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Welcome to the latest edition of Receipts. Loyal readers know that one of my most deeply held political beliefs is that complexity rewards demagogues. This is certainly true for the very real, very complex housing crisis.
Rents and home prices are high for a lot of boring, complicated reasons that politicians either can’t or won’t address, so they point to nefarious-sounding scapegoats instead. This week’s newsletter is about the bipartisan agreement over the scapegoat du jour: “institutional investors.” Everyone loves to hate Wall Street, after all. But in this case, banning investors who own a small (and shrinking) slice of the market will do little to solve the problem.
If you don’t already subscribe to Bulwark+ I hope you’ll consider doing so. The support of our members helps us debunk bad proposals, even when doing so turns out to be politically inconvenient. Plus, members get to join in the comments—and I’d love to hear from you there about other slopulist policy proposals that get under your skin. You can become a Bulwark+ member today right here:
–Catherine
Everyone’s Favorite Slopulist Scapegoat
Trump and populist Dems have linked arms to “fix” the housing crisis.
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FOR MAGA REPUBLICANS, the root cause of every problem is immigrants. Populist Democrats, by contrast, prefer to scapegoat billionaires and Big Business.
But lately, President Donald Trump has started to bogart Democrats’ favorite villains, too, by casting them as the baddies conspiring to increase housing costs. There’s now bipartisan (and yet wrong) agreement that Wall Street’s “institutional investors” are to blame for high home prices, and Congress appears on the verge of making the problem worse.
Here’s the background: Trump has struggled to address Americans’ affordability concerns. Calling the whole thing a “hoax” didn’t work. His administration frequently blames immigrants for high prices, especially when it comes to homes. (“Want affordable housing?” DHS tweeted. “Help report illegal aliens in your area.”) Yet somehow, even as the administration claims to have deported hundreds of thousands of immigrants, prices still aren’t going down. In fact there’s reason to believe that house prices could rise faster than they otherwise would, because Trump is effectively shrinking the homebuilding labor force.¹
So the president has pivoted.
Last month, Trump announced that his new solution for the housing affordability crisis would be banning “institutional investors” from owning homes. He is now demanding that Republicans in Congress add an amendment to their housing bill to enforce the ban, reportedly with language that would allow the treasury secretary to define or exempt institutional investors as he sees fit. “Neighborhoods and communities once controlled by middle-class American families are now run by faraway corporate interests,” Trump wrote in his executive order. “People live in homes, not corporations.”
If this sounds like the kind of thing you might hear progressive Democrats say, that’s because it is.
For years, progressives have argued that the real reason that prices are high is that Wall Street firms are gobbling up all the homes. It’s a compelling narrative with terrific optics: Politicians naturally want to be seen as standing up for the little guy against big, bad, greedy corporations.
Unfortunately, the story happens to be wrong.
First let’s define our terms. “Institutional investors” typically refers to landlords who own at least a thousand housing units. And it is true that in the aftermath of the 2008 housing bust, when foreclosures skyrocketed and there was a surplus of housing, some big Wall Street institutions (such as Blackstone) did swoop in to the market and buy lots of homes on the cheap. This was, and remains, controversial. They didn’t buy these homes to bulldoze them, of course; they bought them to rent them out. Which they did, and some continue to do.