New research from the McCombs School of Business at the University of Texas identifies foreign investment as a measurable driver of housing unaffordability — one that operates separately from the supply-side constraints that dominate most policy discussions.

The McCombs study, published 26 June 2026, finds that international capital flowing into residential real estate, combined with local zoning restrictions, pushes prices upward faster than new construction can match. Here's the key detail: the research is consistent with a 2024 paper in the Journal of Economic Geography which found that foreign investment reduces housing affordability and vacant units — without triggering any measurable increase in new building. Capital is being absorbed without prompting more homes to be built.

The mechanism is straightforward. When investment funds or overseas buyers view residential property as a financial asset rather than a home, they increase demand for existing homes without sending a signal for developers to build. Vacancy rates drop. Prices rise. Local residents — especially first-time buyers and renters with lower incomes — find themselves locked out of markets they might have accessed a decade earlier.

A Pattern Across Multiple Countries

This is not confined to one place. In Portugal, Reuters reported in 2023 that since 2015, short-term rental platforms, new hotels, and foreign investment groups buying entire residential blocks have reshaped the housing market — with direct effects on affordability for younger Portuguese residents. Spain has experienced similar pressure: data from 2025 showed US buyers paying the highest prices of any foreign group for Spanish property and leading purchases in several central regions.

Scholars cited in The Regulatory Review in August 2024 documented the same demand-side pressure in US markets already strained by limited housing supply. The geographic spread — North America, Western Europe, Southern Europe — suggests this is a structural pattern rather than a local issue.

Different Countries Have Tried Different Solutions

Governments have used different approaches. Canada's housing minister called as early as December 2021 for a temporary ban on foreign home buyers alongside aggressive city rezoning — a two-part strategy acknowledging that restricting demand alone cannot solve a housing shortage. An MDPI-published study examined how countries could design strategies to capture economic benefits from foreign investment while preventing residential market distortions — a framing that at least recognizes a trade-off exists rather than treating inbound capital as purely good.

In the United States, a separate supply-side problem has emerged. A Buy American provision requiring most materials used in federally funded affordable housing projects be domestically produced is now fully in effect, and AP News reported in March 2026 that the requirement is causing construction delays. The original intent — supporting domestic manufacturing — is different from solving housing affordability, and these two goals are now in tension. When a rule designed to protect one industry group slows construction of the housing type most needed by low-income residents, the real costs fall directly on those people.

What This Research Actually Tells Us

The value of the McCombs work, alongside the Journal of Economic Geography findings, lies in testing something precisely. Housing affordability debates have long swung between two camps: supply-side thinkers who say "build more, prices fall" and demand-side advocates who support tools like rent control, which most economists view with caution. Foreign investment introduces a third element: outside demand that does not respond to local income levels and is unaffected by local construction activity.

The research does not claim that foreign investment is the main driver everywhere, and policymakers should avoid using it as a universal explanation. Local zoning rules, construction cost inflation, and the treatment of housing as a financial product by domestic investors all remain significant factors. But the evidence that cross-border capital reduces affordability and vacancy without spurring new construction is now documented across multiple studies and geographies. That is a harder argument to dismiss than it was three years ago.

The practical implication is that building more homes alone may not be sufficient in markets with heavy foreign investment. Rezoning and relaxing zoning rules are necessary but not enough if a large share of new units are absorbed by investors with no plan to occupy them. More lasting solutions likely combine supply-side reforms with targeted rules on non-resident ownership — a combination Canada suggested in 2021 and several European cities have since adopted.

The timing of the McCombs research gives it real weight. This policy combination is under active debate in multiple legislatures right now, so these findings have immediate relevance.