Investors who buy up swaths of residential properties and turn them into rental homes have apparently caught the attention of Democrats in the U.S. Senate.
The Stop Predatory Investing Act, introduced Tuesday by a coalition of lawmakers (including Sens. Sherrod Brown, D-Ohio; Elizabeth Warren, D-Mass.; and Ron Wyden, D-Ore.), aims to limit corporate investors from purchasing homes by restricting their tax breaks. The bill would stop investors who buy 50 or more single-family homes after the date of the law’s enactment from deducting interest or depreciation on those properties.
“In too many communities in Ohio, big investors funded by Wall Street buy up homes that could have gone to first-time homebuyers, then jack up rent, neglect repairs and threaten families with eviction,” Brown said. “Our bill will help prevent corporate landlords from driving up local housing prices, and put power back in the hands of working families, who need a safe, affordable place to live and raise their children.”
“In Oregon and all across the country, typical Americans who just want affordable housing are getting outmuscled by Wall Street investors that are buying up homes and hiking up rents,” Wyden added. “America’s housing policy desperately needs a remodel, and by looking out for the interests of working people and the middle class, this bill represents a key part of the blueprints.”
The bill cites figures from the National Association of Realtors and argues that corporate investors have acquired outsized shares of homes in several states in recent years. In Texas, for example, institutional investors purchased 28% of homes in 2021. In Georgia, the share was 19%. And according to a paper released last year by the Joint Center for Housing Studies of Harvard University, the share of investor purchases made by those with portfolios of at least 100 properties jumped from 14% in September 2020 to 26% in September 2021.
“Many large investors rely on technology, their lower cost of funds, and their ability to pay all cash to outcompete aspiring homeowners,” according to a one-page release that accompanied the proposed legislation. “And their purchases also typically focus on smaller, more affordable homes – taking critical starter homes that could otherwise go to first-time homebuyers out of the market.”
The body of the bill is loaded with conditions aimed at penalizing big residential investors without kneecapping builders or renters. To keep incentivizing the construction of new housing (and affordable housing in particular), the legislation would let owners continue to take deductions on properties that are financed using Low-Income Housing Tax Credits (LIHTC) and are still within their affordability period, as well as on built-to-rent single-family housing. The bill is not retroactive either, allowing deductions for single-family rentals purchased before the bill’s passage. The authors of the legislation say this will protect renters in existing single-family rental housing.
Numerous housing advocacy groups have voiced their support for the bill, including the National Association of Local Housing Finance Agencies, Americans for Financial Reform, Enterprise Community Partners, the Local Initiatives Support Corporation, the National Community Stabilization Trust, the National Housing Law Project and the National Low Income Housing Coalition.