Finger-pointing over the nation’s housing woes has become an annual tradition. Both parties have blamed professional housing providers for the ongoing affordability crisis. In Congress, Rep. Adam Smith (D-Wash.) and Sen. Jeff Merkley (D-Ore.) have introduced legislation to impose tax penalties for institutional investors buying single-family homes or even to force them to sell any single-family homes they have purchased. Several states have followed suit.
This rush to ban certain entities from owning homes flows from a misunderstanding of their effect on the housing market and their small presence in the single-family housing market. Evidence shows institutional investors in housing rarely displace individuals from the housing market or increase prices, but local government restrictions certainly do reduce housing supply and drive up prices.
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