Democrats in both Congress and the Senate have introduced bills seeking to ban hedge funds from investing in the single-family housing market, according to Chris Clow of HousingWire. Lawmakers cited limited supply and affordability challenges as the justification for these proposed laws. Senator Jeff Merkley of Oregon introduced the “End Hedge Fund Control of American Homes Act of 2023” to the Senate, and Representative Adam Smith of Washington introduced the House version. Senator Merkley stated:
“You have created a situation where ordinary Americans aren’t bidding against other families, they’re bidding against the billionaires of America for these houses…And it’s driving up rents and it’s driving up the home prices.”
Ronda Kaysen of the New York Times reports on this development, highlighting that the bill would require hedge funds to sell off any SFRs over ten years and prohibit purchasing these assets moving forward. During the phaseout period, there would be tax penalties for funds holding SFRs, and the proceeds would be allocated to down-payment assistance for homebuyers. Kaysen states that this proposed law could increase the supply of single-family homes for individual buyers.
Aruni Soni of Business Insider also reports on this story, noting that investors who own over 75 SFRs will face an annual fee of $10,000 per home. Soni notes that according to reports, institutional owners of SFRs account for roughly 3% of the current housing stock.
“The bill is unlikely to pass in a divided Congress, but lawmakers have insisted the conversation needed to be started. For its part, the investor community has said lack of new housing supply is the problem and the policy should be focused on development.”