Ahead of tonight’s State of the Union address by President Trump, Senate Democrats put forth a proposal that rivals Trump’s call to restrict institutional investors and corporations from buying up single-family homes.
Last month, Trump signed an executive order restricting large institutional investors that buy single-family homes from accessing federal housing programs, including secondary market securitization through Fannie Mae and Freddie Mac.
The new Democrat bill, dubbed the American Homeownership Act, would prevent institutional investors and corporations from claiming federal tax deductions for depreciation and mortgage interest payments. These entities would be prohibited from obtaining federally backed mortgages or buying foreclosed homes sold by Fannie Mae, Freddie Mac, and other federal agencies.
However, the bill has some carve-outs, notably by allowing institutional investors and corporations that build and own multifamily housing to keep tax benefits for that new construction. Entities that own federally funded affordable housing, including through the Low Income Housing Tax Credit, would also keep their tax benefits.
Furthermore, those entities that are building new single-family homes will be permitted to keep the tax benefits for five years, while those purchasing homes that are uninhabitable and require significant capital investment will keep their tax benefits for rehabilitating those properties.
The bill differentiates between the large investors and what the Democrats call “small mom-and-pop landlords who are more likely to charge affordable rents, live in the community, and invest in the homes they own.” The latter would not be impacted by the bill’s proposed restrictions.
“Today Democrats are introducing legislation to stop Wall Street from snapping up homes in bulk and jacking up rent for families,” said Sen. Elizabeth Warren (D-MA), the Ranking Member of the Senate Banking Committee. “This bill will take on predatory landlords while making investments to increase housing supply and boost homeownership for Americans.”
Sen. Jeff Merkley (D-OR), the ranking member of the Senate Budget Committee, blamed hedge funds for “driving up home prices and rents across America as they gobble up single-family homes. They are a significant factor in killing the dream of home ownership and must be stopped. Even President Trump has acknowledged the problem. I’ll work with anyone, on either side of the aisle, who is serious about driving down home prices and rents.”
