Housing affordability is becoming a major concern as home prices soar in California and across major metropolitan areas across the country. Some people are blaming real estate investment trusts (REITs) — major financial companies that buy up homes to rent. But the real culprit is local zoning regulations that artificially restrict the construction of new homes.

The concern about REITs is that they are driving up home prices as they gobble up real estate to rent. Higher prices in turn prevent lower-income households from becoming homeowners, denying them access to what is often a necessary investment for acquiring generational wealth.

This concern is misguided, and it isn’t supported by the data. The truth is home values have been increasing at a fairly constant trajectory since long before REITs held a measurable share of mortgage assets. And despite the recent growth of REITs, they still hold only a tiny percentage of mortgages and properties.

Spiraling home prices do make saving up for a down payment while paying rent difficult. But it clearly isn’t the REITs driving real estate values beyond the price range of Americans. REITs are simply helping make marginal adjustments to housing stocks to meet the needs of households looking to rent, given the conditions of the housing market.

Who are these renters? In 2020, only about 1/3rd of renters were households with incomes above $70,000. So most of the demand for rental housing comes from lower-income households. These households are overwhelmingly comprised of young people or those with no family — people who are still establishing themselves financially or those who simply may not need the extra space. They also include many retiree households, who often aren’t looking to purchase a home.

There are, of course, households who are ready to purchase a home but cannot afford to do so. While that’s certainly frustrating, it isn’t new. Homeownership even among low-income groups in the U.S. has remained remarkably constant since the mid-1990’s (also see here) despite the emergence of REITs. In fact, mortgage payments for the median new U.S. home may even have become more affordable compared to median income. And, the strong record of U.S. economic mobility means that today’s low-income households saving up for a down payment stand a good chance of becoming the higher-income homeowners of tomorrow.

If it is not REITs putting houses out of the reach of some Americans, what is? The culprit is local governments that are restricting the supply of residential construction with onerous zoning laws and building codes, despite increasing demand for homes.

The primary reason local governments are restricting the supply of housing may be precisely because homeownership is seen as an investment. When homeowners feel entitled to appreciating values, they may see new residential developments as a threat to home prices in their neighborhoods. Thus, they are more likely to support cumbersome zoning restrictions and building codes which hamper the pace of new home construction. Pushing homes as an investment may also encourage homebuyers to purchase outside of their price range.

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Homes should be more appropriately viewed as a major consumption good; one requiring lots of maintenance. Individuals seeking to acquire generational wealth should be encouraged to invest in indexes of stocks, bonds, and yes, even REITS, rather than betting their family fortune solely on a home; the value of which is heavily dependent on the continued artificial restriction of local housing growth.

The solution to high real estate values is not to ban REITs. Metropolitan governments concerned about their residents struggling with housing affordability, such as those in California, should remove burdensome regulatory restrictions that are needlessly hampering the construction of new homes in their cities. But accomplishing this may require disabusing people of the belief that a home is an investment.

Daniel J. Smith is the director of the Political Economy Research Institute at Middle Tennessee State University and professor of economics at the Jones College of Business. Twitter: @smithdanj1