New executive orders about homeownership, the housing market, and residential development

President Trump has issued 256 executive orders so far in his current term, with more than 30 since our last big recap in October. Trump has zeroed in on homeownership, the housing market, and residential development with three executive orders in recent months.

Wall Street investors crowding out families seeking to buy homes

One aims to prevent “large institutional investors” from buying “single-family homes” but tasks the Treasury Department with determining the definitions for those two phrases. Since 2008, the number of single-family homes owned by large corporations and leased for rent has ballooned. Institutional investors began buying foreclosed properties and renting them out. The Government Accountability Office (GAO) reported that before 2011 an investor owning more than 1000 single family properties was virtually unheard of, but in 2022 there were 32 investors who owned more than 1000 single family properties with 450,000 homes in total. This is only about three percent of the national market, but tends to be concentrated in densely populated areas. The Executive Order calls for narrow exceptions for build-to-rent homes, a model which many large institutional investors like American Homes 4 Rent and Invitation Homes have pivoted towards in the last couple of years.

Streamlining mortgage lending

Another instructs federal regulators to review and potentially revise financial regulations around mortgage lending with the goal of establishing a more modernized and cost-effective mortgaging process. The order suggests provisions to streamline the mortgaging process (such as modernizing disclosure laws and signature requirements to allow for more digital processes), shift the focus of oversight towards ability-to-repay instead of technical compliance, and adjustments to capital requirements (the amount of liquid cash a bank has to have on-hand compared to the amount of its total loan portfolio).

The order doesn’t change any rules, but advises regulators to consider these changes, so it remains to be seen how new rules might influence access to mortgages. Community banks, credit unions, and associated industries have been asking for these types of changes for a long time, and appear optimistic about the implications of incoming changes. However, consumer advocacy groups warn that reductions of regulatory oversight could enhance vulnerabilities that contributed to the 2008 financial crisis, and that reducing some reporting requirements limits data collection which is used to determine whether banks are engaging in discriminatory lending. CATO Institute calls it “better than nothing”, acknowledging that it has the right idea in identifying some of the issues with current lender requirements, but misses the mark on truly addressing some of those concerns.

Making residential development less expensive

A third order instructs federal agencies to find ways to reform, eliminate, or otherwise limit enforcement of some regulatory requirements that increase the cost of the development of housing. The goal is to lower the costs and shorten the timelines associated with building housing, making these projects more appealing to developers and investors and lowering ownership costs. Some environmental requirements involve lengthy permitting processes and expensive efficiency baselines. This order instructs the Environmental Protection Agency to review requirements related to bodies of water to reduce construction costs and barriers to insurability, and other agencies to consider eliminating rules that constrain residential development. Trump recommends elimination or reform of several programs related to affordable housing, including rules on development density, Reconnecting Communities Pilot Program, Pathways to Removing Obstacles to Housing Program, and guidelines for lending on manufactured homes and low-balance mortgages.