In a

Curbing Hedge Fund Influence on American Housing Market

significant legislative move, Democrats in both houses of Congress have introduced a bill to prohibit hedge funds from acquiring and owning single-family homes in the United States. The proposed legislation, known as the End Hedge Fund Control of American Homes Act of 2023, outlines a comprehensive plan requiring hedge funds, defined as corporations, partnerships, or real estate investment trusts managing pooled funds from investors, to divest all single-family homes they own over a 10-year period.

Senator Jeff Merkley of Oregon, who introduced the bill alongside Representative Adam Smith of Washington, expressed concerns about the current housing market dynamics. He 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 home prices.”

What the Bill is Trying to Accomplish

The proposed legislation aims to address this issue by imposing stiff tax penalties during the phased-out period. The generated proceeds would be allocated for down-payment assistance, benefiting individuals seeking to buy homes from corporate owners. If enacted into law, this legislation could potentially disrupt a growing sector of the housing market, offering hope for increased availability of single-family homes for individual buyers.

In a parallel legislative move, Representatives Jeff Jackson and Alma Adams of North Carolina introduced the American Neighborhoods Protection Act. This bill targets corporate owners of more than 75 single-family homes, requiring them to contribute an annual fee of $10,000 per home to a housing trust fund. The funds collected would be directed toward down-payment assistance for families, providing a counterbalance to the impact of corporate ownership on the housing market.

However, with a divided Congress, the likelihood of these bills passing into law during this session is uncertain. Representative Adam Smith acknowledged the challenges but emphasized the necessity of initiating a conversation about the growing influence of corporate-backed investments in the housing sector.

Difficulties in the Housing Market

These legislative initiatives come three months after The New York Times investigated the impact of corporate-backed investment in Charlotte, N.C. The report highlighted instances where investors purchased 17 percent of the city’s homes in cash in 2022, often outcompeting first-time buyers relying on mortgages. This trend was observed in cities nationwide, with corporations focusing on modestly priced houses, frequently in neighborhoods with large Black and Latino populations.

The article also sheds light on Wall Street’s entry into the single-family rental market following the 2008 housing crisis. Institutional investors owned 3 percent of all single-family rentals nationwide by June 2022, with a significant 20 percent market share in more affordable markets like Charlotte, according to the Urban Institute. Despite the housing market’s slowdown, investors remained active, acquiring 26 percent of single-family homes sold in June 2023, as reported by CoreLogic.

Knowledge Is Key

Andre Enriques, a seasoned Mortgage Banker, offers valuable insights into the evolving mortgage landscape. With a commitment to keeping clients up-to-date, Enriques emphasizes the importance of staying informed amid transformative developments. As a knowledgeable professional, he navigates the complexities of the mortgage market, ensuring clients are equipped to make informed decisions.

While some argue that the real issue is a lack of new housing units, not Wall Street’s involvement, Andre Enriques emphasizes the need for policies that support the production, investment, and development of new housing. As the chief executive of the National Rental Home Council, David Howard, suggests, shaping policies to address housing challenges is crucial for sustainable solutions.