Want lower home prices? Cut incentives for house investors

"Basic economics tells you that if you lower the demand for a product, the price should fall. Limiting financial incentives for housing investors could increase the share of homes owned by the folks who live there. Consider a new study from the American Enterprise Institute. It notes that favorable financing available to small-scale house investors nationwide may provide 10% more buying power than traditional mortgages offered to the general public."

"The study asks "whether federal mortgage finance policy should subsidize small-scale investors competing for the same starter homes sought by first-time buyers, particularly when government-backed credit lowers investors' cost of capital and strengthens their ability to outbid first-time borrowers for starter-home stock." Yes, it's not Wall Street giants gobbling up a wannabe homeowner's shot at the American dream. Investors of all sizes create competition for California house hunters, particularly in the state's more affordable communities."

"That's what my trusty spreadsheet found after reviewing a BatchData report from the third quarter of 2025 that calculates investor ownership of houses and townhomes nationwide. Investors in this study include everything from giant companies controlling thousands of houses to folks with a small collection of rentals to short-term rental operators to people with a second home. Condo ownership was not included. By this math, investors of all sizes own 1.28 million houses statewide - 17% of California's supply."

Favorable financing for small-scale house investors can provide roughly 10% more buying power than traditional mortgages, increasing investor competitiveness for starter homes. Government-backed credit can lower investors' cost of capital and strengthen their ability to outbid first-time buyers for starter-home stock. Investors of all sizes create competition in more affordable California communities. Investor types include large corporate landlords, small rental owners, short-term rental operators, and second-home holders, with condos excluded. Investors own about 1.28 million houses in California, representing approximately 17% of the state's house and townhome supply.

Read at The Mercury News