Democratic lawmakers have introduced a bill in Congress that would restrict tax breaks for corporate investors who buy large quantities of homes. If passed, the Stop Predatory Investing Act would prohibit investors who acquire 50 or more single-family homes for rental purposes from deducting interest or depreciation on those properties.
Sen. Sherrod Brown (D-Ohio), chair of the Senate Banking, Housing and Urban Affairs Committee, said investors funded by Wall Street buy up homes that could have been sold to first-time homebuyers. He claimed they rent them out at higher rates, neglect repairs, and then threaten families with eviction.
“Our bill will help prevent corporate landlords from driving up local housing prices and put power back in the hands of working families, who need a safe, affordable place to live and raise their children,” Brown said.
According to a press release from Brown’s office, two major investors own more than 12,000 homes in three Ohio markets. Other investors don’t report how many homes they own.
“In 2021, 16 percent of homes in Cleveland were purchased by investors, with one ZIP code reaching 70 percent. In Cincinnati, they bought 15 percent of homes and nearly 50 percent of homes in some communities, and a single company bought 29 homes on a single street,” the press release said.
It is estimated that a corporation purchased one out of every six homes sold in Ohio last year.
Sen. Ron Wyden (D-Oregon), chair of the Senate Finance Committee, is a co-sponsor of the bill. He said that in his state and across the country, Wall Street investors buying up homes and hiking rents is problematic.
“America’s housing policy desperately needs a remodel, and by looking out for the interests of working people and the middle class, this bill represents a key part of the blueprints,” Wyden said.
Supporters of the bill say it could incentivize big investors to sell single-family rental homes back to homeowners or nonprofits in the community.
How much influence on the housing market do corporate investors have?
Investors jumped into the housing market in 2021 to flip and rent single-family homes because there were rock-bottom mortgage rates, and demand was surging.
According to a National Association of Realtors presentation, institutional buyers — defined as companies, corporations, or limited liability companies — made up 13 percent of the residential sales market in 2021. That year, Texas, Georgia, Oklahoma, Alabama, and Mississippi had the highest shares of institutional buyers.
Cory Ure at SecurityNational Mortgage Co. in Salt Lake City recently talked with The Mortgage Note about how frustrating it was for the average homebuyer in Utah two years ago.
“At one point in my life, I was a first-time homebuyer, so I’ve had a lot of sympathy for a lot of these first-time homebuyers that were being completely shut down by investors coming in and paying cash. And we had big investors,” Ure said.
“They’d go to a builder and say, ‘We’ll buy 10 homes right in a row from you.’ Even some very qualified buyers couldn’t compete against these investors, especially these big pension funds and hedge funds coming in and paying way over value.”
But Ure said that has changed in the past year, and a February report from Redfin showed investor home purchases have fallen across the country.
