Democrats introduce bills to ban hedge funds from single-family housing market

Democratic lawmakers in both the U.S. House of Representatives and the U.S. Senate have introduced bills in their respective chambers designed to ban hedge funds from participating in the single-family housing market, citing supply and affordability challenges as justification.

First reported by the New York Times, Sen. Jeff Merkley of Oregon introduced the “End Hedge Fund Control of American Homes Act of 2023” to the Senate. Rep. Adam Smith of Washington introduced the House version.

Democratic Reps. Jeff Jackson and Alma Adams of North Carolina introduced a separate bill, the “American Neighborhoods Protection Act.” It would “require corporate owners of more than 75 single-family homes to pay an annual fee of $10,000 per home into a housing trust fund to be used as down payment assistance for families,” according to the Times.

Affordability challenges

“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,” Sen. Merkley told the Times. “And it’s driving up rents and it’s driving up the home prices.”

In an announcement on his congressional website, Rep. Smith expounded on his reasons for supporting the effort.

“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,” he said. “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.”

An “increasing number of large investors purchasing a significant percentage of single-family homes” exacerbates the issue, which “squeezes out prospective buyers,” Smith added.

Likelihood of passage is low

In an interview with the Times, Smith acknowledged that realities in Congress — which just saw its Republican majority thinned by one member after the retirement announcement of Rep. Kevin McCarthy of California — make passage of the bills unlikely. Still, Congress must start a conversation on this issue, he said.

Data shows that institutional investors currently maintain a sizable stake in the single-family housing space.

“By June 2022, institutional investors owned 3 percent of all single-family rentals nationwide, but in more affordable markets they owned a considerable market share; in Charlotte, they owned 20 percent, according to the Urban Institute,” the Times explained. “Even as the housing market slows, investors have remained active, buying 26 percent of the single-family homes that sold in June 2023, according to CoreLogic, a data analytics company.”

However, David Howard of the National Rental Home Council told the Times that the issue is not institutional investors as much as a lack of action from homebuilders.

“Policies really need to be shaped and crafted so that they support the production, investment and development of new housing,” he said. “I think bills that work against that ultimately are just going to perpetuate the challenges we’re already facing.”

Recently, Democratic lawmakers also turned their eyes toward a bill proposal seeking to  “preserve” and “revitalize” manufactured home communities across the United States.