In a surprising alignment that transcends typical political divides, California Governor Gavin Newsom and former President Donald Trump are both pointing fingers at corporate landlords and institutional investors for exacerbating the nation’s housing affordability crisis. This unexpected consensus marks a significant moment, as two prominent political rivals find common ground on a highly populist message: Wall Street is largely responsible for making homeownership unattainable for many Americans. This article delves into their proposals, the economic realities, and the profound political implications of blaming big finance for housing woes.
An Unlikely Alliance Against Corporate Landlords
Governor Gavin Newsom is poised to unveil a bold new strategy during his upcoming State of the State address, focusing on regulating corporate entities that purchase and control vast swaths of residential properties. His office indicates a pivot towards a more populist stance, proposing measures to curb the influence of large investors. These could include enhanced state oversight, stricter enforcement, and potentially significant alterations to California’s tax code, all aimed at fostering more affordable homeownership for residents.
A source from the Governor’s office emphasized the core concern: “When housing is treated primarily as a corporate investment strategy, Californians feel the impact. Prices go up, rents rise, and fewer people have a chance to buy a home.” This sentiment echoes the growing frustration among the electorate regarding escalating housing costs.
Concurrently, Donald Trump recently used his social media platform, Truth Social, to advocate for similar action. He declared immediate steps to “ban large institutional investors from buying more single-family homes.” This announcement notably triggered a sharp decline in the stock prices of major publicly traded residential investment firms. Trump urged Congress to enact such a ban and promised further housing policy details at the World Economic Forum in Davos. While Newsom’s approach seems to favor regulation and curbing rather than an outright ban, the shared target of “Big Landlord” is unmistakable.
Political Foes, Shared Rhetoric: A Deeper Look
The agreement between Newsom and Trump on this issue is particularly striking given their frequent and often acrimonious disagreements across a spectrum of policies. Their political rivalry has manifested in numerous high-profile clashes. For instance, Newsom has been a vocal critic of the Republican Party’s role in potential government shutdowns, directly attributing blame to them for failing to reach spending agreements and threatening crucial programs like affordable healthcare initiatives. He has explicitly stated that a shutdown under a Republican-controlled House, Senate, and White House would be “on them.”
Similarly, Trump has repeatedly criticized California’s leadership, including Newsom, often using inflammatory rhetoric. During the state’s severe wildfire crises, Trump made controversial claims, blaming California’s “liberal policies” for the fires and threatening to withhold federal aid with “unprecedented” conditions. Newsom vehemently opposed such conditional aid, calling it “playing politics with people’s livelihoods.” Moreover, their conflict escalated dramatically over immigration enforcement, with Newsom branding Trump’s deployment of federal troops to Los Angeles as a “deranged fantasy” and launching a lawsuit, while Trump accused California of harboring “migrant invasions.” These past conflicts underscore the unusual nature of their current alignment on housing.
Despite their deep ideological chasm and history of opposition, both leaders are tapping into a powerful populist undercurrent. They recognize that blaming distant, wealthy entities like Wall Street for tangible local problems like housing affordability resonates deeply with struggling voters. This political maneuvering suggests a strategic response to widespread concerns, irrespective of concrete policy details or economic nuances.
The Economic Reality: Is Wall Street the True Culprit?
While the political rhetoric is clear, the actual economic impact of institutional investors on the housing market is a subject of considerable debate among experts. Many housing industry professionals, economists, and policy researchers express skepticism about the extent to which corporate landlords are the primary cause of the affordability crisis.
Dr. Caitlin Gorback, an economist from the University of Texas at Austin, suggests that institutional investors might be “more of a symptom of the affordability crisis than they are a perpetuator of it.” Research on this topic is complex, with mixed findings. Some analyses indicate that when companies convert owner-occupied homes into rentals, it can increase the supply of rental units, potentially exerting downward pressure on rents. However, simultaneously, it removes homes from the purchase market, which can contribute to higher home prices.
In California specifically, the scale of institutional ownership is often exaggerated. Data from the California Research Bureau shows that companies owning at least 10 properties account for less than 3% of all single-family homes in the state. Furthermore, firms with portfolios of 1,000 units or more own a mere 20,066 homes statewide. For perspective, California has over 16 million rental units. Large institutional players like Invitation Homes, Blackstone, and Progress Residential primarily targeted markets with lower prices and rapid population growth following the Great Recession, a profile that doesn’t fully describe California’s historically expensive real estate market.
Nuance in Impact: Rentals vs. Ownership Opportunities
The conversion of single-family homes into rentals by institutional investors presents a nuanced picture. On one hand, it undeniably reduces opportunities for aspiring homeowners to purchase a coveted single-family residence. This directly impacts the dream of homeownership for many Californians.
However, Dr. Gorback points out an often-overlooked benefit: it creates more opportunities for “priced-out renters” to live in single-family homes. These homes are frequently located in more affluent, higher-resourced neighborhoods—areas traditionally accessible only to those who could afford to buy. This offers a chance for greater socioeconomic and racial integration in communities that might otherwise remain exclusive.
California has seen previous legislative attempts to address this issue. For nearly a decade, state Democrats have proposed bills to track or ban institutional investor practices. Former Governor Jerry Brown vetoed a bill in 2018 seeking a registry for institutional investors, arguing that data collection wouldn’t halt purchases. More recently, in 2024, bills proposing outright bans on large investors buying single-family homes for rent, or prohibiting developers from selling entire new subdivisions to investors, all failed in committees. Assemblymember Alex Lee, a proponent of such legislation, expressed surprise at finding common ground with Trump, noting that Democrats need to “wake up to this populist, but righteous, position.”
The Political Appeal of Blaming Big Money
Regardless of the complex economic realities, “inveighing against big monied investors for the high cost of housing” holds immense political appeal. Stan Oklobdzija, a public policy professor at UC Riverside, characterizes it as “archetypical cheap talk”—a way to appear active without necessarily delivering substantive solutions. Blaming a clear, wealthy adversary simplifies a multifaceted problem, making it highly attractive across the political spectrum, from progressive New York Rep. Alexandria Ocasio-Cortez to conservative figures like Senator J.D. Vance.
For politicians like Newsom, expected to contend for the presidency in 2028, this populist stance aligns with a broader strategy. His shift from primarily focusing on boosting construction over the past seven years to now targeting corporate landlords represents a significant policy evolution, aiming to connect with an electorate deeply concerned about everyday affordability. Similarly, Trump’s dramatic pronouncements resonate with his base and reinforce his image as a champion of the working class against powerful elites. The real challenge, however, lies in translating this shared populist sentiment into effective, economically sound policy that genuinely improves housing affordability for Californians and Americans nationwide.
Frequently Asked Questions
Why are Governor Newsom and Donald Trump proposing regulations on institutional housing investors?
Both Governor Newsom and Donald Trump are responding to widespread public concern over housing affordability. They argue that institutional investors are buying up large numbers of homes, treating housing as a corporate investment rather than a community asset. This practice, they claim, drives up prices, increases rents, and makes homeownership more difficult for ordinary citizens. Their proposals, though differing in specifics, leverage a populist message that blames “Wall Street” for the housing crisis, resonating with voters across the political spectrum.
How widespread is institutional investor ownership of single-family homes in California?
Despite the significant political rhetoric, institutional ownership of single-family homes in California is relatively small. According to an analysis by the California Research Bureau, companies owning at least 10 properties account for less than 3% of all single-family homes in the state. Furthermore, firms with portfolios of 1,000 units or more own only about 20,066 homes across California. This suggests that while these investors exist and have an impact, they represent a small fraction of the state’s overall housing stock, which includes over 16 million rental units.
Do experts agree that institutional investors are the primary cause of California’s housing crisis?
Many housing industry professionals, economists, and policy researchers are skeptical that institutional investors are the primary cause of California’s housing crisis. Economists like Dr. Caitlin Gorback suggest these investors are more a “symptom” than a “perpetuator” of affordability issues. Research is mixed; while corporate buying can reduce available homes for purchase and increase prices, it can also boost rental supply, potentially putting downward pressure on rents. Experts often point to broader market conditions, lack of new construction, and regulatory hurdles as more significant drivers of the affordability crisis.
Conclusion
The surprising confluence of Governor Newsom and Donald Trump in blaming Wall Street for the housing crisis highlights a potent political issue that transcends traditional party lines. While their shared populist message resonates deeply with an electorate struggling with affordability, the economic realities are far more complex. Experts caution that institutional investors may be a symptom rather than the root cause, and their actual impact in California remains relatively small. As both leaders advance their proposals, the challenge will be to move beyond rhetoric to implement solutions that genuinely address the intricate dynamics of housing affordability, balancing market forces with the fundamental need for accessible and affordable homes. The coming months will reveal whether this unlikely consensus can translate into meaningful policy, or if it remains largely a politically expedient distraction from deeper systemic issues.
