Excessive land use restrictions are a primary contributor to the ongoing housing crisis, and minimum lot size (MLS) regulations are among the most pervasive. MLS requirements dictate the smallest amount of land on which a home can be built. These rules are often coupled with minimum setback and square-footage regulations, creating a template for what homes must look like to obtain a permit. This bundle of laws makes smaller homes either unprofitable for developers or illegal. The homes produced by these design standards are out of reach for many Americans, underscoring a need for flexible housing options in the low-density forms most appealing to buyers.

Rolling back these regulations where they are excessive can open the door for smaller, denser, and less expensive units. Empirical evidence from many municipalities finds that allowing more homes per acre can lead to an influx of new units at the lower end of the market. Understanding the motivations behind MLS regulations, their current state, and what positive policy change would look like can pave the way for reform in this area.

History, rationale, and current state

Minimum lot size requirements are among the oldest and most pervasive elements of zoning, shaping land use patterns across nearly every city in the U.S. Throughout the 20^th century, MLS regulation expanded, both in where it is imposed and the size of lots mandated. According to a report from the American Planning Association (APA), in the mid-20th century, it was not uncommon for localities to have lot requirements of over 20,000 square feet, with some areas requiring as much as five acres per unit. Despite growing populations, many of these laws have remained stagnant or become more severe. MLS laws serve three functions: generating tax revenue, providing water and sewer distribution, and maintaining aesthetics.

The inception of many MLS laws can be traced back to local tax policy. The Mercatus Center finds that MLS laws expanded during the baby boom, in part, to exclude smaller homes that could not generate enough property tax revenue relative to the number of children who would live in them. Specifically, “by setting a floor for land costs, [MLS] was intended to slow, if not exclude entirely, the entry of such families…”

Additionally, according to the APA, historical justifications for MLS regulations include the ability for local governments to plan their distribution of utilities, regulate congestion, and maintain air quality and health standards. For example, lots must be large enough to accommodate adequate water and sewage service, especially in areas not connected to a central system that relies on disposal methods such as septic tanks. Typically, zoning codes account for different levels of connection by having lower requirements where connection to central systems is possible, and higher requirements where it is not. Laws to ensure a minimum standard of sanitation are understandable. However, the vast majority of American homes are connected to central water and sewage, so sanitary concerns are a somewhat dubious justification in most areas today. Instead, today, MLS requirements are commonly used to promote spacious residential environments and to exclude denser housing options.

Figure 1 depicts the median lot size in each state. One influence is the environment and nature preservation. Nevada, which has the lowest median lot size, is largely uninhabitable, with development concentrated around cities and necessitating more efficient use of space. However, in less environmentally constrained areas, local land-use regulations play a significant role in determining lot sizes. Vermont combines extensive land conservation with some of the most stringent MLS requirements in the country, designed to preserve its rural character. The Northeastern Vermont Developments Association, for example, mandates an acre lot for every family as the densest option.

Often, MLS requirements vary significantly on a granular level. Let’s consider just one state. Florida has a wide range of minimum lot size requirements, determined either at the county or city level. Figure 2 shows the minimum lot sizes in a single city, Plantation, with just over 100,000 residents.

The patchwork of 18 different districts with 10 different minimum lot sizes in Plantation is not the result of meaningful differences in infrastructure capacity, but rather, a legacy of aesthetic preferences. In fact, Plantation was founded in the 1950s with the vision of large lots, fruit gardens, and a unique feel to every home in mind. Initial advertisements for the “anti-development” bolstered that there would be “a full acre with every home,” to prevent crowding. The zoning code accompanied these preferences to ensure this outcome. While a large home far from neighbors is the dream for many, codifying this preference into law has downstream consequences that cannot be ignored. Today, the median home sale price in Plantation is $515,000, well over Florida’s median of $404,400. Prices in Plantation have climbed so high that the city has signed on to a countywide gap-finance effort, despite a history of being resistant to affordable housing measures. Crystalized policy has not allowed Plantation to adapt to its modern challenges, highlighting a need for reform in this area. While their stories may be less clear, most other localities across the nation look just like this. Each county has its own version of these regulations, leading to varying MLS standards that can change from city to city and even street to street. As these areas look to tackle their affordable housing challenges, it would be helpful to reassess existing rules, such as minimum lot sizes, rather than trying another complicated and expensive approach.

MLS regulations and the cost of development   

The cost of housing can be divided into several categories, and the relative proportions depend on many factors. Location, current market conditions, and home construction processes all determine the division of cost categories. While construction is typically cited as making up the majority of the cost of new housing, evidence from Redfin suggests that, depending on location, the cost of land acquisition can be substantial. Tracking the cost of land as a share of home values across 40 U.S. metros, Redfin finds that the cost of land can be up to 60% of the home’s value. Of the top 20 metros with the highest land-cost-to-home-value ratio, nine were in California, with the rest in other notorious high-cost areas, including Boston, New York City, and Seattle. Requiring developers to purchase more land than they need influences the types of projects they can take on and the cost of housing down the road.

Research finds that MLS regulations raise housing prices in two ways: directly and indirectly. Accounting for 78% of the cost increase, the direct effect refers to mandating larger homes, which are naturally more expensive. The indirect impact captures the amenities that larger lot sizes create, for example, less congestion and higher local tax revenue. A 2011 study of homes in the Boston area corroborates this finding, estimating that areas with restrictive MLS regulations have home prices 20% higher than towns that do not. Further, regions that restrict their MLS are likely to experience rapid home price appreciation after the restriction takes effect. The study finds that towns experienced home price increases of up to 40% 10 years after an increase in MLS listings, controlling for other factors. Importantly, this relationship goes both ways.

Houston, Texas, has among the most liberal land use rules in the country, and this trend extends to minimum lot sizes. In 2013, Houston expanded a previous policy allowing lots as small as 1,400 square feet across most of the city. This reduction is credited as one of the reasons home prices in Houston, even in its urban core, have remained lower than in comparable metros across the country. A flexible policy has made Houston resilient in a time of strain. Minimum lot-size rules raise housing costs across the board, and their impact is burdensome on entry-level homes.

Small single-family homes, often referred to as starter homes, have been hit especially hard by large lot size regulations, contributing to the phenomenon of the “missing middle.” This phrase refers to the decline of middle-density development affordable to middle-income earners. By mandating expensive land purchases, small housing becomes unprofitable. Just by allowing more homes per acre, massive supply additions can be made specifically for middle-income buyers. Estimates by the American Enterprise Institute (AEI) find that single family homes were built at an average rate of 5.5 units per acre (~8000 sq ft) from 2000-2024. Even a modest increase in density of eight units per acre (~5400 square feet) could have added 4.8 million additional units in this time frame. These findings are not just theoretical; they are supported by profit incentives that developers respond to. Data from the U.S. Census Bureau show that between 2009 and 2024, the percentage of single-family homes built on 7,000-square-foot lots or smaller rose from 25% to 39%, indicating a desire among developers to supply these density levels—if they are allowed to do so.

While large homes and neighborhood amenities are desirable for many, they should not be the only option. When land is a primary expense, requiring developers to purchase more of it than they need is a substantial barrier to new supply—especially for lower cost options. In combination with other regulatory reforms, many high-cost areas would benefit from allowing smaller land parcels for housing development.

Policy recommendations

Fully addressing current housing challenges requires not only expanding total housing supply but also enabling the construction of the types of homes that reflect the preferences of buyers, particularly single-family housing in the form of starter homes. Reforming minimum lot sizes will lower prices for many housing types, and it is an especially critical step toward opening the single-family market.

Key points

As policymakers work to liberalize land use in their communities through MLS reform, here are several key points to consider:

#1 Reduce and standardize minimum lot sizes

Where central water and sewer connectivity is possible, states and communities should reduce and standardize their MLS to modest entry-level sizes. While different communities will have varying levels of willingness, any change in regulations could increase the supply of affordable units. By reducing and standardizing, states can create a predictable development atmosphere and enable more efficient use of space where desired. Standardization also aids city planners in accounting for utilities, one of the primary motivations behind MLS regulations from a planning perspective. Importantly, reducing lot size minimums does not mean that every neighborhood will be dense—just that developers can offer more options to prospective residents.

#2 Couple MLS and dimension requirement reform

While clear MLS reform is the top priority in this area, these reductions must be supported by accompanying dimension reforms. For example, setback rules specify how far a structure must be from the edge of the property line. Setbacks are often justified on grounds of fire safety or privacy, but are frequently used in practice to maintain a suburban or rural feel for communities. If safety were the true motivation, it raises the question of why urban areas with far smaller setback requirements are not viewed as comparably at risk. Much like MLS, these laws mandate inefficient use of space and result in higher prices for residents. Reducing minimum lot sizes should be paired with adjustments to setback requirements to ensure land is used efficiently.

Further, square-footage requirements for structures restrict small housing options, like tiny homes (defined as having 400 square feet or less of living space). While some areas have changed their square-footage minimums to accommodate these housing options, many maintain larger minimums. For small lots to make sense, they must be paired with small homes. Together, MLS and dimension reforms enable compact development.

#3 Allow lot-splits by right

Lot splitting is dividing one existing lot into two or more lots. Allowing lot splits is critical for infill development and complements MLS reform by creating options for existing neighborhoods. For example, lot splits are a great way to integrate smaller housing options, like tiny homes and accessory dwelling units. Because adjusting minimum lot sizes only affects future development on raw land, it may fail to capture areas that already have homes but include property owners interested in more density. Allowing this practice by right is a valuable tool to ensure MLS reform reaches its full potential.

Recent lot size policy reform: Case studies

As housing becomes an increasingly relevant policy action item, several states and localities have reformed their MLS regulations. Below are three recent examples of putting the policy recommendations above into practice.

Maine, House Paper 1224 (2025)

In April 2025, Maine passed House Paper 1224, banning any municipality from setting an MLS requirement greater than 5,000 feet per dwelling unit in areas connected to central water and sewer systems. Importantly, this bill includes a provision that setback and other dimension requirements cannot be stricter for multifamily housing than for single-family housing, though no specific maximum is given. In addition to reforming lot size requirements, this bill loosens density rules and allows affordable housing projects an additional story above the existing local height limit. HP 1224 ranks among the most comprehensive, clear, and far-reaching statewide minimum lot size reforms to date.

Texas, Senate Bill 15 (2025)

Texas’ 2025 Senate Bill 15 sets a minimum lot size of 3,000 square feet for single-family lots in new subdivisions larger than five acres. These provisions apply only to municipalities with more than 150,000 residents at least partially in counties with over 300,000 residents. In qualifying municipalities, SB 15 also provides maximum setback limits. As of 2025, municipalities within 19 out of Texas’ 254 counties meet the county population requirement to be subject to SB 15. While this change may seem incremental, the passing of this bill represents a massive win for Texas. The provisions in this bill were contentious and required revision from an initial 1,400-square-foot minimum proposed due to pushback from House members. While not as sweeping as initially desired, SB 15 opens the door for further reform and establishes a significant win for efficient use of land in the populated areas where Texans need it most.

The City of Pittsburgh, Pennsylvania, Legislation 1579 (2025)

In Pittsburgh, Pennsylvania, a recent MLS reform reduced requirements across all existing subdistricts, effective May 7, 2025. Table 1 includes the change in minimum lot size per dwelling unit for each subdistrict.

Table 1: Pittsburgh Minimum Lot Size Reform by Subdistrict

Source: The City of Pittsburgh

While Pittsburgh’s current median home price is $235,000, which is well below the national average, prices in the city are rising. Through this legislation, lawmakers are taking active steps to ensure residents and developers are not faced with arbitrary hurdles.

Conclusion

Reducing MLS requirements does not mean mandating density or erasing existing neighborhood character. Instead, it provides flexibility, allowing communities to grow with their needs and respond to housing challenges as they arise. Buyers need these smaller homes, and developers are willing to answer. Reducing these regulations could substantially increase supply in the coming years through medium-density development. Homeowners can still enjoy traditional large single-family options, but others gain access to homes that better meet their needs, desires, and budgets. Given current home prices, mandating inefficiency through outdated lot size regulations is no longer a viable option.

The post Mandating inefficiency: Minimum lot size regulation and housing appeared first on Reason Foundation.

One reason the act has gained support is that it avoids preempting local zoning authority outright. Instead of overriding local control, the act focuses on research, guidance, and incentives for localities that choose to reform their zoning and regulatory frameworks. While this approach may seem like a balanced first step, it raises important questions about how far federal agencies should go in shaping local decisions. Incentives and guidance can easily evolve into indirect pressure, administrative burdens, or expectations that narrow the flexibility of states and localities. Even if all the bill’s provisions are implemented, it will not, on its own, significantly reduce price pressures. States and local governments still must reform their restrictive systems.

The ROAD to Housing Act utilizes a range of policy tools, grouped into four general categories: mandated reports, financial incentives for regulatory reform, adjustments to housing finance programs, and updates to existing federal supply-side initiatives. This bill takes the unusual step of focusing on expanding housing supply before turning to subsidy-heavy approaches, which marks a shift from many earlier federal housing proposals. Even with this emphasis on supply, the breadth of the bill makes it difficult to evaluate as a cohesive policy approach, and combining many unrelated programs into a single package increases the risk of mission creep, a problem common across federal housing initiatives.

New reports

A major component of the ROAD to Housing Act is its mandate for a series of reports from the Government Accountability Office (GAO) and the Department for Housing and Urban Development (HUD). Many of the reforms highlighted in these guidelines are supported by evidence, including reducing minimum lot sizes, parking reform, allowing accessory dwelling units (ADUs), and streamlining both zoning and building codes. Collectively, these reports would be mandated by the Housing Supply Frameworks Act. The Housing Supply Frameworks Act is the portion of the broader bill that directs GAO and HUD to develop these reports and model guidelines, essentially serving as the research and planning section within the ROAD to Housing Act. However, federally curated guidance often becomes an informal standard that localities feel pressured to follow, even when local conditions differ. Analysts at institutions focused on federalism have frequently warned that benchmarking and advisory frameworks can grow into de facto expectations that add new bureaucratic oversight without meaningfully accelerating supply.

However, requiring research and monitoring by HUD and GAO into these reforms is not equivalent to enacting them. Local governments must implement these changes to enable supply adjustment, and that is where they are likely to encounter resistance. Knowing these barriers, this act goes one step further to nudge local governments toward enacting these proposed reforms.

Federal financial incentives for reform

Beyond requiring research, the ROAD to Housing Act establishes several incentives to local governments that expand their housing supply. Most notably, it establishes a $200 million “Innovation Fund,” which will be awarded annually by HUD to local governments that demonstrate measurable supply expansion from 2027 to 2031. Grants will range from $250,000 to $10 million and be awarded to no fewer than 25 recipients annually.

This could encourage cities to take on politically difficult zoning reforms. However, federal grants can also cause jurisdictions to prioritize actions that maximize eligibility rather than reforms that address the most significant structural barriers. Jurisdictions may make symbolic or superficial changes to qualify for funding while avoiding deeper reforms that could truly expand housing options. There is also the possibility that some jurisdictions will benefit from market-driven supply increases unrelated to any policy change, while others with genuine constraints receive little or no support.

In addition, the ROAD to Housing Act establishes several other grant programs to expand home supply through rehabilitation. Notably, the Whole-Home Repairs Act and the Revitalizing Empty Structures Into Desirable Environments (RESIDE) Act give grants and forgivable loans to low-income homeowners and small landlords looking to repair old or dilapidated structures, through differing avenues and terms. Further, under the Accelerating Home Building Act grants are provided to local governments to develop pre-approved designs. These grant programs are also to be administered through HUD. 

Rehabilitation programs help preserve aging housing and prevent the loss of existing units. Still, they do not meaningfully expand overall supply in markets where zoning and permitting rules limit the addition of new homes. The act also supports pre-approved building designs through the Accelerating Home Building Act. These efforts may help simplify parts of the construction process, but without broader zoning reform, pre-approved plans will not significantly expand supply. HUD’s growing portfolio of grant programs also raises concerns about administrative complexity.

Mortgage reform

The ROAD to Housing Act includes several demand-side tweaks to the existing housing finance landscape to aid accessibility. Included as part of the act are incentives to increase the role of small-dollar loan originators and the expansion of Title I loans to cover the construction of accessory dwelling units (ADUs) and the purchase or improvement of manufactured homes. Further, this act expands existing financial literacy programs.

While these may help certain borrowers, demand-side tools do not directly address the primary driver of high prices: inadequate supply in many communities. If supply does not increase, new lending programs can unintentionally raise prices by boosting purchasing power without increasing the number of available homes. Because the act also aims to encourage supply-side reform, the risk is smaller than in past demand-driven programs, but it still warrants caution.

Reforming existing housing programs

Finally, this act makes several positive adjustments to existing housing programs. For example, it lifts the cap on the Rental Assistance Demonstration (RAD) program, which allows local Public Housing Authorities (PHAs) to convert public housing into privately-managed Section 8 housing and is largely beneficial for tenants. Further, through the Build Now Act, it ties community block grants, one of the largest federal affordable housing and development grants, to broader housing supply, thereby again incentivizing land-use liberalization. Regarding private investments in affordable housing, it raises the cap on public welfare investments by banks, many of which directly support affordable housing initiatives.

This could encourage better land-use regulation, but it also imposes additional conditions on one of the largest federal development programs. The expansion of caps on public welfare investments for banks will likely increase private capital in affordable housing projects, though it also raises questions about the growing federal influence over private investment decisions.

Conclusion

Taken together, these provisions aim to connect federal programs more directly to local regulatory reform and affordable housing investment. The intent is to support voluntary action rather than mandate it. However, there is a real risk that expanding federal incentives, guidance, and grant programs will overshadow the need for comprehensive local reform. A meaningful improvement in housing affordability still depends on states and cities reducing exclusionary zoning, shortening permitting timelines, and updating outdated building codes. The ROAD to Housing Act identifies many contributors to high housing costs and encourages local governments to take action. The bill includes several positive elements, especially the emphasis on zoning reform and regulatory streamlining. At the same time, it carries risks of administrative expansion, program duplication, and indirect federal involvement in land use decisions. A balanced assessment should highlight both the promise and the pitfalls of the act. Federal guidance and financial incentives can only support affordability if they help remove barriers to housing expansion rather than add new layers of oversight. Genuine progress requires local and state governments to confront and reform the regulatory barriers that continue to limit housing supply

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Florida’s housing market is under severe strain. Median home prices now exceed $450,000, with more than half of renter households being cost-burdened, spending over 30% of their income on housing. This growing imbalance between home prices and income has made it difficult for workers and families to live near employment centers, schools, and essential services. Senate Bill 208 presents an opportunity to address these challenges by strengthening property rights, removing restrictive zoning barriers, and streamlining permitting processes so the private sector can respond effectively to housing demand.

We share the same goal as Chair McClain: strengthening property rights and improving housing affordability in Florida. Senate Bill 208 would do both.

Strengthening property rights and preempting restrictive zoning

Senate Bill 208 reinforces the right of property owners to determine the most productive use of their land within reasonable bounds of public safety. In many communities, outdated zoning codes prohibit the construction of multifamily housing or mixed-use development on land already suitable for such purposes. These restrictions prevent willing owners and developers from responding to demand, blocking the natural evolution of neighborhoods.

By preempting local governments from imposing unnecessary barriers to housing, this bill restores the decision-making authority of property owners. Property rights are a cornerstone of economic freedom and prosperity, and zoning should not be used to preserve exclusivity or prevent lawful, market-driven development. When local governments restrict property owners’ ability to adapt to changing needs, the result is higher costs, less competition, and fewer choices for Florida families.

Streamlining development and reducing bureaucratic delays

This bill also strengthens Florida’s commitment to reducing red tape in housing production. Lengthy and uncertain approval processes often increase project costs and discourage investment. By refining permitting timelines and creating greater consistency across jurisdictions, Senate Bill 208  provides predictability for builders and investors while ensuring transparency for residents.

A streamlined permitting process allows private developers to bring new housing online faster, reducing the mismatch between supply and demand. Every additional week or month of delay increases carrying costs, which are ultimately passed on to renters and buyers. Cutting unnecessary bureaucracy is one of the most effective ways to expand housing supply without adding new spending or subsidies.

Encouraging private investment

Senate Bill 208 relies on private-sector leadership rather than government intervention. The bill does not mandate specific outcomes but instead allows developers and property owners to respond to the market. By lowering barriers and creating predictability, the legislation encourages investment in a range of housing types that meet the needs of Floridians.

Developers, small builders, and local investors are best positioned to assess demand and deliver housing where it is needed most. A regulatory framework that aids development leverages the efficiency of markets rather than expanding state programs or long-term subsidies. Allowing the private market to function more freely aligns with Florida’s economic strengths.

Reducing labor market distortions

Restrictive local zoning not only limits housing supply but also distorts Florida’s labor markets. When workers cannot find housing near job centers, they are forced to live farther away, increasing commute times and reducing productivity. Employers, in turn, face higher recruitment and retention costs.

By removing these barriers and allowing more housing to be built near employment hubs, Senate Bill 208 helps align workforce availability with economic growth. The legislation will make it easier for workers to live closer to jobs, improving both household well-being and business competitiveness.

Consideration: Tax preferences

While Senate Bill 208 takes a strong step toward deregulation, it continues to rely in part on property tax exemptions to encourage housing production. Although these incentives can help offset regulatory costs, they can also create uneven advantages among developers and distort market neutrality. Florida should continue to focus on broad-based deregulation as the most effective and equitable way to promote housing supply, ensuring that all property owners benefit equally from a freer market.

Policy adaptation for Florida

Senate Bill 208 represents an important step forward in expanding housing opportunities and protecting private property rights in Florida. By curbing restrictive local zoning, streamlining permitting, and encouraging private investment, the bill empowers property owners and the market to respond to demand for housing.

Reason Foundation supports the passage of this legislation and encourages the Florida Legislature to continue leading the way in housing reform that respects individual freedom, limits government interference, and promotes economic growth.

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As Figure 1 shows, median rents in Manhattan have risen between 21% and 25% across neighborhoods since 2015.

Figure 1. Median monthly rent in Manhattan by area, 2015-2024

While the degree of regulation varied by year and policy, a review of the decade reveals that new rules were introduced almost continuously. This accumulation of regulation, without corresponding expansion of supply, created mounting pressure on the city’s housing stock.

The following overview of the city’s regulatory efforts demonstrates the sheer breadth and frequency of intervention, which, rather than counteracting, fostered record rent increases.

The rent freezes of 2015, 2016, and 2020

Under Mayor Bill de Blasio, the Rent Guidelines Board froze one-year stabilized rents in 2015 and 2016, and repeated the move in 2020 during the pandemic. For tenants in rent-stabilized units, which make up roughly half of the city’s rental housing stock, the freezes produced an immediate and tangible benefit: monthly costs stopped rising even as the Consumer Price Index (CPI), the standard measure of consumer inflation, increased by more than 25% between 2013 and 2023. For landlords, particularly small property owners operating older buildings, the freeze widened the gap between operating expenses (such as taxes, insurance, and fuel) and allowable rents. Over time, the inability to adjust rents for inflation erodes net operating income, often leading landlords to defer maintenance. From an economic theory perspective, these freezes functioned as binding price ceilings, protecting existing tenants in the short run but discouraging investment in rental properties and reducing landlords’ incentives to keep stabilized units in active use. That left fewer homes available, so more people had to compete for the unregulated, “market-rate” apartments, the ones not covered by rent limits, driving those rents even higher.

Universal right to counsel (2017, expanded 2021)

The 2017 Universal Access to Legal Services Law, commonly known as the Right-to-Counsel (RTC) program, made New York the first city in the nation to guarantee free legal representation for low-income tenants facing eviction. The Office of Civil Justice was tasked with implementation, and by 2021, the City Council accelerated full citywide coverage. From a tenant-protection standpoint, RTC represented an important procedural safeguard: tenants who might previously have defaulted gained access to counsel capable of delaying or dismissing cases. But there is an asymmetry built into the program, because landlords receive no equivalent guarantee of counsel. Most must pay for private attorneys or attempt to navigate a more complex housing-court system alone.

This imbalance has distributional and behavioral consequences. Extended case duration and higher transaction costs reduce the expected value of owning or managing rental property, particularly for small landlords whose margins are already thin. In practice, delays and uncertainty in enforcement alter the risk calculus for landlords, further discouraging them from doing business. To offset potential nonpayment or extended proceedings, many respond by tightening screening, increasing deposits, or setting higher initial rents—choices that ultimately make housing less accessible to lower-income tenants. As tenants continued to be priced out of the market, the City instituted even more regulatory constraints in 2019.

The 2019 Housing Stability and Tenant Protection Act (HSTPA)

The 2019 HSTPA represented the most comprehensive overhaul of New York’s rent laws in decades. It ended vacancy decontrol, repealed vacancy and longevity bonuses, and sharply limited the rent increases allowed for individual apartment improvements (IAIs) and major capital improvements (MCIs). For tenants, the reform meant near-total security from deregulation and reduced exposure to sudden rent hikes. For landlords, it eliminated the few mechanisms that had previously enabled them to recover upgrade costs or increase rents after turnover.

Columbia Business School found that HSTPA led to a dramatic increase in deferred maintenance and a surge in “warehoused” apartments, units kept offline because the cost of code-compliant renovation exceeded the potential rental revenue. By 2023, as many as 60,000 rent-stabilized units—roughly 5% of the city’s stabilized stock—were estimated to be empty because landlords couldn’t afford to put them on the market. Making matters worse for maintenance of heavily stabilized buildings, refinancing also became more difficult, as lenders re-priced risk to account for capped future income. While HSTPA locked in tenant stability, it reduced long-term housing quality and made it harder for small landlords to sell, refinance, or reinvest in their properties. For renters, that meant fewer livable, affordable units coming back on the market and longer waits for repairs or vacancies to open up.

The pandemic moratoria and emergency aid (2020–2022)

The COVID-19 pandemic emergency forged a new layer of intervention: eviction moratoria and large-scale rent-relief transfers. The Tenant Safe Harbor Act and subsequent state measures froze most evictions through January 15, 2022. The goal was public-health protection, not market management, but the consequences spilled over. For tenants, the moratorium ensured stability during crisis conditions. For landlords, especially those ineligible for relief or delayed in reimbursement from state rent-assistance programs, it meant months or even years of arrears without recourse. Once again, the policy transferred risk to property owners, and that risk was later reflected in prices. With lenders viewing rent collection as uncertain, financing for new or rehabilitated projects tightened. The moratorium period also created a backlog of housing court cases and set a precedent for political intervention in private contracts. The temporary protection raised the perceived long-term regulatory risk of being a housing provider in NYC.

The NYCHA case dismissals (2022)

In 2022, the New York City Housing Authority (NYCHA), the city’s public housing authority and its largest landlord, voluntarily dismissed over 31,000 non-payment cases from housing court. While framed as an administrative efficiency measure, the decision carried symbolic weight. When the largest public landlord deprioritizes enforcement, it reinforces the expectation that rent obligations are negotiable. For private landlords, this shift in norms translated into further uncertainty about judicial consistency and the hierarchy of property rights. The broader message that non-payment would not necessarily trigger removal contributed to the “moral hazard” environment. In economic terms, weakening the enforcement mechanism of contracts undermines the credibility of future rent agreements and raises risk premiums citywide.

The 2024 Good Cause Eviction Law

The state of New York passed the Good Cause Eviction law in 2024. The law applied to NYC automatically and allowed municipalities to opt in, extending rent-increase limits and eviction protections to properties that did not have a rental cap or eviction protection. The statute presumes any increase above the lesser of 10% or 5% plus CPI to be “unreasonable,” barring eviction unless justified by tenant behavior, while prohibiting non-renewals absent specific “good cause.”

The law carves out exemptions, which include owner-occupied buildings, new construction, high-rent units, and very small portfolios; however, it still covers a vast share of the city’s private rental stock. For tenants, the measure offers stronger renewal rights and predictability. For landlords, it effectively extends rent caps to previously unregulated units and adds litigation risk over what constitutes a reasonable increase. From an economic standpoint, Good Cause embeds rent control logic into the broader market: because landlords cannot fully adjust rents to inflation or risk, in the long term, they could compensate by screening more aggressively, favoring high-income tenants, or converting units out of the long-term rental market altogether.

The broader market outcome

According to the New York City Comptroller’s Spotlight on New York City’s Rental Housing Market (2024), rent burdens now exceed historic levels even as turnover and vacancy rates remain near record lows. The effects of price ceilings, procedural asymmetries, and compliance risk are choking the housing supply. When investment slows and existing housing stock deteriorates, scarcity drives prices upward in the unregulated segment. Understanding how persistent regulatory layering has driven rental inflation in NYC is critical to forging solutions that restore the rental market, benefiting both renters and landlords.

To address New York City’s housing crisis, policymakers must acknowledge that making renting property a poor investment leads to fewer rental units available. To restore the rental market, they must shift from reactive restrictions to structural solutions that expand choice and restore investment incentives.

As previously highlighted, HSTPA should be recalibrated to allow owners to recover renovation and operating costs. Additionally, restoring vacancy and improvement allowances would help return thousands of warehoused units to the market and slow the deterioration of the city’s rent-stabilized stock.

NYC must also modernize its zoning and permitting system. Decades of exclusionary zoning, height caps, and lengthy approvals have made it extraordinarily difficult to add new housing, even in high-demand areas. Streamlining approvals, easing density restrictions, and legalizing a broader mix of multifamily and accessory units would allow supply to respond to demand—reducing the pressure that drives rents upward citywide.

Finally, NYC should strengthen and better target its housing voucher programs like Section 8. Vouchers can deliver direct, flexible assistance to renters without distorting price signals or discouraging investment. A robust, adequately funded voucher system would protect vulnerable tenants while preserving a functioning private rental market. Sustainable affordability cannot be legislated through freezes or caps; it must be built. A reformed HSTPA, a more flexible zoning framework, and a well-functioning voucher program would do more to stabilize rents and expand opportunity than another decade of politically popular but economically counterproductive regulations.

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Among the most influential yet overlooked aspects of the building code are its egress, or exit, requirements. In most jurisdictions, apartment buildings above three stories must include two separate staircases to allow occupants to evacuate during a fire. This rule originated in the early 20^th century, when fire spread rapidly through wood-frame structures and safety systems such as sprinklers and smoke containment did not yet exist. While the intent remains sound, ensuring safe escape during emergencies, the rule’s rigidity now limits the kinds of multifamily housing that can be built, particularly smaller and mid-rise apartments that fall between single-family homes and high-rise towers.

Although it may appear that revisiting these safety standards means trading safety for cheaper or easier construction, that is not the case. Modern building practices have advanced far beyond what older codes account for, and most developers are constructing safer buildings than ever before. Nearly all new multifamily projects include sprinkler systems, smoke detectors, pressurized stairwells, and fire-resistant materials that significantly reduce the risk of smoke, which remains the greatest danger associated with stairwell safety during a fire. Compartmentalized floor plans and automatic suppression systems further limit exposure and contain flames within a single unit. Research consistently shows that the number of staircases in a building is far less predictive of safety outcomes than the presence of these systems, which are now standard features in contemporary construction. This means that older, still-in-force regulations requiring multiple stairwells are less effective and redundant in light of new practices. Such redundancy leads to higher costs and fewer dwelling units than could be accomplished with more up-to-date requirements.

Many developed nations reflect this same understanding in their building codes. Countries such as the United Kingdom, Canada, France, Germany, and Australia permit single-stair residential buildings well above the U.S. height limit of three stories, with research finding no higher fire-related risk. Canada, for example, allows such buildings up to six stories, while France permits them up to 16 stories, yet both maintain lower residential fire fatality rates than the U.S. The United States records roughly 1.1 residential fire deaths per 100,000 people, compared with 0.5 in the United Kingdom and 0.4 in Canada, despite their more flexible egress standards. This disparity in fire-related deaths suggests that comprehensive fire-safety strategies such as sprinklers, pressurized stairwells, and smoke containment are the true determinants of safety outcomes, not the number of staircases a building contains.

Design, livability, and housing supply

Revisiting the two-stair requirement could also improve spatial efficiency and expand housing options. A second staircase consumes valuable interior space, often lengthening corridors and reducing the number of possible apartments per floor. Further, when this constraint is removed, developers can construct dual-aspect units (apartments with windows on two sides), enhancing natural light, airflow, and livability. In one modeled comparison, the single-stair design accommodated 10 apartments per floor compared with nine in the two-stair version and provided six wheelchair-accessible units instead of four. The freed space can be used in different ways, whether for additional units, larger floor plans, or improved features and amenities, depending on how developers choose to design the building. This design flexibility also allows for a greater range of apartment types, including family-oriented two-, three-, and four-bedroom units, within a compact footprint.

Studies also indicate that single-stair mid-rise buildings with compact floor plates can reduce total construction costs by roughly 6% to 13% compared to similar dual-stair designs, further improving their financial viability.

From a policy standpoint, these design efficiencies can make development feasible on smaller or irregular infill lots, specifically the sites often left vacant in urban areas due to design restrictions. Grouping minimum lot size reform, density reform, and reforms allowing single-stair layouts could facilitate mid-rise “missing middle” housing—three- to six-story buildings that bridge the gap between single-family homes and large apartment complexes. Such buildings tend to integrate more harmoniously into existing neighborhoods while providing attainable homes near transit and employment centers.

Importantly, the discussion around affordability should recognize that cost savings derived from code flexibility can directly influence project feasibility. Reducing excessive internal space requirements does not compromise safety and allows resources to be reallocated toward quality finishes, energy efficiency, or additional units. Developers respond to both the profit motive and the cost structure imposed by regulation; adjusting those structures can stimulate new housing production at little to no cost to the taxpayer without direct subsidies.

Policy reform momentum and a balanced path forward

A growing number of jurisdictions are beginning to reexamine building codes through this lens. Seattle updated its building code in 2024 to allow single-stair buildings up to six stories when equipped with sprinklers, pressurized stairwells, and limited evacuation distances. Hawaii and Washington, D.C., are conducting similar studies, and New York City has initiated a review of its egress standards in light of advancements in suppression and smoke-control systems. These reforms reflect a shift toward performance-based regulation, where compliance is measured by safety outcomes rather than by prescriptive design rules.

Critically, reform efforts are proceeding with caution. Policymakers and fire-safety experts emphasize that single-stair layouts should remain limited to mid-rise buildings with comprehensive safety systems and robust construction materials. Evidence supports this threshold: both international practice and empirical testing indicate that buildings within this height range (three- to six-story buildings) can maintain safe egress conditions during fire events when modern systems are present.

Understanding that the greatest fire risks occur in older, noncompliant buildings reframes the debate. Encouraging new construction under contemporary codes not only adds housing but also improves safety overall by replacing aging, higher-risk structures. Updating the egress standard retires old, out-of-date rules that no longer enhance safety with proven modern safety engineering that also serves public needs for housing.

Building codes interact with zoning, permitting, and infrastructure requirements to shape the feasibility of new housing. When outdated internal standards persist, they inadvertently restrict production and inflate costs with no added benefit to anyone. Modernizing these codes allows cities to respond to both safety expectations and affordability challenges with equal rigor—an approach that’s both smarter and safer. Ultimately, the single-stair discussion is part of a broader movement to align building regulations with current technology and housing demand. The data show that under modern safety systems, single-stair mid-rises achieve comparable safety performance to traditional two-stair buildings simply through codifying already-standard practices. Updating the code to reflect that reality would not only encourage innovation but also ensure that new homes are built to the highest contemporary standards of safety, design, and livability.

The post The staircase rule that’s limiting housing growth appeared first on Reason Foundation.

The common thread from stories to political campaigns to proposed legislation is the claim that institutional investors buy up homes to rent them out for profit, and in doing so, crowd out families who want to buy homes to live in. At the same time, these investors also drive up rents and tend to be absentee landlords who don’t take care of properties. But a closer look at what’s actually happening in the market shows that almost the opposite of all that is happening: Institutional investors are actually helping renters.

The first clue that institutional investors are not likely to be the driver of housing costs or rents is that they only own about two percent of the total single-family housing stock in the United States, though they own almost 40% of apartment buildings. There are good reasons for both numbers.

When the housing market crash triggered the Great Recession in 2008, millions of mortgages went into default, and many of those homes wound up owned by banks and by federal lending institutions Fannie Mae and Freddie Mac. At that time, only institutional investors were in a position to buy those homes from the lenders and get them back on the market. In fact, before 2011, no investors owned more than 1,000 units.

A similar shift occurred during the pandemic, as thousands of landlords saw their rental income plummet, leading many to sell out or walk away. Again, institutional investors had the capital to get those homes back into the rental market. Without institutional investment in stores, millions of homes likely would have sat vacant for years.

Neither of those crisis opportunities for institutional investors is happening today. Housing analyst Kevin Erdmann has pointed out that almost all purchases of homes by institutional investors happened at the time of crisis, and their growth has been minimal since then. A shift in ownership years ago is not what is driving housing prices and availability today. Erdmann notes that in 2004, there were 33 million rental households, which grew to 44 million by 2016. But during that same time, only three million single-family homes were built, so about eight million single-family homes shifted from being owned to being rented. Despite that shift, census data shows that the homeownership rate in the U.S. increased by over two percent since 2015, even as investor ownership grew.

In fact, in the subsequent years, while the rate of homeownership was growing, the rate of building permits was half the rate at the peak of U.S. homeownership, and the rate of construction of new homes was flat. So, homeownership was growing as homes shifted back from being rented to being owned.. Institutional investor-owned rentals have not been crowding out homeowners; instead, rising numbers of homeowners combined with slow growth in housing stock mean homeowners have been crowding our rental housing!

Meanwhile, there’s no evidence that institutional investors are letting the housing they own fall apart. The Urban Institute argues that institutional investors tend to purchase homes in need of repair and “can repair these properties more quickly and efficiently than an owner-occupant generally can.” It makes sense: Fixer-uppers cost less, and with economies of scale, it will cost less per unit to remodel and repair a large number of homes in an area than just a single home alone.

Banning investor-owned housing doesn’t work—Dutch city Rotterdam tried it in 2021 and promptly saw rents increase and displace low-income families. In truth, fears surrounding investor-owned housing are just red herrings in trying to understand the housing crisis.

The real culprit is local government restrictions on housing supply. Homeownership growth since 2016, not investor-owned housing, has crowded out rental housing. If rental housing permits and construction had kept up, increased home ownership would not be a problem, but permitting of new rental housing has not kept pace with demand.

Persistent regulatory barriers, including zoning restrictions, minimum lot sizes, limits on multifamily housing, and long and costly permitting processes, have made it difficult, if not impossible, to adjust to the rise in demand in a cost-effective way. According to a recent paper from the National Bureau of Economic Research, barriers to building have led to fewer homes being built: “If the U.S. housing stock had expanded at the same rate from 2000-2020 as it did from 1980-2000, there would be 15 million more housing units.”

This is why states as politically diverse as California, Texas, Vermont, and Montana have passed laws in the past few years that require local governments to allow more housing to be built and reduce restrictions, costs, and delays on new housing.

It really works. Austin, Texas, pursued one of the most aggressive efforts to change policies to allow more housing construction, allow more density in parts of the city, and allow a wider range of housing types. The result is that average rents dropped by 22 percent, about $400/month.

It is not the infusion of capital from investors that disrupts housing markets; rather, it is local government policies that fail to allow supply to keep up with demand. Banning institutional investors will not help, but allowing housing supply to fulfill the needs of both renters and owners will.

The post Investor-owned housing helps renters appeared first on Reason Foundation.

Florida has a housing shortage of over 120,000 units. A household must make at least twice the median income in Florida to afford the median home in Florida. Increasingly, homeownership in Florida is leaving lower and middle-income families behind. The reason for this is that Florida cities and counties have failed to issue new housing permits at a rate that keeps up with new population and housing demand.

This happens in many ways:

• Permitting delays can prolong projects for months or even years, which, unfortunately, drives up housing costs.
• Restrictive zoning locks in low-density, single-family development and often ignores the demand for smaller homes, townhomes, and apartments.
• Limited adoption of flexible solutions such as accessory dwelling units (ADUs) and residential duplex units (RDUs), which could be blended gradually into neighborhoods while aiming to preserve local charm and character.
• Local politics that turn housing developments into battlegrounds. Add layers of complexity, uncertainty, and costs that restrict developers, entrepreneurs, and locals from adding housing supply in a timely and sustainable manner.

The consequences ripple through the state’s economy and quality of life. Businesses cite housing costs as a barrier to attracting and retaining workers. Families can be pushed farther from jobs, stuck with long commutes, and are often forced into trade-offs between housing, childcare, and health care.

With straightforward housing supply numbers tailored for local use, citizens and policymakers alike can see how deeply the housing shortage cuts into their communities—and why fixing Florida’s broken housing system is no longer optional.

Visit the Florida Housing Data Project to learn more.

The post New data model addresses Florida’s statewide housing supply shortages appeared first on Reason Foundation.

As with all policies, there are trade-offs, and in the case of the Low-Income Housing Tax Credit, the trade-offs have been substantial. It is likely that its positive outcomes can be brought about through simpler, more widespread, and less burdensome means. While the LIHTC has maintained bipartisan support since its inception, it is worth considering whether alternative policies would better address current housing needs. 

How does it work?

The Low-Income Housing Tax Credit was established through the Tax Reform Act of 1986 and made permanent in 1993. Between 1987 and 2023, the Department of Housing and Urban Development (HUD) calculated that 3.7 million housing units had been created under this program. To achieve this, the federal government allocates population-proportionate federal income tax credits to states, which then distribute them to qualifying projects either directly or through a competitive application process.

To apply for the LIHTC, developers must set aside a minimum proportion of units meeting specified affordability requirements. These units can take a variety of forms, including multifamily developments or several detached single-family homes. Though credits are distributed over a period of 10 years, qualifying developments must maintain affordability for at least 15.

A development can qualify for one of two LIHTC versions–4% and 9%. Once developers are granted these credits, they sell them to investors to finance the costs of construction. Entirely new projects and substantial property rehabilitations are eligible for a 9% credit, which finances 70% of the cost of construction. For lighter repairs and property acquisitions, a 4% tax credit is offered, which then finances 30% of costs. The 9% and 4% figures are applied to specific construction costs, often referred to as the “eligible basis” of the property, to determine the size of the tax credit. Calculating the eligible basis of a property requires intimate knowledge of the tax code and the costs associated with each development. The complexity of calculating these credits and applying them remains one of the largest challenges of the program.

Despite its intricacy, the LIHTC remains a favorite among federal legislators. While many programs were slashed during the 2025 budget reconciliation, the LIHTC grew. The One Big Beautiful Bill Act permanently increased the number of 9% credits each state can give by 12% and loosened the financing requirements, environmental consideration incentives, and depreciation deductions for LIHTC properties.

Benefits

Through its nearly 40 years in operation, the LIHTC has been associated with several documented benefits. A 2019 study found that units built through this program have positive spillover effects, especially in low-income neighborhoods. Specifically, LIHTC developments are linked with lower property and violent crime, potentially due to the stability these developments provide for the community and the introduction of security measures. Further, low-income neighborhoods surrounding a LIHTC development have observed home price increases, though the opposite was seen for high-income neighborhoods.

Additional research has found a connection between LIHTC developments and locational efficiency. Locational efficiency in the context of affordable housing is the ease of access to everyday destinations like work, school, and shopping locations. Specifically, between 25% and 50% of LIHTC developments built from 2007 to 2011 were placed in location-efficient areas, meaning substantial transportation gains for residents. This benefit is particularly helpful because low-income residents have been priced out of these lucrative areas across the nation. The LIHTC program is one avenue for low-income residents to access locationally efficient areas and the benefits they bring.

Concerns

Despite some success, the Low-Income Housing Tax Credit has several major drawbacks. A 2010 study finds the LIHTC does not increase the overall stock of housing and instead produces a “crowding-out” effect. Rather than bringing in developers from other endeavors (like commercial development) to add to the stock of housing, the LIHTC is primarily utilized by developers already specializing in housing construction. A University  of Wisconsin study corroborates this finding, observing “no significant relationship between the number of LIHTC units (and other subsidized units) built in a given state and the size of the current housing stock, suggesting a high rate of substitution.”

The existing housing crisis is the result of a persistent housing shortage. The substitution observed by the available academic literature suggests the LIHTC does not address this fundamental problem.

Further, a 2009 study found that LIHTC developments are generally more expensive to construct than market-rate units, stating, “the program encourages developers to construct housing units that are an estimated 20% more expensive per square foot than average industry estimates.” In some notoriously high-cost areas, these figures have reached staggering figures, with per-unit costs as high as $898,837 in Chicago, and $708,000 on average in California.

There are several reasons for these high costs. First, basing the amount of tax credit awarded on the eligible basis of a development does not incentivize cost minimization. Further, the administrative costs of building affordable housing through this program can be steep. Receiving and using this credit requires extensive documentation and verification on behalf of the developer and their accountants, not to mention the administrative costs that come with housing development in general. Both the material and compliance costs of these developments exceed those of their market-rate counterparts. The LIHTC creates an incentive structure and regulatory framework antithetical to an efficient use of resources.

Finally, as with many subsidy programs, the LIHTC has been fraught with corruption. From several documented cases of developers inflating reported construction cost figures for larger credits to state officials leveraging credit awards for political gain, there are abundant opportunities for federal funds to be misused.

With so many remaining questions about efficacy, cost, and corruption, this program appears to have fallen short of its goals. As policymakers at all levels of government consider tools to address the ongoing housing crisis, it is important to consider alternatives to the LIHTC.

Conclusion and alternatives

The Low-Income Housing Tax Credit fails to address the root of existing housing challenges. It gets one thing right: there is a severe housing shortage, especially for low-income residents, and building more units is the answer. However, the documented benefits of the LIHTC are not necessarily program-specific and instead are the result of building housing affordable to low-income individuals in desirable areas generally. Other programs and market outcomes share the credit. Instead of expanding already overcomplicated and inefficient incentive programs, like the LIHTC, the government should consider stepping out of the way.

The National Low Income Housing Coalition estimates that the lowest income groups are short 7.1 million units as of 2025. Closing this gap is going to require building and entrepreneurship, not a burdensome regulatory process. Policies from rent control to restrictive zoning have made investing in housing affordable to low-income individuals either impossible or unprofitable. Easing rules around density, parking, and permitting would unlock new housing supply, something LIHTC struggles to deliver at scale. Even small legislative tweaks could bring about massive additions to housing supply with little additional cost to the taxpayer. Zillow estimated in 2019 that allowing duplexes on one in ten single-family lots could add over 3.2 million new units over the next 20 years across the 17 largest US metros. More drastic changes would bring more drastic results. Just in the Los Angeles area, Zillow notes that allowing four homes on 20% of single-family homes would “add more than 1.5 million more homes than allowing only one additional home on the same lots.”

Medium-density development is often less expensive due to its smaller size, making it ideal for low-income families. When local and state governments pass legislation allowing it, developers respond. Instead of continuing to distort these markets through a complicated tax credit, federal policymakers should encourage state and local officials to remove laws that discourage housing construction and allow regional adjustment to meet local housing needs. Supply expansion is possible without a middleman; it just must be allowed to happen.

The post The Low-Income Housing Tax Credit does not address the root of America’s housing challenges appeared first on Reason Foundation.

Although legally, a mayor cannot unilaterally halt rent increases, New York City’s Rent Guidelines Board (RGB)—the body that sets annual increases for stabilized units—is entirely appointed by the mayor. A determined mayor can effectively engineer a freeze, as Bill de Blasio did in 2015, 2016, and again in 2020 during the pandemic. These freezes slowed rent growth for stabilized units: while the Consumer Price Index rose by more than 27% between 2013 and 2023, stabilized rents increased by less than 12%. For landlords, especially in older buildings, it translated into widening gaps between income and expenses.

Even before Mamdani’s proposal, landlords were grappling with the aftershocks of the 2019 Housing Stability and Tenant Protection Act (HSTPA), which eliminated nearly all the mechanisms that once allowed modest rent increases in stabilized apartments. For decades, landlords could apply vacancy bonuses, raising rent by up to 20% when a tenant moved out to cover turnover costs and reduced the incentive to hold apartments off the market. They could recover expenses for improvements, either through individual apartment improvements (IAIs) like kitchen or bathroom upgrades, or major capital improvements (MCIs) such as boilers or roofs. These provisions had encouraged reinvestment in the city’s aging housing stock.

HSTPA effectively abolished vacancy bonuses and drastically limited the ability to recoup IAI or MCI costs. According to Columbia Business School, the result was a “dramatic increase in deferred maintenance” and a surge in warehousing (simply not renting units because the cost of doing so is more than the potential income). Ann Korchak, board president of the Small Property Owners of New York (SPONY), underscores the point, explaining via email that “over 50,000 apartments are empty because they don’t have the financial resources for required upgrades after a tenant vacates.” Those 50,000 units represent roughly 5% of the city’s rent-stabilized stock, a striking share of housing kept offline due to financial constraints.

The financial strain is compounded by debt. Columbia estimates that $105 billion in loans are secured by 26,000 rent-stabilized buildings. This isn’t caused by HSTPA per se, but the law has made refinancing or restructuring debt far harder because the expected income from stabilized units is now capped. With lenders pulling back and property values falling, owners in places like the Bronx now find that average sales prices per square foot have dropped to the same level—or below—their outstanding debt, leaving many properties with zero or negative equity.

For buildings that are 100% rent-stabilized—meaning all units fall under stabilization rules with no market-rate tenants to offset costs—the risks are even sharper. Columbia models show that a four-year freeze would create a structural decline in net operating income (NOI). Even if rents were allowed to rise modestly afterward, NOI would never fully recover, permanently reducing property values. In harsher scenarios—such as expenses rising 5% annually while rents remain frozen—NOI turns negative within 16–17 years, effectively making the property worthless. In reality, many owners would face insolvency and distress sales long before that point, as operating losses mount.

Critics of the real estate industry often portray landlords as deep-pocketed corporations or hedge funds, but the reality of New York’s housing market is more complex. According to The Wall Street Journal (WSJ), “mom-and-pop” landlords may own a single six-unit building in Brooklyn, or a small multifamily in the Bronx, and they manage them not as faceless investment vehicles but as their primary source of income or retirement savings.

One Brooklyn landlord, Ebony Hannibal, exemplifies the bind. She owns a four-unit building and struggles to make her $3,800 monthly mortgage while pursuing tenants who collectively owe nearly $100,000 in back rent. Hannibal told the WSJ that if Mamdani’s freeze becomes reality, she plans to sell her building. But you must wonder who would buy it if the rents do not cover the costs. Her story is not unusual—“every single landlord in my neighborhood has similar experiences,” she said.

Unlike large institutional investors who can spread losses across portfolios, mom-and-pops often have all their wealth tied up in one or two buildings. When costs rise but revenues are capped, they have no cushion. As WSJ reports, many of these owners are already walking a financial tightrope. Rents often barely cover the basics: mortgage payments, property taxes, utilities, and rising insurance premiums.

The broader market reflects these struggles. Sales of rent-stabilized properties have slowed since the 2019 rent law changes, and many listings linger on the market far longer than typical. To attract buyers, sellers are cutting prices by around 10% on average. For small owners hoping to sell or refinance, that erosion in value directly threatens their financial survival.

It’s no wonder that one lender described Mamdani’s plan as “the kiss of death” for small landlords. Unlike large investors, who may warehouse units or sit on losses, small owners often face a binary choice: raise rents modestly to keep pace with expenses or lose their buildings. A multi-year freeze removes that choice altogether, leaving foreclosure, distress sales, or abandonment as the only options.

For tenants, the picture is equally bleak. When landlords cannot afford upkeep, it is renters who remain in deteriorating apartments with broken boilers, leaky roofs, or unsafe wiring. Rent freezes also pit tenants and owners against each other over shrinking resources, and by locking some households into large apartments they no longer need, they squeeze families with children into smaller, less suitable units. Far from helping renters, the freeze risks degrading their living conditions. And more warehousing of units just means fewer affordable rental units and more renters left out of the market entirely.

An emailed comment from Korchak cuts to the heart of the issue: “Let’s accurately identify Mamdani’s housing agenda—it’s not policy, it’s housing politics.” She warns that a four-year freeze would trigger “affordable housing Armageddon,” pushing thousands of small buildings into foreclosure. Widespread foreclosures would hit the city’s finances twice over: first, through tax delinquencies as struggling landlords fall behind, and second, through falling assessments as distressed sales depress property values. And while buildings would eventually be resold, the transition often means prolonged vacancies and the loss of small, active landlords who keep units on the market, replaced by speculative owners more willing to hold apartments empty.

Instead of political promises, Korchak argues for pragmatic reform. Specifically, she calls for amending the 2019 HSTPA provisions that restricted the amount of money owners can recoup from their improvements and capital investments to the units (IAIs and MCIs) to allow owners to bring over 50,000 warehoused apartments back to market quickly. “That would make an impact on affordable housing,” she emphasizes, far more than new construction schemes that take years, if they happen at all.

Mamdani’s rent freeze pledge has undeniable populist appeal in a city battered by high rents. But the evidence from Columbia, testimony from small owners, and the warnings of advocates like Ann Korchak suggest that such a freeze would backfire—deepening disrepair, bankrupting mom-and-pop landlords, and ultimately shrinking the affordable housing stock. If the goal is truly to help tenants, reforming HSTPA to unlock existing units may be a more immediate, effective, and sustainable path.

The post Mamdani’s rent freeze: Politics, policy, and the fate of small property owners appeared first on Reason Foundation.

This rush to ban certain entities from owning homes flows from a misunderstanding of their effect on the housing market and their small presence in the single-family housing market. Evidence shows institutional investors in housing rarely displace individuals from the housing market or increase prices, but local government restrictions certainly do reduce housing supply and drive up prices.

Professional housing providers first significantly appeared in the aftermath of the 2008 housing and financial crisis. Before 2011, no investors owned more than 1,000 units. After the housing crash, investors purchased foreclosed homes, anticipating a rebound. This helped to balance the mass exit of individual homebuyers and prop up housing prices that were in freefall, which meant significantly fewer abandoned homes and dilapidated neighborhoods.

Today, institutional investors only own about 2% of single-family housing in the United States, which is far from a crisis. They did not displace individuals or families—census data show that the homeownership rate in the US increased by over 2% since 2015, even as investor ownership grew.

Professionally managed housing provided a much-needed increase in the supply of single-family rental housing. The Government Accountability Office found that, over time, institutional investors are increasingly paying for the construction of new rental houses rather than buying existing homes. The Urban Institute has pointed out that institutional  investors tend to purchase homes in need of repair and “can repair these properties more quickly and efficiently than an owner-occupant generally can.” Fixer-uppers cost less, and with economies of scale, institutional investors can repair a large number of homes at lower cost.

And banning investors has failed. Rotterdam in the Netherlands banned them in 2021, which promptly triggered a 4% increase in rents, displaced lower-income families, and led to homes being purchased more often by richer and older buyers. Hardly a victory for affordability or equity.

Blaming institutional investors distracts focus from addressing real housing problems. The market is not acting as the critics of institutional investors say. If investors are driving up prices, the natural market response would be to increase supply so that homebuilders could sell to both investors and families. If supply keeps up with demand, prices won’t fluctuate much. But while prices did increase, housing supply hasn’t kept up. Persistent regulatory barriers, including zoning restrictions, minimum lot sizes, limits on multifamily housing, and long and costly permitting processes have made it difficult, if not impossible, to meet the rise in demand in a cost-effective way. According to a recent paper in the National Bureau of Economic Research, barriers to building have led to fewer homes being built. In fact, the paper finds that “If the U.S. housing stock had expanded at the same rate from 2000-2020 as it did from 1980-2000, there would be 15 million more housing units.”

Investors see that and are likely to continue to invest in single-family homes. When Jeff Bezos launched a new company to invest in buying rental properties, he pointed out that after years of housing supply not keeping up with demand, it was a sure investment. Rather than being a cause of persistent high prices in the housing market, investors are aware of the major shortage. Should barriers be reduced, not only would prices fall, but it might also spark a reduction in the presence of institutional investors. This is why states as politically diverse as California, Texas, Vermont, and Montana have passed laws in the last few years that require local governments to allow more housing to be built and reduce restrictions, costs, and delays on new housing.

It really works. Austin, Texas, pursued one of the most aggressive efforts to change policies to allow more housing to be built, more density in parts of the city, and a wider range of housing types. The result is that average rents dropped by 22%, about $400/month.

It is not the infusion of capital from investors that disrupts housing markets; it is local government policies that do not let supply keep up with demand, creating a shortage that attracts investors. The increased involvement of investors in the housing market should be a wake-up call to policymakers. Housing supply should be able to fulfill the needs of both the single-family rental and the for-ownership sectors of the broader housing market.

A version of this column first appeared at RealClearMarkets.

The post Institutional investors are not making housing more expensive appeared first on Reason Foundation.

The barriers to building housing are best addressed at the state and local levels, so it was a good outcome for the provision focused on selling land to build housing to die in the federal bill. However, the intense emotions surrounding the divestment of even one of those 640 million acres illustrate how challenging it has become to confront the government’s poor asset management and spending.

It’s understandable to get passionate about protecting the Grand Canyon, Yosemite, Yellowstone and the other crown jewels of our national parklands. But the National Park System only accounts for approximately 13% of all federal land, though.

Most calls for land divestment focus on the Bureau of Land Management and the Forest Service, the agencies that hold nearly 70% of all federal lands. These two agencies collectively control almost 50% of the total land west of the Mississippi River, making them major players in the economies of Western states.

Outside of a federally landlocked city like Las Vegas, these vast Bureau of Land Management and Forest Service land holdings are often in remote areas far from job centers and existing infrastructure. While there are inherent development challenges (e.g., steep terrain, water supply) that make residential housing construction prohibitive, the land could be sold to eliminate taxpayers’ costs of managing it.

The Government Accountability Office has flagged federal property management as “high risk” since 2003. Maintenance backlogs for federal land have gone from $170 billion to $370 billion in just seven years. Federal facilities are crumbling, underutilized and poorly configured for modern needs. Therefore, it should not be heresy to suggest that targeted, data-driven divestment could save taxpayers money, prioritize lands with genuine development potential near existing communities, while preserving crown jewel parks, wilderness areas and wetlands that provide clear public and ecosystemic value.

The federal government owning nearly 50% of the area west of the Mississippi suggests a massive misallocation of resources and missed economic opportunities. While there are pockets of parks, and recreational and industrial revenue generation from public lands, many federal land holdings offer minimal public benefit while imposing substantial carrying costs.

Rural communities across the West have long chafed under federal land rules that limit local economic development and constrain local tax bases. A smart approach to federal land sales could strengthen rural economies, increase local property tax revenue, and bring environmental protection and land management under local oversight.

It’s not about selling Yosemite or the Grand Canyon; it’s about unloading underutilized properties that drain federal resources without delivering commensurate benefits.

The best path forward requires Congress to launch a comprehensive inventory of federal holdings, identifying properties ripe for divestment while safeguarding truly national assets. It could even create a bipartisan federal lands committee modeled after the Base Realignment and Closure Commission, which successfully navigated the closure of hundreds of the country’s military bases through a fair process with minimal politics and maximum pragmatism.

When it comes to California’s and America’s housing crisis, selling federal land isn’t the answer. Local land-use regulations, zoning laws, subdivision ordinances, delays in permitting, poor regional planning and governance, and other regulatory barriers are to blame for the lack of housing and high prices. These regulations, red tape and long delays prevent builders from meeting the demand for housing.

Rather than relying on Congress to provide a solution, leaders in California should follow the lead of major cities in Texas, such as Austin and Houston, by focusing on legalizing accessory dwelling units, streamlining permitting processes, and loosening or eliminating restrictive zoning regulations. These types of reforms can help increase housing supply quickly and at scale, and are far more impactful than what could be expected from distant federal land sales. California’s recent housing reforms demonstrate what’s possible when state governments are motivated to finally address long-standing problems.

States and localities must continue to build momentum in implementing the zoning and permitting reforms that actually increase housing supply and drive down costs.

Congress can’t solve the housing crisis by selling federal land, but that doesn’t mean we should cling to an outdated land ownership model that serves nobody well. It’s time to right-size the federal government’s real estate empire — not because it will make housing more affordable, but because responsible stewardship demands it.

The federal government should focus on safety, security and truly national priorities, not on being America’s largest and worst landlord. And state and local governments should remove the barriers they’ve created to building more housing. That’s the path to more affordable housing and a little less government.

A version of this column first appeared in The San Diego Union-Tribune.

The post We should sell some federal land, but housing crisis requires local solutions appeared first on Reason Foundation.

Table 1: 2023 Montana Housing Reforms and brief synopsis

2023 legal challenges

These bold reforms have not been without their legal challenges. In late 2023, Montanans Against Irresponsible Densification (MAID), an interest group created to challenge the state’s sweeping zoning reforms, filed a suit against the state. They claimed these new bills violated “Montana and U.S. Constitution’s Equal Protection guarantees” as well as “substantive due process protections” by reversing local zoning restrictions without sufficient justification. As written in the original plaintiff’s motion for temporary restraining order specifically against Senate Bills 323 and 528 (see Table 1), the essence of these concerns rests on a fear that residents may “wake up one morning to find that, without any notice at all, a new duplex or ADU is going up next door in their previously peaceful and well-maintained single-family neighborhood.”

Initially, a Gallatin County District Court sided with MAID and granted a preliminary injunction. However, in 2024, the Montana Supreme Court overturned this initial decision and ultimately upheld the initial zoning reforms. The court concluded that housing does, indeed, constitute a legitimate state interest and provided enough justification to warrant overhauling restrictive local restrictions.

This decision by Montana’s highest court provided the basis for even bolder reforms in 2025.

Taller buildings

During the 2025 legislative session, the Montana state government passed Senate Bill 243, allowing taller buildings in areas that previously prohibited their construction. Specifically, in municipalities with more than 5,000 residents, maximum height restrictions are not permitted to be lower than 60 feet. Typically, this corresponds to anywhere between five and six stories. The 5,000 resident requirement is a common feature of these types of legislation because that is the Census Bureau’s qualifier for an area to be considered “urban.” This step mandates that localities allow the option for a more efficient use of space in urban areas. This law will take effect on October 1, 2026.

Impact fee reform

Impact fees are one-time fees charged to developers to offset the cost of the additional strain on public resources caused by their new construction. These fees typically go toward roads, emergency services, and schools. While impact fees are, in general, good policy tools to offset the burden on existing residents through property taxes, it is vital that these fees are proportional to the impact they are designed to mitigate. If impact fees are excessive, poorly designed, or regressive (meaning they are a higher proportion of home value for smaller homes), these fees can be unfair or even discourage development.

Through Senate Bill 133, the Montana State Legislature took steps to make sure impact fees in their state are properly designed. In addition to existing state guidelines that require impact fee calculation to be proportional and in accordance with Generally Accepted Accounting Principles (GAAP) new legislation forbids impact fees to increase by more than the rate of inflation. This provision prevents unjustified impact fee increases, taking steps to not only enact proportional impact fees but maintain them over time.

Manufactured housing

Manufactured homes are typically assembled off-site and then transported to the desired final location. Traditional homes, in contrast, are constructed on-site from start to finish. Importantly, manufactured homes do not include mobile homes or trailers. Senate Bill 252 makes a statewide change to local zoning laws, requiring local governments to treat manufactured and factory-built homes exactly as they would traditional homes. Manufactured homes are typically less costly than traditional homes, so they present an affordable option for prospective homebuyers. SB 252 takes precautions to ensure these homes are not barred from certain neighborhoods due to their construction method, expanding housing opportunities across the state.

Continuing ADU reform

Montana’s Senate Bill 532 explicitly builds on and revises SB 528, the state’s 2023 ADU reform. The original 2023 legislation made bold moves in expanding the areas in which ADUs can be built and getting ahead of many ADU killers (owner occupancy requirements, impact fees, etc.), but included some restrictions. For example, initial restrictions required that these ADUs be no larger than 1,000 feet or 75% of the floor area of the primary dwelling. SB 528 strikes this requirement.

On the other hand, SB 528 originally banned counties from requiring a parking space for ADUs. The 2025 version reinstated counties’ ability to require parking for ADUs. Finally, SB 532 qualifies ADUs on parcels already connected to public water and wastewater service for a 15-day expedited review. Largely, these 2025 revisions make it easier to permit an ADU and start construction. ADUs are an infill tool to aid existing housing supply problems. While they don’t offer a universal solution, they are great options for low-income individuals, homeowners looking to make additional income, and extended family. Likely due to intense early criticism of ADU legislation in the state, the legislature has only made this bill a trial. As currently written, this new law will sunset on September 30, 2029.

Single-exit stairways

For decades, the International Building Code (IBC) has required that buildings with multiple floors have two exit stairways accessible from each point in the building. These requirements arose from a concern over safety in the case of a fire emergency. Existing analysis suggests that having these requirements for four to six-story buildings makes construction more expensive, without realizing the promised safety difference compared to single-exit stairways. Existing estimates suggest that single stairway buildings can cut anywhere between 6%-13% off the cost of construction. Further, additional stairways either encroach on living space or require larger parcel purchases. With the Montana State Legislature actively looking to encourage new multifamily construction, they amended this requirement via Senate Bill 213. This legislation tentatively relaxes building requirements, allowing single-exit stairways in buildings no more than six stories tall, with no more than four units on each floor. To qualify, buildings must also meet specified fire safety standards, like being equipped with automatic sprinklers and having windows in each unit.

Parking reform

Excessive parking requirements substantially increase the costs of new housing construction. States across the nation have taken steps toward loosening their parking requirements to lessen the burden on developers and encourage more building. While minor parking provisions have been included in several other bills, House Bill 492 is Montana’s most extensive parking reform to date. Under this law, municipalities with more than 5,000 residents may not require more than one parking space per unit or one-half parking space for units under 1,200 square feet on multi-family developments. For residential units more broadly, this bill prohibits requiring more than one parking space per unit, or any requirement at all for non-multifamily units under 1,200 square feet. Developers are, of course, still able to add more parking if they choose. HB 492 bill is effective October 1, 2026.

Conclusion

Montana’s housing crisis has been over a decade in the making, and no policy can provide an overnight solution. Many of these 2025 reforms have yet to take effect, and it is still too early to see the results of the 2023 bills. All markets take time to adjust, construction being especially time-consuming, so these policy reforms have yet to manifest in lower home prices for Montana residents. However, expanding supply through incremental reform is the clearest path toward relief for the state’s residents. These 2025 bills, in coordination with those passed in 2023, provide a foundation for Montana’s housing market to adjust to the new challenges placed on it.

The post The ‘Montana Miracle’ continues through housing reform passed in 2025 appeared first on Reason Foundation.

In effect, “Good Cause” transforms lease renewals from a private contractual matter into a judicial process, one that assumes bad faith on the part of landlords and imposes procedural hurdles that are difficult to meet, especially for small property owners. As of June 2025, five states—California, New Hampshire, New Jersey, Oregon, and Washington—and a number of cities nationwide, along with at least 15 New York municipalities, have adopted versions of the law, most often using “just cause” rather than “good cause” as in New York—a number that may grow unless policymakers understand the unintended impact of this legislation.

New York’s law is the latest and most stringent example. In Oregon and Washington, landlords cannot increase rent by more than 7% plus the Consumer Price Index (CPI), with a maximum cap of 10%. In practical terms, this means that if inflation runs at 3%, landlords can raise rent by up to 10%—but if inflation is just 1%, the maximum allowable increase would still be 8%.

In New York, for tenants covered by the law, annual rent increases are capped at the lesser of 10% or 5% plus the regional CPI—a threshold that functions similarly to traditional rent control measures. Landlords may provide reasons for a higher rent increase for the court to consider, such as significant repairs or increased property taxes. To legally deny a lease renewal, landlords must now demonstrate a “good cause,” broadly defined to include nonpayment of rent, substantial lease violations—such as unauthorized alterations or illegal activity—substantial damage to the property, or refusal to allow access for repairs. Although these exceptions may seem reasonable, the reality is more complicated. The combination of vague and rigid definitions makes it significantly harder to remove problematic tenants, even in cases where their behavior undermines the quality of life for neighbors or presents persistent management difficulties. While these provisions make it harder for landlords to arbitrarily evict a tenant—and given that evictions are not easy in any case, it seems unlikely there are a lot of baseless evictions—they swing the pendulum very hard in the other direction.

One of the primary issues with Good Cause Eviction is that the burden of proof falls entirely on the landlord, especially after the initial lease term has expired. Once a tenant has completed the first 12 months, the lease effectively becomes permanent, unless the landlord can demonstrate one of the legally defined “good causes” for non-renewal. For example, if a tenant begins engaging in disruptive or illegal activity, such as the ongoing sale or distribution of controlled substances, the landlord must prove that the unit is “customarily or habitually” used for that purpose. This bar is exceedingly difficult to meet. Most small landlords lack the capacity to conduct surveillance or gather the necessary documentation, and local law enforcement may be unresponsive unless an active criminal case is already underway. As a result, problematic tenants can remain in place indefinitely, even if their behavior significantly affects the safety, comfort, or property values of surrounding tenants. While some degree of evidence is certainly necessary to break a contract, the law offers little flexibility when a tenant’s conduct becomes intolerable only after the original lease period has passed.

Although specifics vary by municipality, NYC, for example, offers more legal support to tenants than landlords throughout such litigations. In NYC, tenants facing eviction proceedings—whether in Housing Court or through New York City Housing Authority (NYCHA) administrative processes—are entitled to free legal representation under the city’s Right-to-Counsel program (also known as Universal Access). At the time of the program’s creation, the idea was to balance the access to such help from both parties since landlords were seen as more affluent than tenants. However, since no such program was ever put in place for landlords, they have no such guaranteed right to free legal representation. Most landlords must hire private counsel at their own expense or attempt to navigate Housing Court on their own. While some nonprofit or bar association resources exist for landlords, access is not universal, not guaranteed, and rarely sufficient to meet the demands of complex eviction proceedings. The result is a highly asymmetrical legal process: tenants benefit from publicly funded legal teams, while landlords are left to bear the financial and procedural burden of defending their property rights unaided.

Good Cause Eviction laws often have exemption thresholds that can unintentionally discourage small-scale rental growth. California’s law only applies to corporate-owned units, Oregon exempts owners of one or two units, and Washington exempts single-family homes. Under New York City’s version, landlords who own 10 or fewer units are exempt, while those with larger portfolios must comply with the new requirements. Some municipalities have gone even further. Albany, the state’s capital, narrowed the exemption to apply only to landlords with more than one unit. Rochester, the state’s fourth-largest city, with a population exceeding 200,000, adopted the same stricter standard.

While these exemptions are designed to protect small housing providers, they can create strong disincentives to increase the number of available units. Once landlords exceed the exemption threshold, they become subject to additional regulations, which may deter them from expanding. This is a problem because small and midsize landlords (defined as those with 3-20 units) often fill an important niche in the housing ecosystem. Unlike corporate landlords, they are more likely to live in the communities where they rent, maintain direct relationships with tenants, and offer a degree of flexibility that larger property management companies simply can’t match. When policy discourages this class of landlord from growing—or drives them out entirely—it shifts the rental landscape toward larger operators who might not have the personal touch and incentive to build and improve the community. In the long run, this creates a rental market that is less responsive, less personal, and ultimately less stable for the very tenants the law was designed to protect.

In its effort to strengthen tenant protections, New York’s Good Cause Eviction is undermining the very stability it is looking to promote. By shifting the legal balance disproportionately toward tenants and creating disincentives for small-scale housing providers, the law is likely to reduce the availability of quality rental housing over time. If small and midsize landlords—who often offer more community-rooted, flexible housing options—are pushed out or discouraged from expanding, the rental market will increasingly be shaped by large institutional actors with less personal investment in tenant well-being. As more municipalities consider adopting similar legislation, it is critical that policymakers take a closer look at how these rules operate in practice. Without a more balanced, evidence-based approach, the long-term effects may include reduced housing supply, higher costs, and a rental landscape less equitable for both tenants and landlords.

The post Why “good cause” or “just cause” eviction risks undermine housing markets appeared first on Reason Foundation.

On the news, social media, and even in legislatures, housing market speculators have been taking the blame for high home prices.

CBS Miami said earlier this year, “Finding an affordable home in Florida is becoming increasingly difficult for families as corporate investors buy up properties, driving prices up and limiting options for local buyers.”

Even in Congress, several bills have been introduced to restrict investors from buying houses, and at least half a dozen states have seen similar legislation. Despite calls for such restrictions in Florida, the legislature has instead focused on passing several bills like the Live Local Act that make it easier to increase housing supply statewide.

There has been growth in the role of institutional investment in the housing market throughout the last 20 years, but speculation by major financial players is far from the primary culprit behind current sky-high home prices. Lagging supply remains the largest driver of high housing costs. Rather than being a cause, persistent high prices in the housing market have attracted these investors who are aware of the major shortage.

When Amazon’s Jeff Bezos launched a new company to invest in buying rental properties, he pointed out that after years of housing supply not keeping up with demand, it was a sure investment. Stagnating supply and existing barriers to additional construction are what make entry into the housing market lucrative for investors. Should barriers be reduced, not only would prices fall, but it might spark a reduction in the presence of institutional investors. So, Florida’s legislators are on the right path on housing.

Indeed, there is good reason not to be distracted by the issue of institutional investors. Researchers at the Urban Institute categorize investors in the single-family home market as “mega investors” with over 1,000 units in diverse locations, “small investors” with between 100 and 1,000 units in diverse locations, and “local investors” with over 100 units concentrated in one geographic area. The most common umbrella criterion that characterizes “institutional” is holding over 1,000 units.

These large investors first made a substantial appearance in the aftermath of the 2008 financial crisis. In fact, before 2011, there were no investors who owned more than 1,000 units. After the housing market crash, investors anticipated a rebound and purchased thousands of foreclosed homes. This counterbalanced the mass exit of individual homebuyers and propped up a cascading housing market. Without that infusion of capital, many of those homes would have been abandoned and whole neighborhoods gutted. Today, major investors only own about 2% of the total single-family housing stock in the United States, hardly the seeds of a crisis (see figure). Those numbers are higher in some locations where the supply problem is most severe and investors see that local policies have created a market imbalance: Investors own 5% of single-family homes in the Miami area, 13% in the Orlando area, and 15% in the Tampa area.

In those areas, some are worried that investment firms with massive amounts of capital are outbidding individuals in the market and therefore driving up prices. Further, they worry that through buying properties and renting them, institutional investors are detracting from the for-ownership supply and limiting homeownership opportunities for families.

The current stagnant housing market in Florida shows how oversimplified those arguments are. A lot of things in the market have not worked consistently with that story. If investors buying up homes drives up prices, the natural market response would be to increase supply so that homebuilders could sell to both investors and families. If supply keeps up with demand, prices won’t fluctuate much. But while prices did increase, the expected subsequent supply expansion has had a more difficult time manifesting. Persistent regulatory barriers, including zoning restrictions, have made adjusting to the rise in demand in a cost-effective way difficult or even impossible in many places. Investors see that and are likely to continue to invest in single-family homes.

So, it is not the infusion of capital from investors that disrupts housing markets; it is local government policies that do not let supply keep up with demand. The increased involvement of investors in the housing market should be a wake-up call to policymakers. Housing supply should be able to adjust to the needs of the entire single-family rental and for-ownership sectors of the broader housing market.

A version of this column first appeared in the Sarasota Observer

The post Institutional investors are not to blame for U.S. housing prices appeared first on Reason Foundation.

Sarasota’s fundamental problem is that the city simply will not issue permits for affordable housing built by developers. They won’t let the private sector build affordable housing commensurate with demand, so the city feels compelled to subsidize the affordable housing it won’t otherwise allow the market to build. It’s bizarre, to say the least. 

As Ed Pinto, a Sarasota resident and co-director of the American Enterprise Institute’s Housing Center, has documented, only 4% of the housing for which the city issued permits over the last five years was single-family attached—not a single-family home, but duplexes, quadplexes, or apartments. 

Instead, 96% of permits were for single-family detached homes. 

Even worse, the handful of single-family attached homes permitted had median values of $425,000, hardly affordable. 

Unfortunately, many other cities commit similar folly, hence nearly 42 million American households in the U.S., including renters and owners, are “cost-burdened,” spending more than 30% of their income on housing. 

One result of these decisions is sprawl. Workers seeking affordable housing must live where local governments allow housing supply to keep up with demand and, in turn, face long commutes. 

In Sarasota County, the jobs are concentrated in Sarasota, but many reports have documented that almost all affordable housing is in North Port or the Ellenton area of Manatee County. By not allowing affordable housing in Sarasota, the city is massively increasing sprawl, conversion of undeveloped land, and emissions of greenhouse gases from those long commutes. 

Some easy fixes

Sarasota is a clear case of what is often called a “missing middle” housing problem. The “missing” component of the name refers to the severe housing shortage of homes affordable to middle-income earners and the rapid decline of medium-density development. 

“Middle” refers both to the modest density of units added and the middle-income earners who are the target residents of these homes. The answer is missing middle housing policies that incrementally increase residential density in neighborhoods near commercial land uses while accounting for homeowners’ interests. Florida’s Live Local Act of 2023 (LLA) was aimed exactly at addressing missing middle housing, aggressively incentivizing additions to supply via additions to workforce housing. 

Live Local allows developers to override local use restrictions if they are building affordable housing. Specifically, it allows for residential development on plots zoned for commercial, mixed-use, or industrial use as long as 40% of units are rental units that will be affordable for 30 years. One of the primary intentions of this bill is to allow working individuals to live closer to their place of employment.

The city of Sarasota should work with developers to identify parcels that meet these criteria and speed them through the approval process to develop duplexes, quadplexes, and apartment buildings. This would do far more for housing affordability than city funds subsidizing a handful of units. 

At the same time, the most common type of zoning reform to help with missing middle housing is loosening regulations around accessory dwelling units (ADUs). ADUs are smaller residential buildings constructed on the same plot of land as a larger single-family home, typically housing one or two people. The popularity of ADUs is mainly “infill.” This means they do not require denser housing development but rather provide property owners with the opportunity to build another unit on their land. 

Instead of radical changes to the zoning landscape and massive, intrusive construction projects, accessory dwelling unit reform allows additional housing to be added to existing and fully developed neighborhoods. ADUs are also a popular option for non-rental housing for extended family members, so much so that they are often colloquially referred to as “granny flats” or “in-law units.”

Accessory dwelling unit reform is an affordable housing policy tool that promotes mutual gain and voluntary additions to the housing supply. When policy allows ADUs to be rented out, their smaller size and building costs mean lower rents for tenants when compared to traditional single-family homes. 

This feature makes them especially suitable for lower-income individuals, should they be rented out. The income generated from collected rents is also a clear benefit to the primary homeowner — now functioning as a landlord with one property.

Austin, Texas, as an example of increasing supply

Austin has made leaps in multifamily permitting. In doing so, the city has seen an explosion of multifamily housing in response to the recent influx of young adults aged 20-34 who prefer renting over single-family homeownership. This increase in apartment construction and other rental unit construction, driven by relaxed zoning regulations and a pro-housing policy shift, has led to a notable decline in rents across the region. 

Between 2021 and 2023, the Austin metro area permitted approximately 957 apartments per 100,000 residents, far outpacing other major U.S. metropolitan regions. This boom resulted in tens of thousands of new units, with around 32,000 apartments delivered in 2024 alone, boosting the housing stock by about 5%.

As a result, average rents have fallen significantly. Data from Zillow and other real estate firms indicate that Austin rents dropped by approximately 4% to 7% year over year, with some reports noting a decline of up to 15% from their peak in August 2022. 

The increased supply stems from policy changes, including streamlined permitting, reduced parking mandates and upzoning measures such as allowing up to three units on lots previously restricted to one and reducing minimum lot sizes. The accompanying figure from AEI’s Housing Center shows how much better housing affordability fared in Austin compared to many other growing cities.

How multifamily developments effect property values

Despite common perceptions, research has consistently shown that multifamily developments do not necessarily decrease property values and can even increase them, according to a review of all research by the Joint Center for Housing Studies at Harvard. While there are anecdotal cases where property values have declined upon entry of a multifamily residence, “in general, neither multifamily rental housing, nor low-income housing, causes neighboring property values to decline.” 

Also, Sarasota is rich with examples of other ways to offer people an option to choose single-family housing neighborhoods or protect property values: homeowners associations, condo associations, and deed restrictions. These all allow the property owners in a neighborhood to agree to restrictions on density, and anyone buying in those areas must abide by those restrictions on their property rights. 

This is a much better way to offer people that option than broad-based restrictions across broad swaths of the city under zoning and development rules. The latter allows a small group of vocal activists to persuade the City Commission to limit their neighbors’ options, whether they want them or not. This is always and everywhere the cause of housing affordability problems. 

With the simple changes in attitudes and actions discussed above, much more affordable housing could be unleashed without even changing the city code. 

It’s time for the Sarasota City Commission to stop focusing on penny-ante solutions like subsidizing a trivial number of affordable housing units and start allowing the missing middle workforce housing to be built. 

A version of this column first appeared in the Sarasota Observer.

The post How to boost housing affordability in Sarasota, Florida appeared first on Reason Foundation.

Live Local Act background

The Live Local Act, Senate Bill 102, was passed in 2023 and a revised version, Senate Bill 328, passed in 2024. SB 102 preempted local zoning restrictions, allowing residential development on land zoned as industrial, commercial, or mixed use (if at least 65% of square footage in mixed use development is used for residential purposes). These developments are allowed as long as at least 40% of the units built are “affordable” for 30 years. Affordable in this context means those earning up to 120% of Area Median Income (AMI) do not have to spend more than 30% of their income on housing to live in these units. Developments under the Live Local Act can reach the maximum height and density permitted in the proposed area.

Further, the Live Local Act allows substantial property tax exemptions if stated affordability criteria are met. The development qualifies for a 75% tax exemption if units are affordable to those making between 80 and 120% of AMI. This provision is known as the “missing middle” property tax exemption. A full exemption is granted if units are affordable to those making less than 80% AMI. To qualify for either of these exemptions, at least 10 affordable units must be built. Additionally, SB 102 set aside funding for Florida’s State Housing Initiatives Partnership and State Apartment Incentive Loan programs and enacted a formal ban on rent controls statewide. While most original provisions have been maintained, some have been amended. SB 102’s substantial property tax exemptions prompted pushback from counties worried about diminishing their tax base and incentivizing unnecessary residential development. Pasco County was one such protestor. In response to growing concerns, the Florida Legislature passed SB 328 in 2024, the first revised version of the Live Local Act. House Bill 7073, a 2024 Florida tax bill, further revised some of the Live Local Act’s provisions.

These two 2024 bills revised the original Live Local Act to include a restriction on development near single-family homes and an avenue for counties to opt-out of the property tax exemption. Under SB 328, if a development proposed under the Live Local Act is adjacent to a single-family parcel that is part of a broader single-family neighborhood (specifically, 25 contiguous single-family homes), the county may restrict the height of the proposed development to 150% of the surrounding structures, or three stories, whichever is taller.

Additionally, HB 7073 allows counties to opt out of the missing middle property tax exemption if there is already a surplus of units in a county according to the most recent edition of the Shimberg Center for Housing Studies Annual Report. According to the 2024 Shimberg Annual Report, 34 of Florida’s 67 counties are currently eligible to opt-out of this tax exemption (see Table 1).

Source: Shimberg Center for Housing Studies 2024 Annual Report Appendix 4

SB 1730: What’s new?

Alongside other minor revisions to the Live Local Act, SB 1730 introduces two important new additions: A provision for religious institutions to add affordable housing and a clarification of parking minimums.

SB 1730 states that a board of county commissioners may approve residential development on parcels owned by religious institutions as long as at least 10% are considered affordable. Florida’s SB 1730 is the most recent bill in a growing movement known as Yes-In-God’s-Backyard (YIGBY), which seeks to expand housing supply through work with faith-based organizations. Whereas the original Live Local Act did not particularize developments on religious institution-owned property. Because religious institutions typically build low-income housing, they could play an important role in expanding supply for this income group. SB1730 opens an avenue for faith-based institutions to cooperate with local governments to make this potential supply expansion a reality.

The original Live Local Act also required localities to consider reducing the parking requirement on developments within a quarter-mile radius of a transit stop. Developments could receive at least a 20% reduction in their parking requirement if the proposed location was within half a mile of a major transportation hub easily accessible by pedestrian-friendly means and had available parking within 600 feet. Now, under SB 1730, instead of only requiring consideration, local governments must grant a 15% reduction in the parking minimum upon request of the applicant if the development is located within a quarter mile of a transit stop. Further, only one of the two aforementioned criteria must be satisfied for developments to qualify for the 20% reduction.

To date, there are 105 projects proposed under the Live Local Act, with the majority concentrated in the Miami area. These projects amount to over 31,000 additional units for the state of Florida. This bill has been a monumental step toward alleviating Florida’s shortage-driven sky-high home prices. The Live Local Act, in all its variations, has been successful in spurring development, but this legislation is still far from ideal; several problems remain.

First, while the Live Local Act dramatically expands the areas in which residential units can be built, it does little to address density expansion in places that are zoned as residential but only allow single-family detached homes. The 2024 version of the bill even explicitly restricted projects in the vicinity of single-family neighborhoods. In addition to expanding residential development areas not already zoned as such, addressing density restrictions in residential areas would complement the Live Local Act. Such reform can be made through allowing Accessory Dwelling Units (ADUs) statewide or expanding options for missing middle housing in residential areas as other states have done. Freeing housing markets via state-level preemption should not be limited to commercial centers but also should expand options in existing residential areas.

Second, SB 1730 does not go far enough in its YIGBY reform. Currently, it only encourages localities to consider allowing religious centers to build affordable housing, but takes no explicit steps to prevent localities from preventing religious organizations from building housing. California’s Senate Bill 4 is an example of a state making affordable housing development on land owned by religious organizations legal by right. Without a similar provision, it is unclear whether SB 1730 will be able to realize its full potential given the ease of avoidance.

Finally, by including an affordability requirement for units, the Live Local Act has inherited problems associated with inclusionary zoning since its inception. Specifically, enacting these policies distort markets, often materializing smaller additions to supply than could be seen under blanket zoning reform. Instead, expanding the areas in which residential development can happen without affordability requirements, while simultaneously providing assistance in the form of housing vouchers, may better expand supply and help alleviate Florida’s ongoing affordable housing crisis.

SB 180: Emergency provisions for impact fees

In addition to continuing zoning reform through SB 1730, in 2025 the Florida Legislature also amended the permitting process for rebuilding in wake of a natural disaster. SB 180 clarifies the impact fees that can be charged on rebuilding structures and establishes a statewide standard for post-storm permitting and rebuilding regulations enacted by local governments.

Impact fees are one-time fees charged to developers to make up for the additional strain on public facilities created by their projects. Impact fees fund local roads, schools, and emergency services among other public goods. Generally, impact fees are necessary to ensure that development pays for itself rather than adding the burden of new infrastructure onto existing residents via property taxes. Well-designed impact fees are proportional to the impact of the development for which they are charged. SB 180 takes steps to ensure that Florida’s impact fees are proportional in the wake of a disaster.

Specifically, SB 180 forbids localities from charging impact fees on the reconstruction of destroyed structures if the replacement does not increase the impact on public facilities. If it does, then any impact fee charged must be proportional to the increased strain on public facilities. This law prevents developments from being charged twice by the local government for the same public facilities and is key for maintaining the proportionality of these fees.

Additionally, SB 180 prevents localities from increasing barriers to construction after an emergency in two ways. First, it bars them from increasing their permitting and inspection fees for 180 days after a state of emergency is declared for a hurricane or tropical storm. Second, it prevents them from enacting a moratorium on development or making more restrictive amendments to land development regulations for one year after a hurricane makes landfall. This bill is a step in the right direction, but may be too broad to account for every area’s needs. After a disaster, it is vital that communities can be rebuilt without additional financial or regulatory strain from their governments. However, the general language of SB 180 has led this bill to receive some early pushback, namely from the American Planning Association’s Florida chapter and the New Smyrna Beach city commissioners.

These entities primarily oppose the state’s preemption of local authority over comprehensive planning in the aftermath of emergencies. In New Smyrna Beach, for example, the enactment of SB 180 into law would nullify their recent stormwater regulations. While these provisions may be broad, it is unclear whether stringent comprehensive plan requirements are the answer. Florida building codes already account for the state’s susceptibility to hurricanes and tropical storms. Construction experts in weather emergency-prone areas have been innovating and employing storm-resistant building technologies to grapple with their specific challenges. SB 180 ensures that builders all over the state can build back their communities without undue interference from local government.

Both SB 1730 and SB 180 are awaiting signatures from Governor Ron DeSantis to become law. Both bills, while having room for improvement, are promising steps toward a better housing policy landscape in the state of Florida.

The post Florida Senate Bills 1730 and 180 are solid housing reforms appeared first on Reason Foundation.

In 2024, 33,974 homes were completed in new buildings across the five boroughs, including both market-rate and affordable units, the highest total since 1965, and the first time since 1966 that completions surpassed 30,000. Brooklyn accounted for 40% of the city’s new housing, while Manhattan trailed behind Brooklyn, the Bronx, and Queens for the third consecutive year. But while production is happening, it’s not happening evenly. New development continues to be concentrated in working-class and low-income neighborhoods, while wealthier areas with strong infrastructure and job access have largely shielded themselves from growth through zoning and legal resistance.

Where housing gets built, and who it’s built for, shapes the impact that an increased housing supply can have on the city. Working-class neighborhoods are seeing more construction, but much of it is targeted toward higher-income renters. With limited new housing in areas like the Upper East and Upper West Sides, wealthier renters are increasingly turning to the outer boroughs, where access to transit still offers convenient commutes, to find new homes. That dynamic intensifies demand in working-class neighborhoods, raising prices and accelerating displacement. If more housing were built in high-opportunity neighborhoods, even at market rates, it could help absorb demand that’s currently spilling into lower-income areas. In other words, building where we haven’t built before would relieve the pressure where it’s building up the most.

In SoHo, for example, a 2021 rezoning aimed at creating about 3,500 new apartments, including an estimated 900 affordable units, became one of the city’s most hotly contested land use debates. It was the first major rezoning under the de Blasio administration to focus on a wealthy, majority-white neighborhood after years of targeting lower-income Black and Latino areas. Opponents argued that the plan would encourage luxury development and alter the neighborhood’s character, even though most past rezonings have focused on historically marginalized communities. The backlash was so intense that lawsuits and protests continued even after the City Council’s approval.

The Upper West Side tells a similar story. A proposed 775-foot tower at 50 West 66th Street faced years of legal challenges, community petitions, and zoning appeals. Critics denounced the project’s use of oversized mechanical voids to inflate height, even though it complied with existing zoning. Meanwhile, at 200 Amsterdam, developers assembled a gerrymandered 39-sided zoning lot to push their tower to 668 feet, sparking a drawn-out legal battle that reached the New York Supreme Court. A judge initially ordered the top 20 floors removed, but the decision was reversed on appeal. These projects ultimately progressed but faced years of delays and increasing costs. It also sent the message that even by-right development encounters challenges in affluent areas.

On top of all this is the cost of simply getting housing approved and built. According to Turner & Townsend, it now costs more to build in New York City than anywhere else in the world, averaging $5,723 per square meter. Zoning changes can take more than two years through the city’s Uniform Land Use Review Procedure (ULURP), and lawsuits under environmental laws can add two or three more. That six-year timeline can raise construction costs by more than a third, adding up to $67,000 per unit. Delays make it nearly impossible to provide affordable and middle-income housing without significant subsidies. Consequently, many developers will likely build only in areas with minimal resistance.

In a city where the most powerful neighborhoods can stall or kill housing with lawsuits, design complaints, and procedural roadblocks, it’s no surprise developers default to building in communities with fewer resources to push back. That’s exactly what’s happening. Working-class neighborhoods that have historically absorbed new housing are now facing growing pressure as higher-income renters move in, driving up rents and putting long-term residents at risk of displacement.

Rising demand and limited options have created pressure across the entire income ladder, not just at the bottom. Much of the new housing that is built is targeted toward high-income renters or tied to deeply subsidized units, leaving little for those in the middle. This “missing middle” includes moderate-income earners who earn too much to qualify for programs like housing vouchers or income-restricted affordable units, but not enough to afford market-rate rent in most neighborhoods. With few options available, many remain in rent-stabilized or modest older units that might otherwise serve lower-income families, further tightening supply at the bottom of the market.

Even rent control, which is intended to provide stability, can have unintended side effects that worsen the crisis. Because the benefit is tied to the unit instead of the renter, some tenants hold onto deeply discounted homes regardless of income level. Many of these apartments never return to the open market. And as demand spills over into the remaining unregulated stock, market rents climb even faster. Ironically, this pushes affordability further out of reach for the very people rent control was intended to help.

So yes, more housing is needed, but not just anywhere. The city continues to greenlight growth in specific neighborhoods while others remain off-limits, protected by outdated rules and political resistance. That uneven pattern deepens inequality and worsens the crisis for those already struggling.

To move forward, New York needs a more consistent, citywide framework that prevents wealthier areas from opting out of growth. That could mean strengthening state-level zoning mandates, reforming ULURP to limit discretionary approvals, or setting baseline density requirements for high-opportunity neighborhoods. Until the same rules apply across the board, efforts to address the housing crisis will continue to encounter the same roadblocks.

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In news reports, on social media, and even in state legislatures, housing market speculators have been catching some blame for high housing prices in the United States. Sen. Jeff Merkley (D-OR) introduced two federal bills in 2023 to restrict investors from buying houses, and at least half a dozen states have seen similar legislation. In February 2025, Rep. Adam Smith (D-WA) proposed the “HOPE for Homeownership Act,” which aims to impose additional taxes on hedge funds purchasing single-family homes.

There has been growth in the role of institutional investment in the housing market throughout the last 20 years, but speculation by major financial players is far from the primary culprit behind current sky-high home prices. Lagging housing supply remains the largest driver of high housing costs. Rather than being a cause, persistent high prices in the housing market have attracted these investors who are aware of the major shortage. While supply remains the most significant challenge to high home prices, a deeper look at the role of investors in the housing market can help us better understand the current crisis and how policymakers should proceed.

What is institutional investment?

Under the broadest definition, institutional investors are entities that purchase housing with the goal of making a profit. This is primarily done through flipping and/or renting out properties.

Many of these major players own housing as an asset, so the term “institutional” investors is an attempt to distinguish between small-scale, regional investors and those that may be large enough to induce a broader trend in the housing market. Despite thorough media attention, the definition of the term “institutional investor” seems to be different to everyone. Some consider the worth of the cumulative holdings of an entity. Others are more concerned with the quantity of units owned. Another approach still focuses on the status of ownership entities as “hedge fund taxpayers.”

The wide variance in definition has made data-driven analysis of the role of institutional investors especially challenging. Researchers at the Urban Institute have even created their own stratification system for investors in the single-family home market, where “mega investors” are those with over 1,000 units in diverse locations, “small investors” are those with between 100 and 1,000 units in diverse locations, and “local investors” are those that own over 100 units that are concentrated in one geographic area. The most common umbrella criterion that characterizes “institutional” is holding over 1,000 units, so this article uses this definition.

These large investors first made a substantial appearance in the aftermath of the 2008 financial crisis. In fact, before 2011, there were no investors who owned more than 1,000 units. After the housing market crash, investors anticipated a rebound and purchased thousands of foreclosed homes. Some of this market entry was even facilitated by government-sponsored entities like Fannie Mae. Some argue that this counterbalanced the mass exit of individual homebuyers and propped up a cascading housing market. Since this initial entry, housing has gained a reputation as an increasingly lucrative and stable investment. Today, major investors own about 2% of the total single-family housing stock in the United States. Observing purchases since 2008, transactions involving these types of players make up a small share of overall market activity (see Figure 1). While their presence seems insignificant on the aggregate, institutional investors have a substantial presence in some high-growth areas, especially in the south and southeast (see Figure 1).

Figure 1: Corporate Landlords Buy Only a Tiny Sliver of US Homes

Figure 2: Estimated Share of Single-Family Market Held by Investors with over 1,000 Homes in Selected Areas, as of 2022

The arguments against investors

Critics of major investors in the housing market have multifaceted concerns. First, they are worried that investment firms with massive amounts of capital will be able to outbid individuals in the market and therefore drive up prices. Further, they worry that through buying properties and renting them, institutional investors are detracting from the for-ownership supply and limiting homeownership opportunities for families.

Major investors do have substantial capital at their disposal, and their increased activity has presented an additional shock to demand in the single-family housing market. Standard economic theory suggests a price increase should follow, and it has. This is precisely what happened in the aftermath of the housing crisis. Economic theory also suggests, however, that in the absence of restrictions, supply should respond to this price pressure and expand until the price level falls. While the price increase is observed, in part due to the entry of investors, the predicted subsequent supply expansion has had a more difficult time manifesting. Persistent regulatory barriers, including zoning restrictions, have made adjusting to the rise in demand in a cost-effective way difficult or even impossible in many places. While increased presence and bidding in the housing market may have had some influence on the original price increase following the crash, the persistence of high home prices across the United States suggests an underlying supply-side problem with market adjustment. Beyond supply and demand, the argument for homeownership is based on principles.

Some believe that suburban neighborhoods should be a hub of homeownership, not renting. Often, major investors will rent out their single-family holdings for a steady stream of income and guaranteed long-term returns. However, renting in these single-family neighborhoods is nothing new. The Joint Center for Housing Studies analyzed the proportion of all renter households living in single-family homes. In 2001, before substantial entry, about 30% of renter households lived in a single-family home. By 2021, that number rose to 33%. This is an increase, and while not substantial, it presents one effect of investor entry into the housing market. Recent research suggests that the entry of institutional investors into a neighborhood is associated with a decrease in for-ownership properties and an increase in rentals. These rentals are occupied by lower-income individuals on average compared to the homeowners that surround them, though this isn’t always the case. While this trade-off has been documented, a relative increase in rental properties is not necessarily a negative thing.

Single-family rentals are an integral part of the housing stock and meet the needs of a specific kind of tenant. David Howard, chief executive officer of the National Rental Home Council, stated that “Single-family rental home providers offer residents a more affordable option to live in neighborhoods that offer the kinds of things families really care about—access to quality schools for their kids; proximity to good jobs; opportunities to be a part of a community. Why should it be that homeownership is the only avenue that makes these things possible?”

What are the investors saying?

The presence of institutional investors is undeniable, but they are a symptom of price pressure, not the cause. With a consistently suppressed supply through excessive regulatory burden, and the fallout from the 2008 financial crisis, upward price pressure made housing an extremely lucrative investment. Rising prices have signaled to investors that housing is a safe, reliable, and relatively low-risk investment. Investors themselves have revealed why they are entering the market.

In 2021, Jeff Bezos backed Arrived, a company that allows individuals to invest small amounts into the single-family rental market. Currently, their single-family residential fund has over 21 million dollars in assets, with 53 properties all over the country. This is just one of their several investment avenues. While not yet large enough to qualify as an “institutional investor” under the definition employed here, statements made by company heads give insight into the motivation behind housing market entry.

When initially asked about why he was launching this venture, the CEO, Ryan Frazier, noted that housing is a less volatile asset than alternatives, and that “the persistent demand for housing [has been] outpacing the supply of new homes over the last decade.” Stagnating supply and existing barriers to additional construction are what make entry into the housing market lucrative for investors. Should barriers be reduced, not only would prices fall, but it might spark a reduction in the presence of institutional investors.

Conclusion

The presence of institutional investors in the housing market has grown substantially in the past 15 years. Despite an inconsistent definition and mounting criticism of their involvement, these players are responding to price signals—regardless of whether those signals reveal an over or undervalued asset. Housing has gotten more expensive, and large firms are noticing. Rather than being a cause, the increased involvement of investors in the housing market should be a wake-up call to policymakers. Housing supply should be able to adjust to both the needs of the entire single-family rental and for-ownership sectors of the broader housing market. Policymakers must address the need to expand the housing supply rather than cracking down on investors.

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