Democrats Want to Kick Hedge Funds Out of the Housing Market

  • Democrats want to ban hedge funds from buying houses in an effort to improve housing affordability.
  • A bill introduced in the Senate would require hedge funds to sell off their single-family homes over the next 10 years.
  • It would also prohibit hedge funds from owning any single-family homes at all.

Some streets aren’t for Wall Street. As the housing affordability crisis drags on, lawmakers are seeking to kick out hedge funds from the housing market.

Two bills proposed by Democrats in Congress this week aim to curb home ownership by big investors in an attempt to improve buying conditions for Americans, the New York Times reported.

In the Senate, the End Hedge Fund Control of American Homes Act of 2023 would force big investors to sell off all the single-family homes they own over a period of 10 years, and eventually ban hedge funds from owning any single-family homes entirely. 

“The housing in our neighborhoods should be homes for people, not profit centers for Wall Street,” co-author of the bill, Senator Jeff Merkley, D-Ore., said in a press release. “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.”

At the other end of Capitol Hill, Democrats in the House proposed a separate bill that would discourage Wall Street’s involvement in the housing market by charging investors who own more than 75 homes an annual fee of $10,000. The money would be pooled into a housing trust fund to be used to support families with down payments.

According to CoreLogic, investors accounted for 26% of all single-family home purchases in June. That’s up from pre-pandemic levels of less than 20%.

Meanwhile, the median home price is up 38% from 2019 to $431,000. And mortgage rates have shot up since early 2022, touching 8% in October. While they eased sharply this month, affordability remains a problem.

To be sure, the price of homes is also up because the supply available for sale has been tight, with construction of new homes among the few sources of fresh inventory.

But that supply crunch has been amplified by institutional investors who have snapped up houses, legislators say. 

“This [affordability] crisis has been exacerbated in recent years by an increasing number of large investors purchasing a significant percentage of single-family homes, squeezing out prospective buyers,” said Rep. Adam Smith, D-Wash., in a statement.

The bill is unlikely to pass with a sharply divided Congress, but lawmakers have insisted the conversation needed to be started.

For its part, the investor community has said lack of new housing supply is the problem and the policy should be focused on development.

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