Trump Issues Executive Order on Institutional Investor Purchases of Single-Family Homes

The White House focus on affordability continued this week with a sweeping announcement that will impact the single-family housing market.

On Jan. 20, President Trump issued an executive order (EO), “Stopping Wall Street from Competing with Main Street Homebuyers,” establishing it is the policy of his administration “that large institutional investors should not buy single-family homes that could otherwise be purchased by families.” To implement this policy, the EO directs various executive branch agencies to take certain actions and directs White House staff to prepare a legislative recommendation for Congress. As discussed in Brownstein’s Jan. 10 client alert, President Trump highlighted the EO in his Jan. 21 speech to the World Economic Forum in Davos, Switzerland, after previewing the announcement in a Jan. 7 social media post. An EO with additional provisions aimed at addressing affordability challenges, including housing affordability, is widely expected ahead of the president’s Feb. 24 State of the Union address.

EO Overview

The EO directs, within 30 days, the Treasury Department and the assistant to the president for economic policy to develop the definitions of “large institutional investor” and “single-family home.” These definitions will be used to implement the EO across the executive branch agencies identified in the EO.

Guidance Revisions

Within 60 days, the Department of Agriculture, the Department of Veterans Affairs (VA), the General Services Administration (GSA), the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) are directed to issue guidance to:

• Prevent the agencies from providing, insuring, guaranteeing, securitizing or otherwise facilitating a large institutional investor’s acquisition of a single-family home that could otherwise be purchased by an individual owner-occupant;
• Avoid disposing of federal assets in a manner that transfers single-family homes to large institutional investors; and
• Promote sales to individual owner-occupants, including through anti-circumvention provisions, first-look policies and disclosure requirements.

The EO provides a “narrowly tailored” exemption for build-to-rent (BTR) properties, defined as properties that “are planned, permitted, financed, and constructed as rental communities.”

Additionally, the EO directs the Treasury Department to review rules and guidance relating to large institutional investors acquiring or holding single-family homes and to consider revisions that would advance the policy established in the EO. This language signals potential expansion beyond acquisitions into treatment of existing single-family portfolios, depending on how it is interpreted and implemented by the Treasury Department.

Disclosure Requirements

HUD is directed to require owners and managing agents of single-family rentals participating in federal housing assistance programs to disclose their direct or indirect owners, managers or affiliates, including changes in ownership or control, to the extent necessary to determine the involvement of large institutional investors.

Competition Considerations

The EO directs the Department of Justice (DOJ) and the Federal Trade Commission (FTC) to:

• Review substantial acquisitions by large institutional investors in local single-family markets for anticompetitive effects; and
• Prioritize antitrust enforcement, as appropriate, against coordinated vacancy and pricing strategies in local single-family rental markets.

Congress

The EO directs the deputy chief of staff for legislative, political and public affairs to prepare a legislative recommendation to codify the policy “so that large institutional investors do not acquire single-family homes that could otherwise be purchased by families.”

Next Steps

The EO’s direction to several agencies will likely result in regulatory guidance, and possibly rulemakings, which could impact institutional investors in the single-family housing market. As outlined in the time frames above, industry has an opportunity over the next few weeks to highlight thoughts and concerns to agencies before they take any official actions. The Treasury Department’s definition of “large institutional investor,” including considerations around ownership thresholds, assets under management and number of homes acquired, will determine how broadly or narrowly the policy of the EO is implemented. It is unclear at this point what weight the regulatory guidance will have in these areas and what the administrative process will be for issuing the regulations and guidance in the compressed time frames.

In Congress, Democrats have introduced—without Republican support—proposals aligned with this policy in recent years, often targeting the tax treatment of single-family properties owned by institutional investors. How Republicans in the House and Senate will react to the EO is somewhat uncertain, though a handful of members have issued statements supportive of the EO’s policy, including Sen. Bernie Moreno (R-OH), Sen. Josh Hawley (R-MO) and Rep. Byron Donalds (R-FL). The president’s emphasis on addressing various affordability challenges, including housing affordability, increases the likelihood that a legislative proposal aligned with the EO could be considered for incorporation into a housing legislative package, especially as House and Senate leadership have signaled interest in reconciling the two bipartisan legislative initiatives that the House Financial Services Committee and the Senate Banking Committee approved last year, the Housing for the 21st Century Act (H.R. 6644) and the ROAD to Housing Act (S. 2651).

The EO is just one of several initiatives that the White House is undertaking as part of a broader focus on addressing affordability concerns, and additional EOs on this topic are expected ahead of President Trump’s Feb. 24 State of the Union address. Reports indicate other policies under consideration for forthcoming EOs include allowing homebuyers to draw from retirement and college savings accounts to help fund down payments without triggering tax penalties.

THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING AN EO ON Institutional Investor Purchases of Single-Family Homes. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.