President Donald Trump has proposed measures aimed at prioritizing individual homebuyers over large financial investors in the housing market, an approach he argues could help address the ongoing housing affordability crisis. Central to Trump’s plan is the idea of promoting single-family homeownership among families rather than allowing Wall Street firms to dominate the market by purchasing homes in bulk and renting them out.

Under Trump’s policy, while institutional investors would still be permitted to buy single-family homes, they would no longer receive federal support from agencies like the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). Additionally, the plan would grant individual homebuyers a 30-day exclusive window to purchase foreclosed properties before investors can make offers. Advocates suggest this approach could foster more stable neighborhoods by encouraging owner-occupancy instead of investment-driven rental markets.

However, some remain cautious about the overall impact of federal intervention. Critics have expressed concern over a recently passed Senate bill, the 21st Century ROAD to Housing Act, which received bipartisan support and passed with a strong majority of 89-10 votes. Sponsored by Senators Tim Scott (R-SC) and Elizabeth Warren (D-MA), the legislation seeks to restrict large investors from acquiring new single-family homes and mandates divestment from properties they already own within seven years. Opponents argue that forcing divestment is unlikely to succeed, citing historical patterns where such measures have failed to influence market dynamics effectively.

The bill also attempts to streamline environmental impact reviews, which have often delayed housing construction projects and created opportunities for litigation. While the legislation aims to reduce these regulatory barriers, some stakeholders believe that eliminating such reviews entirely would be a more effective solution.

Moreover, the act increases the permissible investment stake that large banks can hold in community development financial institutions from 15% to 20%. Critics warn this change could pressure banks to extend mortgages to less qualified buyers, reminiscent of lending practices that contributed to the 2008 financial crisis.

Experts largely agree that state and local governments hold the greatest sway over housing affordability, given their control over zoning laws, building codes, and permitting processes. For example, despite efforts to expedite rebuilding after California wildfires, local permitting has remained sluggish—only about 15% of permits have been issued in the Palisades area after the recent fire, and less than 10% in Altadena following another major wildfire.

Other factors complicating housing costs include rising demand for larger homes—average house sizes have grown by approximately 60% over the past five decades—and the widespread use of impact fees. These charges, intended to fund infrastructure like schools and roads, vary across states but are particularly high in California, where average fees reach around $30,000 per home, roughly double that of other states.

While federal policies, including immigration enforcement measures advocated by Trump, can influence housing markets indirectly, many analysts conclude that meaningful affordability improvements hinge on reforms at the state and municipal levels. Adjustments to zoning codes, reduction of regulatory hurdles, and recalibration of impact fees may hold greater potential to address the complex challenges driving housing costs.