Get Corporations Out of the Housing Market

The article below is about the US housing market, but we need similar legislation in Canada--to reduce purchase prices AND rents. Regarding rents, we need to get rid or Real Estate Investment Trusts (REITs), which mean renters don't even have a landlord/lady to deal with, just a big business.

            -- Gene McGuckin

Dec. 11, 2023

Curbing corporate control: new bill seeks to restrict hedge funds in housing market

Addressing the deepening housing crisis in America.

In an ambitious legislative move, Democrats have introduced a bill aimed at curbing Wall Street’s growing influence in the housing market, which has seen house prices reach record highs amid a deepening crisis.

The housing market in the United States is in turmoil, with prices soaring to unprecedented levels. This crisis has been partly attributed to hedge funds and large corporate entities buying up single-family homes, significantly impacting affordability for average Americans.

The “End Hedge Fund Control of American Homes Act of 2023” is a bicameral bill introduced by Rep. Adam Smith (D-Washington) and Sen. Jeff Merkley (D-Oregon). This groundbreaking legislation seeks to prohibit hedge funds from purchasing and owning single-family homes.

Under this legislation, hedge funds would be mandated to divest their single-family home portfolios over the next decade. Exceeding a specified limit of home ownership would result in tax penalties, the proceeds of which are designated for down payment assistance programs, aiding first-time homebuyers.

Rep. Smith, reflecting on personal history, shared, “In 1971, my father bought our house on a baggage handler’s salary. That house today would cost nearly half a million dollars.” He emphasized that action is crucial to “crack down on corporate greed” and restore affordability in the housing market.

If passed, this legislation could offer significant relief in a market where prices are spiraling out of reach for many. Data from the National Association of Realtors shows a stark increase in median home prices, jumping from $271,300 in November 2019 to $400,000 in the same month in 2022.

The surge in house prices is linked to a spike in homes bought by investors, squeezing out potential homeowners. This trend has been particularly pronounced in the post-pandemic housing market, further complicating the affordability crisis.

Research by the Urban Institute highlights the scale of this issue: as of June 2022, hedge funds and institutional investors owned approximately 574,000 single-family homes in the U.S. This corporate ownership is projected to encompass over 40% of all single-family rental units by 2030, according to MetLife Investment Management.

The bill has garnered support within Congress, co-sponsored by Representatives Linda Sánchez (D-California) and Nikema Williams (D-Georgia), and Sen. Tina Smith (D-Minnesota). It’s also backed by several housing and consumer rights organizations. Bruce Dorpalen of the National Housing Resource Center remarked, “Homeownership is a key wealth-building tool, and these private equity firms are blocking that path for many families.”

The bill defines a hedge fund as entities with $50 million or more in assets, excluding nonprofits and construction-focused companies. Non-compliance, including failure to report home purchases or divest ownership in time, would result in substantial fines and taxes.

The practice of corporate investment in housing has escalated since the pandemic began, with 28% of all homes sold in 2022 going to institutional investors. This trend includes ventures funded by billionaires like Jeff Bezos.

Public reaction to the bill has been mixed, with many expressing concern over corporate dominance in the housing market. Tenants across the country are forming unions to demand better conditions and stronger regulations against corporate landlords.

“The housing in our neighborhoods should be homes for people, not profit centers for Wall Street,” Sen. Merkley stated, encapsulating the sentiment behind the legislation. This bill, if enacted, could redefine the landscape of the U.S. housing market and set a precedent for future housing policies focusing on public interests over corporate profits. As the debate continues, the fate of this bill will be closely watched by stakeholders across the nation.