Dem Bill Would Evict Poor Hedge Funds From Single Family Homes

Democrats in both the House and the Senate have introduced legislation this week aimed at getting hedge funds out of the housing market for good. Over the last 10 years, hedge funds and other corporate landlords have been buying up single-family homes and using them as rental properties, driving up the costs of both home ownership and rent.

The End Hedge Fund Control of American Homes Act of 2023, introduced by Rep. Adam Smith (D-Washington) and Sen. Jeff Merkley (D-Oregon), would put an end to this practice within a decade and ensure that those looking to buy homes would not have to compete with hedge funds to do so.

How? Because it …

• Prevents hedge funds from continuing to purchase single-family homes, imposing an immediate 50 percent tax on the fair market value of any future purchase of a single-family home by a hedge fund.

• Requires large hedge funds to sell off existing ownership of all single-family homes over 10 years or face significant tax penalties.

• Each year over 10 years, large hedge funds would have to sell at least 10 percent of the total number of single-family homes they own until they own zero. Hedge funds would be subjected to a tax penalty for each single-family home owned above the maximum allowable amount for that year.

• Tax revenues would be reserved for down payment assistance for people seeking to purchase homes sold by the hedge funds. • Families and individuals who don’t own any residential real estate are eligible for down payment assistance grants funded by the tax penalties paid by hedge funds.

• Exempts nonprofit organizations, public housing agencies and other government entities, and home builders from the taxes.

• Includes an explicit certification process for a purchaser to confirm that they do not own a majority interest in any other single family residential real estate.

Nice!

Many factors — including wage stagnation — have contributed to the fact that home ownership is now out of reach for many working class Americans, but tackling Wall Street landlords is one way to reverse course.

“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,”Smith said in a joint statement. “Congress must take action to crack down on corporate greed and get hedge funds out of the single-family home market.”

“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.”

In the House, the legislation was co-sponsored by Representatives Linda Sánchez (D-California) and Nikema Williams (D-Georgia), and in the Senate by Sen. Tina Smith (D-Minnesota). Williams noted that her constituents in Atlanta have been disproportionately affected by corporate landlords buying up properties. Black neighborhoods, in general, having been most affected by the subprime mortgage crisis, have subsequently been most affected by the phenomenon of corporations buying up foreclosed-upon houses.

Many of these companies got their start by buying up foreclosed homes in the aftermath of the subprime mortgage crisis, and then by renting them, often to people who had lost their homes during said crisis. They’re not all “hedge funds” — two of the largest, Invitation Homes and American Homes 4 Rent, are both publicly traded companies — but many of them are. Now, they just scoop up piles of homes paying cash, making it difficult for those who may need to rely on mortgages to compete.

It’s not just young couples eager to buy their first home who are affected, either. In fact, while that will increasingly become a more of a problem in the next few years if this trend continues, those who have been hurt the most are those renting from these corporate landlords.

Corporate landlords evict at as much as three times the rate of regular landlords — and in fact used some pretty deceptive tactics to get people out of their homes during the pandemic-era eviction ban — largely because it is a lot easier to raise rents for new tenants than it is to raise them in lease renewals. They often do not respond to tenant complaints, both because it is cheaper and more efficient to just ignore them and because they hope to be able to drive out rent-controlled tenants to replace them with those who will pay more (which is happening right now in California). In other words, they are slumlords.

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The New York Times notes that “[w]ith a divided Congress, the bills are unlikely to pass into law this session,” but that Sen. Smith still believes it’s worth it to start a conversation. I would argue that it is also very good to force Republicans to vote against this very, very popular thing. A thing that some of them have even tried to make a cause of their own (without doing anything about it, naturally).

“Blackrock is pursuing an investment strategy that will make it harder for young Americans to own homes,” JD Vance tweeted in 2021. “The Left will ignore this, because Blackrock has committed to ‘racial audits’ and other diversity BS.”

To be clear, we never ignored this and have been complaining about it for a decade now (and also Blackrock, however evil in general, is not actually a major player in this).

Or, as our own Gary Legum responded at the time “Yes, the left overlooks the predatory behavior of hedge funds if they make their employees attend antiracism seminars, I hope this not-at-all-cynical bullshit moves you off of four percent in the polls.” (Sadly, it apparently did.)

Given the pro-working class image that the GOP has been trying to cultivate over the last few years, it sure will be interesting to see them explain just why they have to vote against something meant to help people buy homes. They’ll figure out something stupid, we’re sure.