This Is Not the Way to Make Housing More Affordable

Everybody wants housing to be more affordable. The question is how best to do that. President Donald Trump’s proposal — banning institutional investors from buying single-family homes — has undeniable populist appeal, but it would not do much to make it easier for Americans looking to buy a home.

The basic idea, straight out of Economics 101, is that with fewer buyers, sellers will have to reduce their prices. Unfortunately, that’s not the way it would work in the current housing market. Such a ban would mostly lead homebuilders, many of which are already struggling with profitability, to cut back on production. That would result in fewer homes being built without meaningfully improving affordability.