Can Legislators Step In Against Institutional Home Buyers?
Institutional investors first stepped in to buy single-family homes after the Great Financial Crisis. Plenty of foreclosed and empty homes existed, offering opportunities for these players to acquire the properties, fix them up and lease them out.
Fast-forwarding more than a decade, an August 2022 report from the U.S. Department of Housing and Urban Development’s Office of Policy Development and Research noted that these investors owned upwards of 700,000 homes. The report also pointed out that this leads to properties being removed from the market for individual homebuyers and “putting upward pressure on home prices and rents.”
Now, legislators are stepping in to try to put a stop to it. A recent article in the Wall Street Journal said that:
- A Republican’s bill in the Ohio state legislature is aimed toward heavily taxing institutional investor homeowners.
- California, Minnesota, Nebraska, New York and North Carolina lawmakers are proposing similar laws. The Minnesota bill would cap ownership of homes to 20.
- On Capital Hill, U.S. Senate and House Democrats sponsored legislation forcing large owners of single-family homes to sell their properties to family buyers. These bills would cap rental-home ownership at no more than 50 homes for companies and require them to sell off more than they have.
The Wall Street Journal article indicated that attempts to discourage investors from buying and renting out homes aren’t new. However, “the legislative proposals represent a new effort by elected officials to regulate Wall Street’s appetite for single-family homes,” the article explained.
While much of this is coming from liberal legislators, the WSJ indicated that some conservatives are also demonstrating concern. For instance, Texas Republican Gov. Greg Abbott expressed his alarm on X in March, noting that “corporate large-scale buying of residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home.”
Additionally, the WSJ reported that a study funded by the University of California, Santa Barbara and the Manhattan Institute reported that close to equal numbers of voting-age Republicans and Democrats would support a measure preventing institutional investors, particularly Wall Street companies, from buying homes.
The current national legislation has not reached a floor vote but has attracted critics. John Burns, with John Burns Real Estate and Consulting, told the WSJ that the larger investors haven’t bought many homes within the past year. Other organizations, like the National Rental Home Council, also oppose legislation and blame an increase in home prices on a lack of new-construction homes.
