For nearly 100 years, the Federal Reserve has been independent of politics. However, interest rates and housing affordability are heading into a critical reset in 2026 as the Trump administration attempts moves to make policy-driven changes to the Fed.
Government Interference and Its Impact on Housing Affordability
Limiting Institutional Access to Single-Family Homes
In the last few weeks, President Trump has signed an order limiting federal financing for institutional investors buying single-family homes.
This order restricts federally backed financing and approvals, changing who gets access to opportunities. Institutional ownership of single-family properties currently represents just 3% of the 16M SFRs owned as investments in the United States.
Quantitative Easing and Mortgage-Backed Securities
At the same time, Trump also released a proposal for quantitative easing, calling on Fannie Mae and Freddie Mac to buy up to $200 billion of mortgage-back securities with the goal of easing housing affordability. While large-scale MBS buying can create temporary relief, improve liquidity, and bring borrowing costs down, it’s still important to remember that this is not a structural fix for affordability, nor is it likely to produce permanently lower rates.
Shifting Opportunity Toward Individual Investors
Since the greater majority of SFRs are owned by small and mid-tier investors, this shift will be changing who gets access to opportunities within the market. As institutional capital steps back, more deals flow to individual investors who understand their markets, manage properties hands-on, and invest in cash flow. This shift favors disciplined investors and relationship-driven lenders. Fragmentation means more individual transactions, more financing needs, and a greater premium on underwriting quality and execution.
Changes Within the Federal Reserve Administration
Upcoming Leadership Vacancies and Political Influence
Another key factor at play is Fed Chaiman Jerome Powell’s plan to retire in May 2026 and board member Lisa Cook’s tenure is currently pending legal review. If both seats become vacant, this will give the Trump administration the chance to fill them—totaling at 5 overall seats appointed by this administration. While it will not give the Trump administration majority (as there are 12 seats total), it will still certainly give more favor toward it as the Fed continues to be influenced by politics.
Policy Intent Versus Long-Term Outcomes
At a high level, the intent is to increase access to homeownership by limiting the scale at which large institutions can acquire single-family homes. Whether the policy ultimately achieves that goal will depend on proper execution and strategy-based decisions from both the administration and the Fed.
The Impact of a Nationwide Housing Shortage
Rising Construction Costs and Supply Constraints
Part of this issue also falls into the rising costs of new construction. The price of labor costs and building material costs have gone up by 28% and 46% respectively over the last five years, creating larger barriers of entry for builders looking into new construction projects. With less homes on the market and less new homes being built, the housing market is becoming increasingly strained as it cannot keep up with the growing population in demand for housing.
Why Lower Rates Alone Won’t Solve the Problem
As the U.S. housing market continues to struggle with supply versus demand, the administration’s plan to drop the Fed funds rate to a lower percentage will not be enough to increase homeownership across the U.S.—simply because there are not enough homes for the population to buy, even if they were affordable.
The Inflation Risk of Additional Quantitative Easing
And while decreasing the funds rate may be initially appealing to potential homeowners, the shortage of supply would in turn make the price of homes themselves skyrocket. It would take additional, massive quantitative easing to help balance the scales—and even then, the potential of increased prices and inflation doesn’t fully disappear.
Investor Takeaway
For investors, the takeaway isn’t to chase headlines; it’s to understand timing and risk.
Market Outlook for Real Estate Investors
Operating in a Policy-Driven Rate Environment
Short-term rate compression can open windows of opportunity, but artificial demand has a history of reversing. Strong underwriting, realistic rent assumptions, and disciplined leverage matter more than ever in environments shaped by policy intervention. While supply is down, investors can focus on markets where local dynamics—including permitting, inspections, and execution timelines.
What Rate Compression Means for Borrowers
RTL rates are down at ABL at about 100 BPS year-over-year, and we’re expecting another 50-100 BPS compression in 2026, meaning even lower rates for borrowers. This is exactly where private lenders like ABL are built to operate, supporting investors with flexible capital, and a long-term view of the market that gives them the confidence to move through projects efficiently.