Family offices could be hit in Trump ban on investors buying homes

A recent proposal by President Donald Trump to ban “large institutional investors” from buying single-family homes has raised concerns among private investment firms of ultra-rich families. While the announcement primarily targeted Wall Street landlords, such as private equity giants like Blackstone, experts warn that family offices may also be inadvertently caught in the crosshairs.

The proposal’s impact on family offices largely depends on how it defines a “large institutional investor.” Currently, this definition is unclear, and it is uncertain whether it will be based on the number of properties owned, total assets, or investment strategy. According to Vicki Odette, a partner at Haynes Boone, recent Congressional and government agency focus has been on the number of homes owned, rather than the investor’s total assets or investment strategy.

Family Offices and Real Estate Investments

Family offices, which manage the financial affairs of high-net-worth individuals and their families, often invest in real estate. A survey by Campden Wealth and RBC Wealth Management found that three-quarters of family offices in North America invest in real estate, with an average allocation of 18%. Residential properties make up approximately 30% of the average family office’s real estate holdings. While many family offices prefer multifamily housing and commercial developments, some have significant portfolios of single-family homes, particularly in suburban or rural areas.

Odette notes that there are many rich families who could inadvertently fall under the proposed ban due to their real estate investments. “There’s a lot of rich families that would fall into that category inadvertently because they are real estate developers and made their money in real estate,” she said. The threshold for what constitutes a “large institutional investor” is still unclear, but recent reports and proposed legislation suggest it could be as low as 50 single-family residential rental properties.

Potential Impact on Family Offices

Experts are divided on whether the proposed ban will affect family offices. Michael Cole, managing partner of R360, an investment community for centimillionaires, believes it is too early to tell. “There is no legal entity called a family office. It’s not a corporation, it’s not an LLC, it’s not an FLP,” he said, highlighting the complexity of family office structures. Arielle Frost, a partner in Withers’ real estate practice, thinks family offices are unlikely to be immediately affected, as the primary target is Wall Street landlords. However, she notes that it is unclear whether politicians and legislators will continue to target other types of investors in the future.

As the proposal moves forward, family offices and investors will be watching closely to see how the definition of “large institutional investor” is finalized and how the ban is enforced. With the potential for significant impact on the real estate market, it is essential for family offices and investors to stay informed and adapt to any changes in the regulatory landscape.