I have written extensively on the subject of housing prices over the past few years. Without a doubt, it’s one of the most pressing issues threatening the economic success of the American people, particularly younger Americans. Perhaps that is why a recent poll revealed that 91% of adult Gen Zers considered housing affordability an important factor when deciding their vote in the last presidential election, ranking it above issues like the overall economy, abortion rights, and gun control.
Perhaps that is also why in Jefferson City, there is growing bipartisan support to take action to reduce the cost of housing in the state. Missouri is considering legislative measures to restrict certain entities from acquiring residential real estate within its borders. Currently, Republican Joe Nicola and Democrat Doug Beck have both sponsored bills which would prohibit corporations and hedge funds from purchasing residential homes as investment vehicles. They argue that these organizations, many of which are not based in Missouri, or even the U.S. are driving prices up and making homeownership much more difficult.
While I agree action needs to be taken on this issue, as an avowed capitalist, I believe these efforts are a bit misguided. Laws like this attempt to lower prices by artificially reducing demand rather than organically increasing supply. Yes, reducing the number of buyers in a market can naturally lower prices, at least in the short-term. However, if we want a long-term reduction in housing prices the real solution is increasing the supply.
According to a recent study by Realtor.com, in 2025 the U.S. faces a housing shortage of nearly 4 million homes. That’s why, regardless of who is purchasing these properties, prices will remain high until this gap is narrowed.
There are several reasons why not enough homes are being built in the U.S. The most impactful of these being the high cost of construction. Shortages of skilled tradesmen, the rising costs of materials, and increased scarcity of suitable land all play a role.
Beyond construction costs, regulatory obstacles also contribute to the shortage. Lengthy permitting processes, excessive environmental compliance requirements, and restrictive zoning laws all hinder new housing projects. Construction companies must weigh the financial benefits of building homes against the risks of bureaucratic delays or cancellations.
Finally, economic uncertainty is discouraging builders from expanding supply. Interest rates, inflation, and unpredictable market conditions all factor into a company’s decision to invest in new construction.
If we truly want to lower housing prices, we must address these root causes. Part of the reason large investment firms are eager to buy existing homes is that they are betting these barriers to new construction will remain unresolved. In fact, threats of banning these companies from purchasing homes in the future may only accelerate their buying spree today, further driving up prices.
Ultimately, the path to making housing more affordable lies not in restricting who can buy homes, but in addressing the underlying supply shortage. Until these systemic barriers are removed, housing prices will remain elevated, and efforts to artificially control demand will likely do more harm than good. I personally believe a free and well-functioning market, supported by policies that encourage new home construction, remains the best way to ensure future generations can achieve the American dream of homeownership.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)