Single-family homes in a residential neighborhood in Miramar, Florida on October 27, 2022.
Joe Raedle | Getty Images News | Getty Images
A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for wealthy investors and consumers. Register to receive future editions, straight to your inbox.
The private investment firms of ultra-wealthy families may inadvertently find themselves in the crosshairs of President Donald Trump’s proposed ban aimed at barring “large institutional investors” from purchasing more single-family homes. While Trump’s announcement took aim at Wall Street landlords, and particularly private equity giants like Blackstone, Haynes Boone partner Vicki Odette told Inside Wealth that family offices aren’t necessarily off the hook.
Three-quarters of family offices in North America invest in real estate, with an average allocation of 18%, according to a survey released by Campden Wealth and RBC Wealth Management last year. Residential properties made up just under a third of the average family office’s real estate assets, according to the same report.
The consequences of Trump’s proposal depend on how it would define a large institutional investor, which has not yet been revealed. According to Odette, in recent years, Congress and government agencies have focused on the number of homes owned rather than the investor’s total assets or investment strategy.
A 2024 Government Accountability Office report on institutional investors focused on those who own more than 1,000 properties with four units or fewer. The threshold is even lower in the Stop Predatory Investing Act, introduced in March, which designates “disqualified single-family homeowners,” defined as taxpayers who directly or indirectly own 50 or more single-family residential rental properties.
“A lot of wealthy families would inadvertently fall into this category because they are real estate developers and they made their money in real estate,” said Odette, a partner at Haynes Boone who advises family offices, funds and institutional investors.
Family offices generally prefer multifamily housing and commercial developments, she said. However, some family offices, particularly in the South, have large portfolios of single-family homes located in suburban or rural areas, she said.
Michael Cole, managing partner of R360, an investing community for centimillionaires, said it was too early to say whether the ban would affect family offices. What’s more confusing is the fact that family offices are structured in different ways, he said.
“There is no such thing as a legal entity called a family office. It’s not a corporation, it’s not an LLC, it’s not an FLP,” he said, referring to family limited partnerships. “These are organizations that are managed according to the concept of a single-family office, but a single-family office is not a legal structure.”
Arielle Frost, a partner in Withers’ real estate practice, said family offices were unlikely to be affected immediately, with Wall Street landlords the main target. What’s unclear, she says, is whether politicians and lawmakers will continue to target other types of investors.
“The first strike is probably the most important, because it requires the support and momentum behind it,” she said. “The question then is, is this going to stop? ‘OK, we made our base happy, and now we’re moving on,’ or is this really something that the administration is interested in and is going to continue to focus on?”