Legislation Against Corporate-Owned Single-Family Homes

A couple of interesting bills have been proposed in response to corporate America being more involved in the single-family home market. These bills were proposed because affordable housing is becoming an issue nationwide and corporate America is fueling that problem. They are easily able to outbid homeowners and even regular investors.

In the last ten years, there has been an increase in corporations purchasing single-family homes. This trend has been accelerated since the pandemic. I believe this was because there was such an increase in home prices that large corporations saw those investments doing better than other investments they had in their portfolio. I was unaware this was happening on such a large scale until a good friend of mine who invests in single-family homes went to a conference this year and told me there were way more corporate employees there than the mom-and-pops who usually attend.

In response to the increasing acquisition of single-family homes by hedge funds and corporate entities, two bills have been introduced in the U.S. Congress. The “End Hedge Fund Control of American Homes Act of 2023,” which seeks to restrict hedge funds, defined as corporations, partnerships, or real estate investment trusts, from owning single-family houses. It mandates these entities to divest their single-family home holdings over a ten-year period, ultimately prohibiting them from owning single-family homes.

Similarly, the “American Neighborhoods Protection Act” targets non-corporate owners who possess more than 75 single-family homes. It requires these entities to contribute an annual fee of $10,000 per home into a housing trust fund. This fund is intended to provide down payment assistance to families, facilitating more accessible home ownership, particularly for those with lower incomes. As those who invest in single-family homes know, you would be lucky to net ten thousand a year on the actual home, so the government is simply proposing you don’t own over 74 homes.

The Impact of Corporate Ownership on Housing Markets

While institutional investors only own three percent of all single-family rentals nationwide, they have a substantial presence in more affordable markets. For instance, in Charlotte, North Carolina, institutions own 20 percent of single-family rentals. Such significant ownership by institutional investors can drive up housing costs and limit the availability of affordable housing for individual buyers and families.

The Future of the Bills and How I Feel on The Matter

The million-dollar question people are asking me is how I feel about this. To start, I hate when the government puts its nose where it doesn’t belong. We have a housing shortage and anything that limits creating housing I am going to oppose. However, these corporations do drive up prices for normal Americans.

I don’t believe these bills will pass into law. This is because there will be a negative effect on the economy if they do. If corporate America was forced to sell their housing stock, it would certainly drive down home prices. This would be great for first-time homebuyers, but those who hold the majority of their wealth in their home would be upset. As would a majority of the members of Congress and the Senate who are also homeowners and don’t want to see their assets lose value.

Secondly, a lot of these institutions get their money from pensions, people’s 401(k)s and other saving vehicles. The government wants to see these assets perform, as well. As do the people whose money they are investing. Real estate is a great diversification for these funds.

However, this is an interesting topic. It really will put to the test how much the legislators want to see housing become more affordable versus how much they want to appease their donors, who want a growing economy. As I discuss a lot on my podcast, “Real Estate Strategies with Ken McElroy,” the only way to make housing more affordable is to deregulate zoning and create more of a supply. Once we can do that, it will be less expensive and easier to get a home. Until then, the trend of moving into a nation of renters will remain strong. That is why I think real estate will stay a good investment for many years to come.

About The Author

Ken McElroy is the co-partner of MC Companies in Scottsdale, Ariz. He is the author of the best-selling books, The ABC's of Real Estate Investing, The Advanced Guide to Real Estate Investing, and The ABC's of Property Management. McElroy is also a contributor for The Real Book of Real Estate by Robert Kioysaki, and The Midas Touch by Donald Trump and Robert Kiyosaki. McElroy's fourth book, The Sleeping Giant, is dedicated to the new class of entrepreneurs who are emerging in today's economy. For editorial consideration please contact editor@jetsetmag(dot)com.

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