An aerial view of suburban homes.

Lawmakers target hedge-fund homebuyers 

The bill, which would give large-scale corporate investors 10 years to unload the homes they own or face massive penalties, faces long odds.

December 8, 2023
2 minutes

A bill proposed this week by several Democratic lawmakers would prohibit large corporate investors from buying single-family houses — and force them to sell the ones they already own.

The End Hedge Fund Control of American Homes Act of 2023 targets partnerships, corporations and real estate investment trusts with $50 million or more in net value or assets, with exemptions for nonprofits and builders.

What would be required? Hedge funds would have a decade to divest themselves of the homes they own, at a rate of 10% per year. If they don't, the penalty would be a tax of 50% of the fair market value of each property they continued to hold. Hedge funds would also need to report new purchases of single-family homes or face a $20,000 fine.

Why this legislation? One of the bill's sponsors, Representative Adam Smith of Washington state, said would-be buyers are getting squeezed out of the market by an "increasing number of large investors purchasing a significant percentage of single-family homes."

Between 2010 and 2019, the number of investor-owned homes outpaced the number of family-owned homes by 56%, according to the Census Bureau. While large, institutional buyers are outnumbered by smaller investors, their impact can be more focused and less healthy for neighborhoods.

"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," Smith said. "That same house would cost nearly $500,000 today yet wages for workers like my father have not kept up."

The bill would create down-payment assistance programs funded by penalties paid by hedge funds that fail to report purchases or sell homes they already own, as required.

What are the chances of this moving forward? Not great, according to the New York Times. However, Smith said it is important to at least start talking about the issue.

And he's not the only one talking: A pair of North Carolina Democrats introduced the American Neighborhood Protection Act this week, which would require corporate owners of 75 or more single-family homes to pay $10,000 a year per home to support down payment assistance programs.

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