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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Buying a home in America is getting harder and harder,

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Speaker 2: and President Donald Trump has been throwing a lot of

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Speaker 2: ideas at the wall to address the country's persistent housing

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Speaker 2: affordability crisis.

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Speaker 3: The President says he's directing the federal government to buy

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Speaker 3: two hundred billion dollars in mortgage bonds working on a

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Speaker 3: fifty year mortgage for home buyers, calling it a complete

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Speaker 3: game changer.

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Speaker 1: Trump is also considered declaring a national housing emergency due

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Speaker 1: to high prices and low availability.

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Speaker 2: But his latest idea came as a bit of a surprise,

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Speaker 2: taking on corporate landlords. Just last week, Trump posted on

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Speaker 2: truth Social that he would be quote taking steps to

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Speaker 2: ban institutional investors from buying more single family homes, in

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Speaker 2: other words, getting Wall Street out of the housing market.

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Speaker 1: Lawmakers advocates on both the left and right have identified

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Speaker 1: this new phenomenon as a culprit in the greater housing

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Speaker 1: affordability problem.

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Speaker 2: Kristen Capps covers housing for Bloomberg City Lab.

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Speaker 1: However, it's not something that President Trump or the White

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Speaker 1: House has talked about very much in this term, and

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Speaker 1: in fact, this same week, the Trump administration also approved

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Speaker 1: a big merger of two large real estate companies.

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Speaker 2: Trump is famously a real estate guy, and some of

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Speaker 2: his biggest donors are in the very sector that his

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Speaker 2: proposal would target. But as housing costs become a major

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Speaker 2: political issue, his administration has been looking for ways to

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Speaker 2: bring them down, and banning big investors from the housing

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Speaker 2: market is a policy idea that's actually circulated for a

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Speaker 2: while among both Republicans and Democrats. Here's Patrick Clark, who

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Speaker 2: covers real estate for Bloomberg.

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Speaker 3: In talking to people over the last week, there's definitely

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Speaker 3: a sense that one the administration wanted to do something

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Speaker 3: meaningful on housing affordability, and going after these companies is

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Speaker 3: something that plays well.

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Speaker 2: But Trump hasn't revealed much about how a policy like

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Speaker 2: this would actually work.

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Speaker 3: Trump said he's going to announce more details at Davos,

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Speaker 3: you know, the place that everyone goes to talk about

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Speaker 3: housing affordability and inequality.

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Speaker 2: And whether cracking down on corporate landlords will make a

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Speaker 2: meaningful difference is another question.

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Speaker 1: The number of homes that large landlords buy at any

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Speaker 1: given year is very, very small, and I think it's

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Speaker 1: difficult to really attach the greater affordability problem to you

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Speaker 1: know those companies who do emerge as boogeymen on both

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Speaker 1: the left and right.

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Speaker 2: Solder and this is the big take from Bloomberg News

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Speaker 2: today on the show, How Wall Street bought up a

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Speaker 2: slice of the US housing market, why Trump wants to

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Speaker 2: stop it, and what impact that policy could have. The

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Speaker 2: subprime mortgage crisis of the late two thousands led to

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Speaker 2: a wave of foreclosures across the US. Millions of Americans

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Speaker 2: lost their homes, and in the wreckage of that Great

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Speaker 2: Recession period, private equity companies and Wall Street investors saw

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Speaker 2: an opportunity.

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Speaker 3: Homes were very cheap, and number of Wall Street firms

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Speaker 3: stepped in, sometimes buying homes with cash on the courthouse steps,

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Speaker 3: and were able to start amassing pretty large portfolios.

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Speaker 2: Starting in twenty twelve, investors were scooping up thousands of

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Speaker 2: homes a month at steep discounts. By the start of

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Speaker 2: twenty thirteen, investment firm Blackstone had spent over two and

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Speaker 2: a half billion dollars buying up homes to manage his rentals.

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Speaker 3: It's all PTSD from the Great Financial Crisis and the

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Speaker 3: foreclosure crisis, or at least a lot of it is

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Speaker 3: that was really a terrible time in the economy and

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Speaker 3: many people, you know, in different walks of life were

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Speaker 3: affected by it, and there was a sense that these

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Speaker 3: were the guys who came in and bought at a

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Speaker 3: discount and made money out of that turmoil.

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Speaker 2: And after years of Wall Street firms buying homes, another

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Speaker 2: inflection point came in twenty twenty post.

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Speaker 3: COVID when interest rates were cheap, when you know, Sun

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Speaker 3: Belt migration was the theme that everyone wanted to bet on,

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Speaker 3: you know, a lot, a lot more money.

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Speaker 2: Came into this investment firms had a leg up in

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Speaker 2: the post pandemic housing market when home prices and rents

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Speaker 2: were bouncing back up but interest rates were low, they

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Speaker 2: could outbid the competition with all cash offers. Since then,

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Speaker 2: institutional investors have continued to buy multi family properties and

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Speaker 2: single family homes and rent them out to families across

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Speaker 2: the US. It can be a lucrative business.

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Speaker 3: The US housing market is this is a huge market, right,

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Speaker 3: There's trillions of dollars worth of homes, so it's a

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Speaker 3: big market you can invest in like you can tailor

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Speaker 3: portfolios in the way that you won't because it's so big,

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Speaker 3: and because there's different types of assets, so there's opportunities

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Speaker 3: to diversify and sort of hedge risk. You know, if

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Speaker 3: the economy in one city is you know, is hurting

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Speaker 3: and you're not collecting as much rent, you know there

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Speaker 3: in Birmingham, Alabama or something, but Indianapolis is thriving, you know.

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Speaker 3: So there's there's those kinds of opportunities, and it's a

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Speaker 3: very liquid market. And if at some point you decide

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Speaker 3: you want to sell homes, you feel very comfortable that

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Speaker 3: there's a buyer, like probably more so than any other

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Speaker 3: kind of real estate you can invest in.

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Speaker 2: One twenty twenty four working paper from the Federal Reserve

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Speaker 2: Bank of Philadelphia found that large financial firms went from

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Speaker 2: owning almost no single family rental properties in twenty ten

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Speaker 2: to almost four hundred thousand by twenty twenty one, but

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Speaker 2: when interests went up in the middle of twenty twenty two,

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Speaker 2: the industry's buying slowed. Last year, Blackstone's Tricon bought about

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Speaker 2: fourteen hundred homes, and Predium bought less than six hundred,

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Speaker 2: according to the Real Estate Investment data firm SFR Analytics,

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Speaker 2: And when you think about the fifteen million single family

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Speaker 2: rental homes in the market. The share that's actually owned

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Speaker 2: by these big players is pretty marginal.

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Speaker 3: Overall, it's somewhere between five hundred and six hundred thousand homes.

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Speaker 3: Those are estimates, but it's three or four percent of

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Speaker 3: the total rental homes in the US. You know, the

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Speaker 3: total single family housing stock owner occupied or renter occupied

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Speaker 3: is it's less than one percent of that. And these

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Speaker 3: are the numbers of industries I always liked to put

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Speaker 3: out there and to say, listen, we're not why are

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Speaker 3: you guys targeting as we're a very small part of

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Speaker 3: the housing market.

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Speaker 2: In a statement to Bloomberg, Blackstone said its ownership of

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Speaker 2: single family homes in the US represents zero point five

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Speaker 2: percent of the overall firm and that it's been a

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Speaker 2: net seller of homes over the last decade, with the

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Speaker 2: company's holdings down more than a fifth. But housing reporter

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Speaker 2: Kristen Capps notes that in some parts of the country,

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Speaker 2: institutional investors own a larger concentration of rental properties, and

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Speaker 2: Atlanta is the starkest example of Wall streets hold on housing.

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Speaker 1: Atlanta was hit harder than most metros during the Great

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Speaker 1: Financial Crisis, but it's also grown more than many metros

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Speaker 1: since then, so that's provided both the opportunity and incentive

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Speaker 1: for institutional buyers to invest. And now in Metro Atlanta,

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Speaker 1: more than thirty percent of the area's single family rental

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Speaker 1: properties are owned by large corporations. Charlotte and Jacksonville come

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Speaker 1: close as areas with maybe twenty five percent ownership share

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Speaker 1: by large corporations.

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Speaker 2: In those areas especially, it can be hard for regular

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Speaker 2: home buyers to compete with institutional buyers, who usually have

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Speaker 2: more cash and sometimes use sophisticated algorithms to generate offers

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Speaker 2: for homes.

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Speaker 1: One reason that home buyers complain about institutional buyers is

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Speaker 1: that algorithmic buying really locks out potential home buyers for

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Speaker 1: institutional investors. As soon as something hits the multiple listing

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Speaker 1: service database for new homes that lines up with their

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Speaker 1: area of specialization, these corporations can submit and all cash

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Speaker 1: offer with no contingencies, no inspections over asking price. You know,

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Speaker 1: there's no household that can or would buy a home

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Speaker 1: in that way.

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Speaker 2: Here's Bloomberg's Patrick Clark.

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Speaker 3: Again, you find yourself biting against a company that can

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Speaker 3: move more quickly, and that making buying decisions like in

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Speaker 3: a way that has no relation to the way you're

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Speaker 3: thinking about it. You know, what is this home going

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Speaker 3: to yield on a yearly basis? And that's why that's

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Speaker 3: why people don't like them, That's why they've become popular

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Speaker 3: or can targets.

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Speaker 2: Patrick says, some firms argue that by turning these homes

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Speaker 2: into rental properties, they're playing an important role in the

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Speaker 2: housing ecosystem.

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Speaker 3: Some of their arguments are fair, right, It's like they

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Speaker 3: at least particularly initially, but even you know, even still,

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Speaker 3: if they buy an existing home, it's very often a

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Speaker 3: home that needs some repair. They'll invest, you know, thousands

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Speaker 3: or tens of thousands of dollars into fixing up the

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Speaker 3: home and making it nicer. And you know what they

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Speaker 3: would say is that they are then by doing that,

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Speaker 3: giving you know, a family that can't afford to buy,

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Speaker 3: access to a higher quality home in a better neighborhood

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Speaker 3: with a better school district.

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Speaker 2: The research on how corporate landlords impact rental prices is mixed.

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Speaker 2: Research from places like the Federal Reserve Bank of Philadelphia

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Speaker 2: have shown that larger landlords do drive higher rents, though

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Speaker 2: there's disagreement about how significant those effects are on the market.

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Speaker 2: Another working paper from Quney Baruch suggests that by increasing

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Speaker 2: rental supply, larger landlords can put downward pressure on rents,

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Speaker 2: but investment firms entering real estate markets have other effects too.

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Speaker 2: Research compiled in a report by the Lincoln Institute of

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Speaker 2: Land Policy in the Center for Geospatial Solutions from studies

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Speaker 2: in Boston, Atlanta, and Kansas City found that corporate landlords

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Speaker 2: were more likely to submit eviction filings than smaller landlords.

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Speaker 2: In Memphis and Indianapolis. Analyzes show some corporate landlords had

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Speaker 2: higher rates of code violations.

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Speaker 1: It's not necessarily the case that large landlords are worse

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Speaker 1: than small landlords, but in the areas where they have

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Speaker 1: been most active, there are fewer tenant protections in local

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Speaker 1: or state law that afford tenants certain rights, certain ability

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Speaker 1: to challenge landlord practices, and tenants in those places say

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Speaker 1: that corporate landlords take advantage of these laws to raise rents,

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Speaker 1: to provide substandard housing, and to affect many households across

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Speaker 1: the metro areas.

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Speaker 2: Trump's proposal to cut those landlords out is hitting at

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Speaker 2: a really pivotal time. Housing feels increasingly out of reach

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Speaker 2: for renters and buyers alike, and some Americans want someone

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Speaker 2: to blame.

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Speaker 3: Affordability is the political issue of our of the moment. Right.

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Speaker 3: It feels unfair if you want to buy a house

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Speaker 3: and you lose to a company. And it's just been

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Speaker 3: red meat politically for years.

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Speaker 2: So could Trump be teeing himself up for a political

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Speaker 2: win ahead of midterm elections this year? And would a

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Speaker 2: band provide meaningful change to the housing affordability picture that's

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Speaker 2: coming up? Targeting private equity for its role in America's

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Speaker 2: housing crisis has been, as Bloomberg's Patrick Clark called it,

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Speaker 2: political red meat for a while now. It's an idea

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Speaker 2: that politicians on both sides of the aisle have gotten behind.

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Speaker 4: Private equity firms and other Wall Street investors were busy

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Speaker 4: scooping up homes and communities across the country, even in

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Speaker 4: the middle of an historic housing shortage.

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Speaker 2: Democratic Senator Elizabeth Warren has been trying to regulate corporate

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Speaker 2: landlords for years, says Bloomberg's Christen caps.

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Speaker 1: It's also something that former Vice President Kamal Harris advanced

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Speaker 1: on the campaign trail.

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Speaker 3: We will make.

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Speaker 5: Sure those homes actually go to working and middle class Americans,

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Speaker 5: not just investors.

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Speaker 2: Current Vice President JD. Vance has weighed into here. He

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Speaker 2: is on Columbus, Ohio's ABC six in twenty twenty three.

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Speaker 1: They have access to lower interest rates, they have access

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Speaker 1: to cheaper money, and they completely crowd out the availability

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Speaker 1: of home for people who want to, you know, just

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Speaker 1: buy it by a piece.

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Speaker 4: Of their community.

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Speaker 2: But it wasn't a given that Trump would take this

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Speaker 2: on politically. It's worth noting Trump's donor base includes Steven Schwartzman,

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Speaker 2: the CEO of Blackstone. He's given generously to Trump's re

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Speaker 2: election campaign and his pack, and after Trump's truth social post,

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Speaker 2: Blackstone's shares fell by as much as nine point three

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Speaker 2: percent before pairing some losses.

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Speaker 3: I think the selloff in Blackstone shares doesn't make much sense.

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Speaker 3: As Blackstone said on the day, you know, single family

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Speaker 3: rentals are a very small piece of Blackstone business in

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Speaker 3: Blackstone has probably more important matters in front of the

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Speaker 3: federal government.

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Speaker 2: And Patrick says many of the people he's spoken to

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Speaker 2: in the single family rental industry have brushed off Trump's

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Speaker 2: proposal as all talk.

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Speaker 3: Say, this is just Trump being Trump. Half the stuff

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Speaker 3: he says, doesn't go anywhere. People have been talking about

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Speaker 3: this forever and it's always just grant standing and we

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Speaker 3: don't have anything to worry about. There are so few details,

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Speaker 3: you know, that the President has.

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Speaker 1: Provided all about what it could potentially look like, what

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Speaker 1: it would mean for there to be, you know, a

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Speaker 1: ban is that a ban on purchasing? Is that a

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Speaker 1: ban on ownership? Is that legal? I don't think that

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Speaker 1: these questions have been fully played out.

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Speaker 3: There's at least five or six states that have proposed

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Speaker 3: some version of this in the past, and they go

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Speaker 3: at it a little differently. Sometimes they'll set a limit,

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Speaker 3: you know, if you own more than a thousand homes

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Speaker 3: or more than two thousand homes, you can't buy anymore.

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Speaker 3: I think there have been some bills that have approached

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Speaker 3: the tax status of owners and in fact, Treasury Secretary

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Speaker 3: Scott Besson said recently at the Economic Club of Minnesota

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Speaker 3: that they're studying this. The thing that he said that

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Speaker 3: people in the industry liked is that this is not

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Speaker 3: a divestiture. They're not going to make companies sell homes

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Speaker 3: they already.

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Speaker 1: Own bygones or bygones. We're not going to have a

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Speaker 1: force sale here.

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Speaker 2: Besson's remarks also raise questions about which institutional investors this

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Speaker 2: ban might apply to. Would it be targeted at the

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Speaker 2: large firms who own thousands of homes or even smaller

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Speaker 2: investors who own more like twelve.

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Speaker 1: So we will decide what the correct level is. Is

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Speaker 1: it a dozen homes? Is two dozen? What makes you

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Speaker 1: an aggregator?

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Speaker 2: With the policy idea now on the table and Trump

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Speaker 2: teasing more information to come at the World Economic Forum

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Speaker 2: meeting in Davos next week, some major players are taking

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Speaker 2: potential regulation seriously.

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Speaker 3: The industry is in bargaining mode. They're talking amongst themselves

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Speaker 3: and trying to come up with things that they can

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Speaker 3: offer the administration and a potential deal. And they're hopeful

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Speaker 3: that this is a transactional administration and there's something that

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Speaker 3: can get done.

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Speaker 2: Because if legislation to ban institutional investors from the housing

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Speaker 2: market makes its way through Washington, Patrick says it could

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Speaker 2: have real bipartisan support and momentum behind it.

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Speaker 3: I think it's very likely that someone will introduce a bill.

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Speaker 3: I think there's a pretty decent chair as it will pass,

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Speaker 3: and I think that'll leave the landlords in the position

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Speaker 3: of challenging the constitutionality.

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Speaker 1: Of a band.

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Speaker 2: But the other big question is whether tackling this issue

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Speaker 2: will actually make it easier for people to buy and

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Speaker 2: rent homes.

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Speaker 3: I would say, in terms of sort of more mainline research,

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Speaker 3: as I take it in, this is pretty low priority.

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Speaker 1: There's not many macro economics who are going to point

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Speaker 1: to institutional buyers as a major factor in America's problems

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Speaker 1: with housing affordability. Those you know, major factors continue to

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Speaker 1: be a lack of supply, a lack of good options

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Speaker 1: in particular geographies. You know, when it comes to home ownership,

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Speaker 1: high interest rates are still, you know, the principal problem

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Speaker 1: that buyers are struggling with.

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Speaker 2: Congress has proposed ways to address some of these other factors,

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Speaker 2: like housing supply legislation, like its Road to Housing Act,

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Speaker 2: which passed the Senate last year with bipartisan support, but

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Speaker 2: was stripped from the Defense spending bill that Trump signed

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Speaker 2: in December. Now, lawmakers and the House Financial Services Committee

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Speaker 2: are trying to push forward another bipartisan housing package.

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Speaker 1: What Senator Elizabeth Warren told me is that the Trump

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Speaker 1: administration has taken no moves to try to move the

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Speaker 1: needle on the housing bill, the major housing bill that's

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Speaker 1: been before Congress, and she said that she does not

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Speaker 1: think that you astray somewhat isolated post on social media

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Speaker 1: really moves the ball or indicates that the Trump administration

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Speaker 1: is focused on this issue.

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Speaker 2: For now, Wall Street investors may just need to wait

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Speaker 2: and see what Trump says next.

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Speaker 3: It's historically been an industry that likes to keep its

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Speaker 3: head down and try to avoid attention. I think what's

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Speaker 3: happening now is forcing it at least some of the

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Speaker 3: companies to step out and try to argue for themselves.

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Speaker 3: And being such a small share of the housing market

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Speaker 3: cuts both ways for these companies. On the one hand,

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Speaker 3: they've often said, why are you guys worried about us?

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Speaker 3: We're tiny? But as a potential band gained some momentum,

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Speaker 3: or if it gains momentum, you can kind of turn

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Speaker 3: that idea around. And on some level, I think there

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Speaker 3: are lawmakers who will say, why should I pick a

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Speaker 3: fight with the president? You're tiny.

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Speaker 2: This is the Big Take from Bloomberg News. I'm Sarah Holder.

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Speaker 2: To get more from the Big Take and unlimited access

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Speaker 2: to all of Bloomberg dot com, subscribe today at Bloomberg

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Speaker 2: dot com slash Podcast offer, thanks for listening. We'll be

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Speaker 2: back tomorrow