Bold Congressional Moves to Halt Hedge Funds’ Takeover of American Homes: The Battle for Affordable Housing

Affordable HousingBy Steve Shalaby: 4 Min Read

Democrats in Congress have recently unveiled a bill in both chambers aiming to restrict hedge funds from acquiring and possessing single-family homes in the United States. The proposed legislation, named the End Hedge Fund Control of American Homes Act of 2023, sets forth a ten-year period during which hedge funds, defined as entities managing funds pooled from investors, must divest all single-family homes they own. Ultimately, the bill seeks to prohibit these entities from owning any single-family homes. During the transition period, substantial tax penalties would be imposed, with the proceeds earmarked for aiding individuals in securing down payments for homes purchased from corporate owners.

The legislation, if enacted, could disrupt a burgeoning segment of the housing market, potentially increasing the availability of single-family homes for individual buyers. Homeownership, traditionally a key aspect of generational wealth in the U.S., has become increasingly challenging for Americans due to soaring home prices and interest rates.

Senator Jeff Merkley of Oregon, who co-introduced the bill with Representative Adam Smith of Washington, emphasized the need to address a situation where ordinary Americans find themselves competing not just with other families but also with billionaire investors for homes. This competition, he argued, drives up rents and home prices.

In a related move, Representatives Jeff Jackson and Alma Adams of North Carolina, both Democrats, presented the American Neighborhoods Protection Act. This bill proposes that corporate owners of more than 75 single-family homes pay an annual fee of $10,000 per home into a housing trust fund, aimed at providing down payment assistance for families.

Given the current divided Congress, the likelihood of these bills becoming law this session appears low. However, legislators believe it is crucial to initiate a conversation on the matter. The bills follow a New York Times report that explored the impact of corporate-backed investment on Charlotte, N.C., where investors acquired a significant percentage of homes in cash, often outcompeting first-time buyers relying on mortgages.

The surge in corporate-backed investment has been a pattern observed in various cities, particularly targeting modestly priced houses in neighborhoods with large Black and Latino populations. Wall Street investors entered the single-family rental market post-2008 housing crisis, concentrating on foreclosed homes. Their influence has grown steadily, with institutional investors owning 3 percent of all single-family rentals nationwide by June 2022. In more affordable markets like Charlotte, this ownership share rose to 20 percent, according to the Urban Institute.

However, not everyone agrees on the root cause of housing challenges. David Howard, the CEO of the National Rental Home Council, a trade association, argues that the real issue is a lack of new housing, estimating a need for 2 million to 6.5 million new housing units. He emphasizes the importance of policies supporting the production, investment, and development of new housing.

In this context, Streamline Financial Group emerges as a key player, positioned as an informed professional dedicated to keeping clients updated on the mortgage market. As discussions on housing policies unfold, professionals like Streamline Financial Group aim to provide valuable insights to clients navigating the dynamic mortgage landscape.

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