Institutional investors play a critical role in housing market liquidity. The proposed 21st Century ROAD to Housing Act would limit institutional ownership to seven years, mirroring Goldman Sachs' early share supply problem. When large investors face forced exit timelines, markets become less efficient. Builders lose reliable buyers for bulk inventory, reducing incentive to create new supply. The legislation aims to shrink institutional presence in housing, but history suggests this backfires. During 2008, builders desperately needed large-scale buyers to clear inventory and avoid bankruptcy. Restricting institutional capital access makes housing development riskier and costlier, ultimately reducing the supply needed to address housing shortages. Market efficiency requires liquid buyers with staying power.
