President Donald Trump announced a proposal to ban "large institutional investors" from buying more single-family homes.
This move is primarily aimed at Wall Street landlords and private equity firms, such as Blackstone. However, the impact on family offices, which are private investment firms for ultra-wealthy families, remains uncertain.
A survey conducted by Campden Wealth and RBC Wealth Management found that approximately 75% of family offices in North America invest in real estate.
These family offices have an average allocation of 18% of their portfolios tied up in real estate ventures. Notably, residential properties account for just under one-third of the average family office's real estate holdings.
The consequences of Trump's proposed ban hinge on how "large institutional investor" is defined. This definition has not yet been revealed.
According to Vicki Odette, a partner at Haynes Boone, recent legislation has focused on the number of homes owned rather than the investor's total assets or investment strategy.
A report by the Government Accountability Office in 2024 highlighted that institutional investors owning more than 1,000 properties with four units or less were under scrutiny.
Additionally, the Stop Predatory Investing Act introduced in March 2024 sets the threshold even lower, targeting those who own 50 or more single-family rental properties.
Experts suggest that many wealthy families could fall into the proposed ban's category inadvertently, especially those involved in real estate development. Odette noted that family offices often prefer multifamily housing and commercial developments.
However, some family offices, particularly in the South, hold significant portfolios of single-family homes in suburban or rural areas.
Michael Cole, managing partner of R360, an investment community for centimillionaires, remarked that it is too early to determine how the ban will affect family offices.
He pointed out that family offices have various structures, making it difficult to pinpoint their impact. There is no specific legal entity called a family office; rather, it is a concept that can include various organizational forms.
Arielle Frost, a partner in Withers' real estate practice, added that family offices are not likely to be affected immediately, as the primary target of the ban is Wall Street landlords.
However, she expressed concerns about whether legislators might extend their focus to other types of investors in the future. "The first strike is probably the most important," Frost said, noting that the momentum behind the ban could either continue or fade away.
