New legislation introduced by Democrats in both chambers of Congress seeks to prevent hedge funds from purchasing single-family homes.
The End Hedge Fund Control of American Homes Act of 2023 was presented in the House by Rep. Adam Smith (D-WA) and in the Senate by Sen. Jeff Merkley (D-OR). The lawmakers cited a 2022 Urban Institute study that found that large hedge funds and other institutional investors owned roughly 574,000 single-family homes, exacerbating the shortage of available and affordable homeownership opportunities.
If the bill is signed into law, it would ban hedge funds from owning these types of homes and require them to sell at least 10% of the total number of single-family homes they currently own to families per year over a 10-year period. After a 10-year full phase-out, the lawmakers added, hedge funds will be completely banned from owning any single-family homes.
“In 1971, my father was able to buy the house I grew up in for $15,000 on the salary he earned as a baggage handler at SeaTac Airport,” said Smith. “That same house would cost nearly $500,000 today, yet wages for workers like my father have not kept up. Too many families in the Puget Sound region and across the country are struggling to afford to rent or buy a home. This crisis has been exacerbated in recent years by an increasing number of large investors purchasing a significant percentage of single-family homes, squeezing out prospective buyers.”
“The housing in our neighborhoods should be homes for people, not profit centers for Wall Street,” said Merkley. “Yet, in every corner of the country, giant financial corporations are buying up housing and driving up both rents and home prices. It’s time for Congress to put in place commonsense guardrails that ensure all families have a fair chance to buy or rent a decent home in their community at a price they can afford.”
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So the hedge funds that own SFRs simply create a separate corporate entity to which they sell the homes, since the poorly prepared law applies to hedge funds not corporations, LLCs, general partnerships or other nonhuman entities. Where are the renters, who do not wish to buy, going to find a single family home? Not to mention, is this not unconstitutional?
Did these proponents of this legislation not take or flunk basic civics class?
Every time the government creates what they think are good laws, something breaks and the taxpayers end up footing the bill. What we really need, are low taxes and less restrictive zoning laws. Essentially, less government intervention.
This bill is way overdue. It’s not a level playing field at all. Properties owned by hedge funds get large tax breaks that the regular homeowners do not. And contrary to what they claim, hedge funds do not increase the supply of housing by what they’re doing. Also, zoning restrictions need to be addressed, so that affordable homes can be built.