Overview of "Can Trump make buying a home more affordable?"
This Planet Money (NPR) episode uses one buyer’s extreme story to examine whether two recent Trump administration moves could meaningfully improve U.S. housing affordability. Hosts Erica Barris and Nick Fountain walk through (1) an executive order aimed at “stopping Wall Street from competing with Main Street homebuyers” and (2) a plan to have government-backed entities buy mortgage-backed securities (MBS) to lower mortgage rates. They pair reporting on these policies with academic research to assess likely effects and risks.
Key points and takeaways
- The episode opens with James, a 40-year-old National Guard member from New Hampshire, who lived in a tent and deployed to Djibouti to save a tax-free down payment for a condo—an anecdote that illustrates the affordability squeeze for first‑time buyers.
- Trump’s housing moves are mostly demand-side interventions: discouraging large institutional buyers and having Fannie Mae/Freddie Mac buy MBS to nudge mortgage rates down.
- Academic research suggests large institutional investors own a small share of U.S. housing overall but can be concentrated in certain Sunbelt metro suburbs.
- The likely impact of the administration’s actions is limited nationally, though there may be localized effects in places with high investor concentration. The MBS buy program can lower mortgage rates modestly (announcement already moved rates ~0.2 percentage point), but it exposes taxpayers to financial risk.
- Many housing economists argue the core problem is supply, not demand; without more homebuilding (especially starter homes), affordability solutions will be incomplete.
The policy moves explained
1) Executive order: “Stopping Wall Street…”
- Directs agencies to limit government support (insurance/guarantees/securitization) for large institutional buyers and asks the FTC/DOJ to review big purchase patterns on antitrust grounds.
- It does not ban institutional purchases outright; Congress would need to pass such a law.
- Potential effect: may "chill" some investor activity if antitrust scrutiny or reduced government backing raises costs for those firms—but large investors often buy in cash or use private funding, so the direct leverage is limited.
2) Mortgage-backed securities (MBS) purchases by government-backed entities
- The administration directed Fannie/Freddie (government-backed entities) to buy up to $200 billion in MBS to lower mortgage rates.
- Mechanism: more demand for MBS → lower yields → slightly lower mortgage rates for borrowers.
- Immediate/short-term effect: announcements alone produced an estimated 0.2 percentage point drop in rates (an “announcement effect”).
- Risk: placing more MBS on government balance sheets increases taxpayer exposure to interest-rate and credit risk — echoes of past financial crises.
What the research says about big institutional buyers
- Caitlin Gorbach (UT Austin) and coauthors analyzed decade-plus sales data (through 2022) and traced large institutional purchases:
- Estimated share of all U.S. housing units owned by those large institutional investors: ~0.3%.
- Share of single‑family/townhome purchases from 2010–2022 attributable to institutional buyers: ~5%.
- In single‑family and townhome rentals, institutional ownership rises to ~3% nationally, with much higher local concentrations in some neighborhoods.
- Large investors bought in cash ~83% of the time in the studied period—meaning mortgage-market interventions affect them less directly.
- Geographic concentration: heavy activity in Sunbelt suburbs (Atlanta, Charlotte, Houston, Phoenix); in some tracts institutional ownership can be double-digit percentages.
- Effects on prices/rents vary by period:
- Post‑2008 crisis: institutional buying of foreclosures increased rental supply and in some places lowered rents and sale prices.
- COVID “bananas” period: some evidence of higher rents and sale prices where large investors were active—possibly due to better pricing tools or simply picking markets already set to rise.
Limitations, tradeoffs, and risks
- Nationally limited leverage: because institutional owners are a small share of the total housing stock, the executive order is unlikely to materially change affordability for most Americans.
- Localized impact possible: neighborhoods with concentrated institutional ownership could see price relief if large buyers step back.
- MBS purchases can lower mortgage rates modestly, but effects are often temporary and sensitive to other factors (global events, Fed policy, tariffs, etc.).
- Taxpayer risk: expanding government purchases of MBS increases public exposure to market losses if conditions sour.
- Fundamental tradeoff: housing as an asset vs. housing as an affordable good—if homes are scarce, they store wealth; if plentiful, prices fall and affordability improves. Policymakers face tension between protecting homeowners’ wealth and enabling first‑time buyers.
Case study — James (illustrates buyer perspective)
- Age: 40 (median age for first‑time buyers is at an all-time high).
- Story: Gave up an apartment, lived in a tent/car to save money, then deployed to Djibouti partly to earn hazard and tax‑free pay to build a competitive down payment.
- Why he wants to buy: control over living space, ability to garden/woodwork/build a “catio,” and stability.
- Policy relevance: small mortgage-rate improvements help someone like James, but obstacles like down payments and intense local competition (all-cash buyers) are larger barriers.
Recommendations and economists’ consensus
- Short-term policy levers (discouraging institutional buyers, MBS purchases) may produce modest, localized, or temporary relief—but they don’t address the core problem.
- Most housing economists emphasize supply-side solutions as the most durable fix: build more housing (especially starter and middle‑market homes), reduce zoning and permitting constraints, and expand housing construction in high‑demand metro areas.
- Policymakers should weigh modest affordability gains from demand-side moves against taxpayer risk and the potential for only fleeting benefits.
Notable data points and quotes
- Institutional ownership of all housing units (research through 2022): ~0.3%.
- Institutional share of single-family/townhome purchases (2010–2022): ~5%.
- Cash purchases by large institutional investors in that period: ~83%.
- Announcement of Fannie/Freddie MBS purchases pushed mortgage rates down ~0.2 percentage point.
- Trump (paraphrased from episode): “We’re going to keep those prices up… we’re not going to destroy the value of their homes.”
- Episode’s bottom line: these executive actions could help in pockets and may slightly lower mortgage rates, but they are not a silver bullet—building more homes is the central, missing piece.
Short conclusion
The Trump administration’s recent initiatives could shift incentives and may produce modest, sometimes local improvements for buyers, and the MBS announcement already nudged rates down a bit. But given the small national footprint of institutional buyers, their frequent use of cash, and the fiscal risks of expanding government MBS holdings, these moves are unlikely to solve the underlying affordability crisis. Most economists point to boosting housing supply as the durable solution.