that institutional investors “are buying less than 2% of all homes—a much lower percentage than misleading headlines imply.” Lawmakers and researchers should understand the differences between these two types of homebuyers before making sweeping accusations and proposing laws that would only squeeze the market further.
Instead of imposing punitive measures on homebuyers, policymakers should encourage more homebuilding. Development of single-family rentals (SFRs) is a part of the solution to building more homes and increasing the overall supply to bring down home prices. Interestingly, one paper found that SFR growth “increases overall housing supply” and that institutional investors “have had limited impact on access to homeownership,” seemingly countering narratives that professionally managed SFRs crowd out first-time homebuyers.
The root of America’s affordability crisis is not unique nor a product of investor activity. It may be politically convenient to blame a small segment of the market, but that won’t fix escalating housing prices. The National Bureau of Economic Research (NBER) found that housing prices have “risen [the] most where new supply has fallen the most,” suggesting that the real solution to addressing the housing affordability crisis is expanding supply, rather than shrinking it. Additionally, rental housing economist Jay Parsons has articulately explained how professional housing providers are not associated with higher rental prices because more supply begets lower rents. More private investment in housing will increase supply and lower rents.
In addition to building more homes, policymakers can and should encourage local governments to cut red tape to alleviate the burden of home prices. For example, New Rochelle, NY, lowered rents because it has “streamlined environmental reviews, offered developers tax incentives, and created standardized zoning rules to make it easier and cheaper to build homes.” Removing barriers to building more homes is a concrete, proven solution to solving America’s housing affordability crisis.
The U.S. cannot achieve housing affordability with finger-pointing that neglects real, practical solutions. Policymakers should support initiatives that unlock greater housing supply, allowing more people to buy homes at more affordable prices: lowering interest rates, reducing regulations that intentionally stifle growth, making the permitting process easier, and incentivizing new construction. Now is not the time to penalize housing providers who helped stabilize our community during times of economic crisis.
