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Proposed Bill Would Ban Hedge Funds from Purchasing Single-Family Properties

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Democrats in Congress have introduced a bill that, if passed, would gradually ban hedge funds from buying and owning single-family homes in the U.S.

The “End Hedge Fund Control of American Homes Act” would require hedge funds to sell-off all the single-family homes they own over a decade-long period and ultimately would prevent them from owning single-family properties at all.

Hedge funds that try to invest in single-family properties during the phase-out period would face a penalty tax of $50,000 per property.

The bill, which is unlikely to pass, is designed to address the problem of deep-pockets investors constantly out-bidding families looking to buy single-family homes. 

A recent report from CoreLogic shows that the share of home purchases made by investors has leaped since January 2019. 

In each of the past three years, investors have made roughly one-quarter of all single-family purchases in the U.S., CoreLogic’s data show.

This demand from investors, in turn, is exacerbating the home affordability problem Americans face.

CoreLogic’s report shows that in July, August and September, the share of single-family purchases made by investors was 26.8%, 27.2% and 28%, respectively.

Given this trend, it would not be surprising to see these numbers climb above 30% in the fourth quarter, the firm says.

Because most hedge funds buy homes with cash, higher mortgage rates have not had much of an impact on investor activity in recent months.

CoreLogic’s report shows that although many of the mega investors have left the market, smaller hedge funds continue to fuel the high number of investor home purchases.

The report shows that California and Texas continue to be the most popular states for home investors.

The “End Hedge Fund Control of American Homes Act,” introduced by Representative Adam Smith (D-Wash.) and Senator Jeff Merkley (D-Ore.) is designed to reverse this trend, which has “made it more difficult for middle-class Americans to become homeowners and is contributing to America’s twin crises of housing unaffordability and wealth inequality.”

“The housing in our neighborhoods should be homes for people, not profit centers for Wall Street,” Sen. Merkley says in a statement.  “Yet, in every corner of the country, giant financial corporations are buying up housing and driving up both rents and home prices. 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.”

Photo: Breno Assis

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