Congress Aims to Limit Corporate Ownership of SFRs
As both the bills are sponsored only by Democrats, it seems unlikely that either will pass into law with a Republican-controlled House.
Democrats in the Senate and House have proposed two separate bills that, if passed into law, would reduce the ability of corporations to own single-family rentals.
It’s not the first time that Democratic members of Congress have criticized corporate landlords as being “predatory.” Some Senate Democrats filed a bill in July 2023 to undercut institutional investment in SFRs by reducing tax deductions. Previous attempts didn’t have a chance of being passed because of the filibuster and the narrow hold Democrats have on the Senate. Similarly, neither of the new bills has a likelihood to passing today.
The new bill in the Senate, called the End Hedge Fund Control of American Homes Act, intends to impose an excise tax certain corporate owners of SFRs to force them to sell off the properties. The tax on the acquisition of any new properties would be 50% of the fair market value of each.
Although the title refers to hedge funds, the definition in the bill defines the taxpayers who could be affected are “any applicable entity” that “manages funds pooled from investors” and that “is a fiduciary with to respect to such investors.” That could bring in many CRE investment funds and businesses that aren’t normally called hedge funds.
In addition, the bill has a structure that reduces the maximum allowed number of SFR units the company is allowed to own over a 10-year time frame.
As the New York Times suggests, if the bill became a law, it would increase the number of houses available for individual buyers. However, given the geographical distribution of the additional houses, they might not significantly lower the cost of houses and they wouldn’t reduce necessary down payments. They certainly wouldn’t cause mortgage interest rates to drop, so there might not be better conditions for people to buy a first home.
The other bill, the American Neighborhoods Protection Act, “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,” as the New York Times explained. That could possibly have more of a workable impact than the Senate bills, as there would be a tangible result that could help people afford to buy a house.
But the politics of Congress make the passage of either of these bills highly unlikely. However, Representative Adam Smith of Washington told the Times that legislators had to start a conversation.