Stopping Wall Street From Taking Away The American Dream.
Democratic lawmakers in both chambers of Congress introduced a groundbreaking bill on Tuesday aimed at curbing hedge funds’ dominance in the U.S. single-family home market. The proposed legislation, known as the End Hedge Fund Control of American Homes Act of 2023, seeks to prohibit hedge funds from acquiring and owning single-family homes.
Under the provisions of the bill, hedge funds – defined as entities managing pooled funds from investors – would be required to divest all single-family homes from their portfolios within a 10-year timeframe. Furthermore, the legislation would ultimately bar such corporations from owning any single-family homes. To incentivize compliance, the bill imposes significant tax penalties during the transitional period, with the resulting revenue allocated to down-payment assistance programs for aspiring homeowners purchasing properties from corporate entities.
If enacted, this legislation could potentially disrupt a burgeoning segment of the housing market and bolster the inventory of single-family homes available to individual buyers. The measure responds to mounting concerns about the escalating costs of homeownership, which have placed this fundamental aspect of wealth accumulation beyond the reach of many Americans amidst surging home prices and interest rates.
Senator Jeff Merkley of Oregon, alongside Representative Adam Smith of Washington, spearheaded the bill’s introduction, emphasizing the urgent need to address the inequities exacerbated by corporate investment in residential real estate. In tandem with this legislation, Representatives Jeff Jackson and Alma Adams of North Carolina proposed the American Neighborhoods Protection Act, which mandates that corporate owners of more than 75 single-family homes pay an annual fee per property into a housing trust fund earmarked for down-payment assistance.
However, with Congress divided, the likelihood of these bills passing into law during this session remains uncertain. Nonetheless, proponents assert the importance of initiating a national dialogue on this critical issue.
The legislative push follows a recent investigative report by The New York Times examining the repercussions of corporate-backed investment in cities like Charlotte, North Carolina. The report highlighted how institutional investors, including hedge funds, have acquired a significant share of homes in cash transactions, often outcompeting prospective homeowners reliant on mortgage financing. This trend has been particularly pronounced in lower-priced neighborhoods with substantial Black and Latino populations, where investors have converted properties into rental units.
The rise of corporate involvement in the single-family rental market dates back to the aftermath of the 2008 housing crisis, when distressed properties became targets for institutional buyers. Since then, their influence has steadily grown, with institutional investors accounting for a notable percentage of single-family rentals nationwide, especially in more affordable markets like Charlotte.
Despite criticisms from lawmakers and housing advocates, industry representatives like David Howard, CEO of the National Rental Home Council, argue that the root issue lies in the inadequate supply of new housing. They contend that policies should prioritize incentivizing the production and development of new housing units to address the underlying challenges faced by prospective homeowners and renters alike.