Opinion | The Housing Crisis Doesn’t Have a Corporate Villain — It Has a Supply Problem

• “Stories can be compelling without being true… The scapegoat takes the blame for a complex problem.” — Jerusalem Demsas, The Atlantic

An unlikely point of agreement has emerged in the housing debate: President Donald Trump and California Governor Gavin Newsom are both blaming institutional investors for driving up home prices.

Trump has pledged to bar large investors from buying single-family homes, declaring that people should live in homes, not corporations. 

Newsom, in speeches and public remarks, has argued that large investment firms are driving prices upward and crushing the dream of homeownership for ordinary Californians.

When leaders across the political spectrum settle on the same villain, people often assume they must be correct.  However, in my view, it is often because the real problem is both harder to explain and harder to solve.

In this case, blaming institutional investors offers a politically convenient explanation for an affordability crisis that is, at its core, the result of chronic undersupply.

The story that housing costs are high because powerful financial actors are greedily cornering the market is emotionally satisfying. 

It assigns responsibility to a visible antagonist and spares voters and officials from confronting the uncomfortable reality that housing scarcity is largely self-inflicted.

As Atlantic journalist Jerusalem Demsas has written, “stories can be compelling without being true.” Scapegoat narratives, she warns, thrive precisely because they “take the blame for a complex problem,” allowing the deeper causes to fade from view.

That is exactly what is happening now. 

The latest version of the housing-villain narrative targets private-equity firms, hedge funds, and other so-called institutional investors, accused of outbidding families, hoarding homes, and driving prices beyond reach. 

The implication is simple: push these actors out of the market and affordability will return.

But as Demsas argues, the evidence does not support that conclusion.

At the national level, institutional investors account for a small share of single-family home ownership and purchases. 

Even in markets with relatively high investor activity, their footprint is far too limited to explain a nationwide affordability collapse affecting cities large and small, coastal and inland, fast-growing and stagnant alike.

What does explain that collapse is something far less dramatic and far more politically uncomfortable: the United States has failed, for decades, to build enough housing. 

Restrictive zoning, procedural delays, layered approvals, and endless legal challenges have constrained supply in precisely the places where demand is strongest. 

As Demsas writes bluntly, “housing is primarily unaffordable in this country because of persistent undersupply.” Investors are not the cause of that undersupply but rather are responding to it.

While targeting institutional investors may satisfy public anger, it does little to address the conditions that allow prices to rise in the first place.

In a market where housing is abundant, investors cannot meaningfully push up prices; competition and supply discipline prevent it. 

In a market where housing is scarce, prices rise regardless of who owns the homes.

That does not mean corporate landlords never cause harm. 

Large investors are more likely to file evictions, extract fees, and neglect maintenance. Those are real problems, and they are worth addressing through tenant protections, code enforcement, and transparency requirements.

Cracking down on bad landlord behavior does not address the real cause of high housing costs, which is that there are not enough homes.

Demsas is particularly clear about how misleading statistics are often used to sustain the investor-blame narrative. 

Reports claiming investors bought 40 percent of homes in a given market frequently rely on expansive definitions that include small landlords, individuals purchasing through LLCs, house flippers, and even vacation-home buyers. 

Once you separate those issues, it becomes clear that institutional investors are not driving the market on their own, but are responding to the same incentives as everyone else.

Those incentives are created by scarcity. 

In markets where housing supply is artificially constrained, prices rise and investment flows precisely because returns are high. 

Investors are responding to housing scarcity, not causing it, a point even one large investor acknowledged in an SEC filing that praised tight supply for boosting rents and prices while warning that more construction would cut into profits.

This reality poses a direct challenge to the political framing offered by both Trump and Newsom.

Even if institutional investors were barred tomorrow from buying another single-family home, the housing shortage would remain, with prices still driven by too much demand and too little supply. First-time buyers and renters would still be competing for too few homes—the villain would change, but the outcome would not.

Blaming investors is appealing not because it is accurate, but because it is easy, letting leaders look tough while avoiding the land-use rules, regulations, and local politics that actually caused housing scarcity—and it neatly fits populist narratives on both the left and the right.

This misdirection reflects another structural problem that Demsas identifies: housing policy is often decided in local processes that shut out the people most harmed by scarcity.

Decisions are dominated by well-housed homeowners in low-turnout settings, while renters, displaced workers, unhoused residents, and younger households have little voice, making scarcity politically durable because those who pay its costs lack power over the rules that sustain it.

Scapegoating investors allows leaders to sidestep this reality. 

It diverts attention from the uncomfortable truth that housing scarcity is maintained by local veto points, procedural hurdles, and political systems that privilege stability over access.

As Demsas cautions, false narratives are dangerous because they distract from real solutions.

Housing affordability will not be restored through symbolic bans or convenient villains.

It will be restored, if at all, by building more housing and reforming the systems that govern land use. 

That work is less satisfying than railing against Wall Street, but it is also the only path grounded in evidence.

When politicians across the ideological spectrum converge on the same explanation, it is worth asking not whether the explanation feels right, but whether it is true. 

In housing, the answer is clear: institutional investors did not create the crisis—America’s failure to build did.

Until leaders are willing to say that plainly—and act accordingly—blaming investors will remain what it has always been: a distraction from the real work of making housing affordable again.

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