Congress couldn’t help but get in its own way. What began as a good faith, bipartisan effort to make housing more affordable has mutated into legislation that would prevent more new home construction than it would encourage. Let us review how we got here.
Lawmakers are right to see housing as an issue of great national importance. Since the pandemic, the median sales price of an American home has surged by close to 30 percent. Rising home prices have outpaced both incomes and overall inflation for decades. Mortgage rates — which were the lowest ever recorded from 2020 to 2022 — have returned to historically moderate levels. Together, these developments have made buying a house less affordable than at any point since the 1980s.
The high cost of housing is why young Americans feel locked out of homeownership. In 2025, the share of home purchases by first-time buyers fell to 21 percent, a historic low. The housing market is increasingly dominated by existing homeowners trading among themselves, many of whom have built up enough equity to forgo expensive financing.
Many younger families never got to grab the first rung of the homeownership ladder, so they have to keep renting instead. But the rental market has its own affordability troubles. Prices have outpaced inflation there as well, and half of all renter households spend more than 30 percent of their income on shelter.
The fundamental problem with the U.S. housing market is a structural shortage of units, both rental and owner-occupied. A supply-side dilemma needs a supply-side solution, so further stimulating demand through cheaper credit or extended mortgage terms won’t work. True affordability can only be achieved by allowing millions more homes to be built in towns and cities across the country.
Congress seemed to recognize this when the House of Representatives passed the Housing for the 21st Century Act last month with huge bipartisan support. Although most barriers to new construction are imposed locally, the bill included some modest federal deregulation that could boost the supply of homes on the margin. The bill promised to ease requirements on manufactured homes and limit environmental reviews on projects requiring federal sign-off. It would encourage state and local governments to ease zoning and land-use restrictions through grant programs.
To win Democratic support, the House bill also expanded subsidies, including higher limits on government-backed loans, that could counterproductively increase home prices by juicing demand. Overall, however, the legislation was a modest yet decent effort to aid new construction.
That is, until the Senate got its hands on it. To comply with President Trump’s populist demand to bar institutional investors from owning homes, the Banking Committee wrecked the bill by including a provision that could shrink the supply of new housing. The arch-progressive Senator Elizabeth Warren (D., Mass.), who leads the Democratic side of the committee, was happy to abet this vandalism.
Trump’s initial proposal was to prohibit large investors from snapping up existing homes. That would have been a bad-enough policy. Institutional investors own just 2 percent of single-family rentals, or less than 1 percent of all single-family homes. Still, they allow some families to rent in costly housing markets where they otherwise couldn’t afford to live. Banning institutional ownership would merely redistribute homes from poorer renters to higher-income buyers without increasing total supply.
Somehow, the Senate made the policy even worse. Instead of just preventing big investors from buying homes, it would also require them to sell single-family homes that are built to rent after seven years. That would function as a ban. Large investors could no longer build houses solely to rent them out to a family over the long term. What prospective homebuyers does this help?
As buying a house has gotten more expensive in recent years, built-to-rent homes have become an important segment of the construction market. Approximately 10 percent of all housing completions are now built to rent. The Senate bill would crush that industry, making hundreds of thousands of new homes illegal. Families who might have lived in them would have to compete for other units, pushing up prices for everyone.
The change is why the National Association of Home Builders, which previously supported the bill, has now come out against it. Any positive tweaks to housing policy have been canceled out by the mindless institutional-investor ban.
Adding insult to injury, the Senate removed an entire section that would have eased requirements on small banks and credit unions, allowing them to offer mortgages on a fairer, more competitive basis with non-bank lenders. The exclusion was no doubt at the behest of Senator Warren, who abhors financial deregulation in any form.
The Senate is expected to pass the revised legislation today, but it may face obstacles in the Republican-controlled House. We hope that it does. If the institutional-investor ban is retained, passing this anti-housing bill would harm affordability far more than it would help.