Proposed Bill Seeks to Ban Hedge Funds from Dominating the Housing Market.
In a bold move, Democrats have introduced a groundbreaking bill that could reshape the landscape of the housing market. The proposed legislation, titled the “End Hedge Fund Control of American Homes Act,” aims to force hedge funds to divest their single-family home stock over the next decade.
The driving force behind this legislative push is the escalating disparity between home prices and wages, as highlighted by Representative Smith, who shared a personal anecdote.
“In 1971, my father bought our family home for $15,000 on a baggage handler’s salary. Today, that same house would cost nearly $500,000,”
Smith stated.
The proposed bill seeks to address this affordability crisis by curbing corporate greed and limiting the influence of hedge funds in the single-family home market.
If enacted, the legislation could bring much-needed relief to prospective homebuyers. Data from the National Association of Realtors reveals a substantial increase in median home prices, rising from $271,300 in November 2019 to $400,000 in November of the current year.
One of the driving factors behind soaring home prices is the surge in investor purchases, particularly during the post-pandemic housing boom. The bill responds to this trend by targeting hedge funds and institutional investors, aiming to curtail their ownership of an estimated 574,000 single-family homes in the U.S., according to research by the Urban Institute.
Lawmakers argue that the housing market should serve people, not become a profit center for Wall Street. Senator Merkley emphasizes,
“The housing in our neighborhoods should be homes for people, not profit centers for Wall Street.”
The proposed legislation has gained momentum with bipartisan support, co-sponsored by Representatives Linda Sánchez and Nikema Williams, along with Senator Tina Smith. Various housing and consumer rights organizations have rallied behind the bill, emphasizing the adverse effects of corporate investors on individual homeownership.
Research by the Urban Institute in June 2022 revealed that hedge funds and institutional investors were on track to own over 40% of all single-family rental units in the U.S. by 2030. This shift threatens the traditional path to homeownership, especially for first-time buyers, as large corporations convert affordable houses into high-priced rentals.
Bruce Dorpalen, Executive Director of the National Housing Resource Center, voiced concerns about the impact of private equity companies on affordable housing.
“Very large private equity companies are buying up thousands of affordable houses that traditionally are the homes for first-time-homebuyers and converting them to long-term and high-priced rentals.”
As the End Hedge Fund Control of American Homes Act gains momentum, it reflects a crucial step toward rebalancing the housing market and ensuring that homes remain accessible for individuals rather than serving as assets in corporate portfolios.
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