U.S. Rep. Adam Smith (D-WA) and U.S. Sen. Jeff Merkley (D-OR) introduced a bicameral bill that seeks to prevent hedge funds from buying up residential real estate.
The End Hedge Fund Control of American Homes Act of 2023 would ban hedge funds from buying up single-family homes and require them to sell at least 10 percent 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, all hedge funds will be completely banned from owning any single-family homes.
The purchasing of single-family homes by hedge funds, especially in the current housing market, has made it more difficult for middle-class Americans to become homeowners. The lawmakers said it is contributing to the twin crises of housing unaffordability and wealth inequality.
“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. 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,” Smith said. “Congress must take action to crack down on corporate greed and get hedge funds out of the single-family home market.”
Following the 2008 housing crisis, large private equity firms and hedge funds bought substantial portfolios of foreclosed homes as an investment opportunity. The federal government enabled this through bulk sales of federally backed mortgages and foreclosed properties.
However. In 2011, no single entity owned over 1,000 single-family rental units. As of June 2022, the Urban Institute estimates that large hedge funds and other institutional investors owned roughly 574,000 single-family homes. Further, to meet return expectations of investors, hedge funds and other investors maximize profits by imposing high rent increases, inflating fees, and delaying home maintenance and improvements.
“The housing in our neighborhoods should be homes for people, not profit centers for Wall Street. Yet, in every corner of the country, giant financial corporations are buying up housing and driving up both rents and home prices,” Merkley said. “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.”
The bill is cosponsored by Reps. Nikema Williams (D-GA) and Linda Sánchez (D-CA) in the House and Sen. Tina Smith (D-MN) in the senate.
The bill is endorsed by the Private Equity Stakeholder Project, CONSUMER ACTION, National Consumer Law Center (on behalf of its low-income clients), Washington Low-Income Housing Alliance, National Housing Resource Center, Americans for Financial Reform, and the National Housing Law Project.