End Hedge Fund Control of American Homes Act Introduced

WASHINGTON, D.C. – Representative Adam Smith (D-Wash.) and Senator Jeff Merkley (D-Ore.) teamed up to introduce the bicameral End Hedge Fund Control of American Homes Act of 2023.

• Bans hedge funds from owning single-family homes and requires them to sell at least 10% of the total number of single-family homes they currently own to families per year over a 10-year period.
• Subjects hedge funds to a $50,000 per single family home per year tax penalty on the number of single-family homes owned above either zero or a scheduled 10% reduction per year over 10-years winding down to zero.
• After a 10-year full phase-out, all hedge funds will be completely banned from owning any single-family homes.
• Imposes a 50% tax on the fair market value of any future hedge fund purchase of a single-family home.
• Tax penalties paid by hedge funds are reserved for down payment assistance for people seeking to purchase homes sold by hedge funds.
• Ensures the tax penalty focuses on problematic actors by excluding nonprofit organizations, public housing agencies and other government entities.
• Includes an explicit certification process for a purchaser of a hedge fund owned home to confirm that they do not own a majority interest in any other single family residential real estate.

This legislation responds directly and forcefully to a persistent and growing problem — What Happens When Wall Street Buys Most of the Homes on Your Block? 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 and is contributing to America’s 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,” said Rep. Adam Smith (D-Wash.). “Congress must take action to crack down on corporate greed and get hedge funds out of the single-family home market. The bill I’m introducing today with my colleagues would ban these problematic hedge funds from the single-family housing market and claw back some of the homes they already own so that more American families have a fair shot at becoming homeowners.”

“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,” said Senator Merkley. “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.”

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 growth through bulk sales of federally backed mortgages and foreclosed properties. This decision excluded ordinary families and mission driven non-profits from buying these homes and returning them to families in need of stable housing.

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. To meet investors’ return expectations, hedge funds and other investors maximize profits by imposing high rent increases, inflating fees, and delaying home maintenance and improvements, which diminishes the quality of housing over time.

The End Hedge Fund Control of American Homes Act seeks to put an end to this harmful practice of hedge funds buying up single-family homes by banning hedge funds from owning these types of homes and requiring them to sell at least 10% 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 fact sheet for the End Hedge Fund Control of American Homes Act can be found here.
The bill text can be found here.

In addition to Smith, this bill is also cosponsored by U.S. Representatives Nikema Williams (D-GA-05) and Linda Sánchez (D-CA-38). In addition to Merkley, this bill is also cosponsored by U.S. Senator Tina Smith (D-MN).

“Without access to housing, nothing else in your life works. Not your job, your health, your education or your family,” said Senator Smith. “The housing crisis is devastating communities all across the country, and corporate executives are exploiting it to put more money in their pockets. 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.”

“When people buy homes, doors open to opportunity. When hedge funds buy homes, those doors shut,” said Rep. Nikema Williams, a member of the Executive House Committee on Financial Services. “This is painfully true in Atlanta, where my constituents are priced out of homeownership while investors purchase homes 10 or more at a time. Homeownership is one of the most powerful tools to close the racial wealth gap, and that power is diminished when hedge funds dominate the housing market. I am introducing the End Hedge Fund Control of American Homes Act so that people can buy homes and enjoy the opportunity homeownership provides —no matter your ZIP Code, no matter your bank account.”

“Working families should be able to rent or buy a home, no matter where they live. Unfortunately, greedy corporations all too often buy up residential properties for their own financial benefit – especially in neighborhoods like mine in Southern California – which takes affordable options away from potential buyers and drives up home and rent prices across the board,” said Rep. Linda Sánchez. “That’s why I’m proud to cosponsor this legislation that will bring down housing prices, giving more families the opportunity to purchase a home and set their families up for a bright future.”

The End Hedge Fund Control of American Homes Act 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.
 
“Corporate housing consolidation harms tenants and destabilizes communities by making it harder for working people to afford shelter. This bill will address the root cause of the consolidation issue, providing meaningful intervention that stops homes from being used as a means for generating profit.” – Madeline Bankson, Housing Research Coordinator, Private Equity Stakeholder Project
 
“Large corporate investors are gutting the U.S. housing market and making in nearly impossible for the average person to purchase a single-family home. This is destroying the American dream,” said Ruth Susswein, Consumer Action’s Director of Consumer Protection. “The End Hedge Fund Control of American Homes Act creates the sorely needed incentive to curb corporate homeownership and reinvest in underserved communities by imposing a hefty 50% tax on hedge funds that insist on gorging on single family homes.” – Ruth Susswein, Director of Consumer Protection, CONSUMER ACTION

“The National Consumer Law Center, on behalf of its low-income clients, supports the End Hedge Fund Control of American Homes Act legislation because it centers the needs of communities and families over the profits of hedge funds by seeking to keep homeownership in the hands of individuals and families. By limiting access of institutional investors to neighborhood homes, especially in communities of color, the bill recognizes the importance of owner-occupied homeownership to the growth of thriving neighborhoods and to narrowing the racial wealth gap.” – Alys Cohen, Senior Attorney, National Consumer Law Center

“Very large private equity companies are buying up thousands of affordable houses that traditionally are the homes for first-time-homebuyers, and converting them to long term and high priced rentals. Homeownership is one of the best ways to build wealth in the United States and these private equity investment companies are shutting that out for too many of our families.  The National Housing Resource Center supports strong legislation that can keep homeownership affordable for first-time-homebuyers and stops large national investment companies from outbidding the average homebuyer.” – Bruce Dorpalen, Executive Director, National Housing Resource Center

Rep. Smith introduced the Saving Homes from Acquisition by Private Equity Act in 2022, which would create a significant federal real estate transfer tax on institutional investors and private equity firms who purchase single-family homes on the open market. He has continued to be outspoken about the challenge of housing affordability in Washington’s Ninth District and across the country and the need to make it more possible for individuals and families to afford to rent or buy homes.

End Hedge Fund Control of American Homes Act

Sen. Jeff Merkley – Rep. Adam Smith

Our nation faces a housing affordability crisis. While some of our housing challenges, including a supply shortage, will take years to remedy, others can be addressed immediately, including a ban on hedge funds owning and controlling large parts of the housing market. American families should not have to compete with multi-billion-dollar corporations when purchasing a home. It’s past time we give every American family a fair chance to become a homeowner and put an end to hedge funds taking over the housing market.

Large scale hedge fund investors are taking over the housing market at an alarming and accelerating rate. 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. Data from the first three months of 2023 shows this trend continuing, with hedge funds purchasing 27 percent of single-family homes.

Predatory hedge funds disproportionately target Black families and vulnerable single parents, as revealed in a recent House Financial Services Committee report.ii The report found these investors focus on neighborhoods with larger Black populations and approximately 30% more single mothers than the national average. Additionally, studies show that hedge funds are 68% more likely than small landlords to file for evictions and often impose high rent increases, inflated fees, and deteriorating housing conditions to maximize profits.

The End Hedge Fund Control of American Homes Act seeks to put an end to this harmful practice of hedge funds buying up single-family homes:

• Bans hedge funds from owning single-family homes and requires them to sell at least 10% of the total number of single-family homes they currently own to families per year over a 10-year period.
• Subjects hedge funds to a $50,000 per single family home per year tax penalty on the number of single-family homes owned above either zero or a scheduled 10% reduction per year over 10-years winding down to zero.
• After a 10-year full phase-out, all hedge funds will be completely banned from owning any single-family homes.
• Imposes a 50% tax on the fair market value of any future hedge fund purchase of a single-family home.
• Tax penalties paid by hedge funds are reserved for down payment assistance for people seeking to purchase homes sold by hedge funds.
• Ensures the tax penalty focuses on problematic actors by excluding nonprofit organizations, public housing agencies and other government entities.
• Includes an explicit certification process for a purchaser of a hedge fund owned home to confirm that they do not own a majority interest in any other single family residential real estate.

The purchasing of single-family homes by hedge funds, especially in the current housing market, serves only to make profits for the investors and provides no value to the communities where these homes are located. People should not have to go up against hedge funds when they are trying to buy a home in their community. Banning hedge funds from the single-family housing market will help enable more families the opportunity to purchase a home and combat the growing large investor landlord model.

• i https://www.urban.org/research/publication/profile-institutional-investor-owned-single-family-rental-properties
• ii https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=408381