Archived link of Vice article.
House Bill 6608
Senate Bill 3402
Hedge Funds Have Invaded the Housing Market. A New Bill Would Ban Them.
A sweeping new bill introduced in Congress would essentially ban hedge funds and private equity firms from buying single-family homes.
Hedge funds, private equity firms, and investment trusts have been snatching up single-family homes all around the country for years, creating concern that homeowners themselves would be pushed even further out of the market. But a sweeping new bill introduced by U.S. Senator Jeff Merkley and Washington Rep. Adam Smith would, if enacted as written, essentially ban such corporate investors from the practice moving forward.
The bill, which was introduced in both the U.S. Senate and the U.S. House of Representatives on Thursday, would over a ten-year period require hedge funds and large institutional investors to completely divest from single-family home ownership. Called the End Hedge Fund Control of American Homes Act, the bill would require large funds to sell off 10 percent of their homes each year over a decade.
“We shouldn’t allow private equity firms to buy up vast quantities of American homes and create a generation of lifelong renters. Congress needs to act fast and help promote access to safe, affordable housing and homeownership for American families, not Wall Street,” Smith said in a press release.
The bill would require the Internal Revenue Service to tax large funds that fail to sell off their single family homes over that timeframe. It already has some support in the house, where it is co-sponsored by the U.S. Representatives Nikema Williams and Linda Sánchez, as well as in the Senate, where it is cosponsored by Senator Tina Smith. Advocacy groups Private Equity Stakeholder Project, Consumer Action, and National Consumer Law Center have offered additional support.
The bill defines a hedge fund as partnerships, corporations, or real estate investment trusts that pool funds from investors and have $50 million or more in net value or assets under management, with exemptions for nonprofits and companies primarily focused on construction. Hedge funds failing to report single-family home purchases would face a $20,000 fine that would go toward a housing down payment trust fund. Funds that fail to sell off their housing stock in the timeframe required would face a tax of 50 percent of the fair market value for each property, with funds also going to the housing trust fund.
Merkley and Smith cite data from an Urban Institute report that said in 2011, no single entity owned more than 1,000 single-family rental homes, whereas by June 2022 hedge funds and institutional investors owned a cumulative 574,000 single-family homes. This includes large corporate owners like Invitation Homes, which owns more than 80,000 homes across the country. While corporate investors only own 5 percent of the nation’s single-family housing stock, the ownership is often concentrated in majority Black and Latino neighborhoods and in some neighborhoods, entire blocks have been purchased by investors.
The practice has ramped up since the beginning of the pandemic, with 28 percent of all homes sold in 2022 going to institutional investors according to Pew Charitable Trust. In 2021, a venture-funded company backed by Jeff Bezos and other billionaires also got in on the act.
Institutional investors have also been buying up multifamily apartments, and tenants across the country have been fighting back by forming unions to demand maintenance and push for stronger regulations.
I'd rather see a an outright ban on all non-owner occupied housing. They destroy community and concentrate crime. I realize there would be certain challenges involving Universities, dense urban cities, and certain highly desirable areas (oceanfront, lake front, Central Park, etc) to deal with.
Dumbest take I've ever heard. Renting doesn't destroy community or concentrate crime. "Low income housing", AKA, government subsidized housing does. There IS a difference.
Besides, what you're describing would basically destroy the number one path to wealth. Literally 90% of Millionaires and/or Billionaires (AKA wealthy people), made the majority of their wealth in Real Estate.
https://www.linkedin.com/pulse/what-real-estate-creates-90-millionaires-ben-lovro
Since I know a source will be asked for, there's one, but a quick google search will provide hundreds of other such examples.
So what you're describing would destroy the absolute number one path that normal people have for creating wealth for themselves and their children. I agree, institutional investors should be banned from owning single family homes, but a blanket ban on "non-owner occupied housing" is the literal dumbest take I've ever heard. It's the exact same crap you hear on literal communist subreddits like r/antiwork.
And before anyone says "just don't invest in housing", newsflash, commerical properties (Retail, office, Hospitality, etc.) are an entirely different animal and require millions of dollars for a down payment on a "low end" property.
On the flip side, in a decent economy, like what we had under Trump, a normal person with a decent job can go out and put down $50K they saved over a few years on a single family rental.
That's how literally 90% of people build wealth for themselves. I agree institutional buyers need to be banned, but a blanket ban is the stupidest thing I've ever heard of. You can't gradually shift into "bigger" things if you cut people off from starting at the small things.
What you're suggesting would literally be playing into the WEF's hands by cutting off the number one way people drag themselves out of poverty or the middle class into the bare minimum of "being wealthy". In other words, that'd be killing the American dream.
It absolutely concentrates crime, if for no other reason than because it concentrates people (ie: if a housing unit cases 0.1 crime per year, a block with 30 residential units has 3 crimes a year, but an apartment complex with 90 units would create 9 crimes a year). But, it's actually worse than that, because violent crime RATES are higher in high density residential areas, regardless of socioeconomic status.
https://newsinfo.iu.edu/news/page/normal/13030.html
Also, you're telling me on the one hand real estate is the number one path to wealth at the same time you're telling me getting rid of non-owner occupied housing a a dumb idea. The reason the guy who owns the apartment building gets rich is because everyone that lives in that building is paying him more than the housing is actually costing him. Meaning they could have lower housing costs or at the very least be building their own equity if they weren't renting. I'd much rather have a world where all the tenants in a building owned their own homes and were building wealth rather than having zero equity and having just one guy/group/company getting rich off the renters.
Nice necro posting three days after a post was basically dead and no one is here to respond to you but me. But you didn't refute a single one of my points.
First of all, you're conflating apartment buildings (specifically low income apartment buildings) with all non-owner occupied housing. That's like taking a statistic about pitbulls and saying "see, all dogs eat babies!" It's inaccurate to the whole picture and dishonest to try and paint the situation in that manner.
Even in the 50s and 60s, when the economy was in it's prime, young people still typically rented for the first few years after college/leaving their parents house. Furthermore, the reason it's the number one path to wealth is because ANYONE can do it moron.
Anyone can go out and buy a house if they have enough money. It's not a groundbreaking idea. It doesn't require anything other than basic financial knowledge. Most people who own a rental, don't own an apartment building, they own a few actual houses, a lot of which are vacation rentals (Cabins, lakeside, ocean front, etc.). which are in gated communities. Further disproving you're apparent "point".
Finally, let's ASSUME you actually manage to pass such a law how do you enforce it or deal with the fallout? You seem to have a gripe with apartments specifically, so let's address that.
Apartment buildings, typically are self metered, meaning every individual unit does NOT have it's own meter to read power consumption, water consumption, etc. etc. The owner just assumes a standard rate based on average consumption and adds it into the rent.
So if every single apartment building in the country suddenly had to be converted into single unit condos, meaning the entire building would need to be overhauled to allow for such upgrades, who would pay for it? The current owner certainly wouldn't, and you're entire defense is that people don't have money to own a home, so the people wanting to buy certainly don't.
Who pays for those upgrades? You're talking hundreds of billions of dollars in upgrades. And that's just for metering. Multifamily is zoned different because building standards are different. You'd also have to upgrade the fire systems, electrical systems, etc. etc.
Who pays for that?
And I can almost guarantee you'll just say to tear them down and build single family homes. In which case I ask you, do you hate farmland and forests? Let's use NYC for example. If every single apartment building in NYC was demolished and replaced with single family homes, the urban sprawl required to replace all those housing units would take up the entirety of New York State, New Jersey, Delaware, Connecticut, and part of Pennsylvania. And that's not accounting for the other major cities in the NY Metro that have their own multi family housing buildings. Just NYC.
At that point you also run into problems like having a house that's literally 5 hours away from where you work because of traffic.
So yeah, you're grand design of having no more multi family housing and having nothing but single family homes and/or condos is a fantasy that is neither feasible, nor possible.
I'm self-employed, I don't always have the time to post daily.
I'm not conflating apartment buildings of any sort with all non-owner occupied housing.
AirBNB rentals also drive up violent crime: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8279333/
If you want a much more in depth that controls for factors like section 8 housing and size of the units and proximity of the landlord, the results section here behaves exactly as you'd expect (more section 8 housing = more crime, bigger units = more crime, the further away the landlord is = more crime, the lower the amount of owner occupied properties in the neighborhood = more crime).
https://www.researchgate.net/publication/23949141_Rental_Housing_and_Crime_The_Role_of_Property_Ownership_and_Management
So again I'll ask if its the number one path to wealth AND alone can do it, why rent? Just do it and build wealth, and more stable communities, sooner.
And does that prevent landlords from renting out apartments? No, so obviously they have a mechanism for cost recovery here. Why does that same cost recovery mechanism not work on condos? Just like your condo pays a portion of the cost of the pool and lawn maintenance the utility cost can also be split out in the monthly fees. Or if a unit owner feels they use substantially less than other units they can pay for their own meter.
If we put 330 million Americans into single family homes on 1/2 acre lots with an average of two people in them we'd need about 130,000 square miles of land for houses, which is a bit less than 2.4 New York States. I have several thoughts:
This would mean if you didn't own a home you wouldn't be allowed to rent.
Obviously just live on the streets with all your cash or live with your parents until you're 50 and can afford a house in a post-Biden world!
This is the way!
Multi-generation households are a great choice and quite common in other parts of the World.
Also, the government has exacerbated the housing crisis
I disagree. I see nothing wrong with people owning homes to rent. People - not multi million dollar companies. That would kick Black Rock out the housing market too 😁 The thought just breaks my heart, can ya tell? Lol
This may be possible, but it would have to be done by zoning at the local level. I live in a highly transient community (state university and military base), so the rental market is sizable. Recently there were a few neighborhoods near the campus were down-zoned from multi-unit to single family. Caused quite a stir because the currentrental property owners were concerned that they wouldn't be able to recoup their investments. Eventually a deal was reached that would allow current owners to continue what they were doing, but a transfer of ownership would move the property to single family only. Some of the property owners moved their properties into LLCs or S-corps before the law came into effect, so it will be interesting to see how that plays out.
How high are you?