Merkley: Hedge Funds in the Housing Market Raise Prices for Renters and Homebuyers

Washington, D.C. – Oregon’s U.S. Senator Jeff Merkley is using his work in Washington, D.C. to highlight how hedge funds’ presence in the housing market is driving up costs for American families to both buy and rent a decent home in a decent community. During a hearing of the Senate Budget Committee titled, “A Blueprint for Prosperity: Expanding Housing Affordability,” Merkley underscored how hedge fund and private equity’s entry into the housing market is further straining an already precarious supply – especially when families who are priced out by all-cash offers are put in competition with lower-income renters.

“If an investor pays more for a house, they’re going to charge higher rents, and going to drive up the rental market in general. But also, if renters who have the income to buy a house can no longer buy a house because they’re competing against a hedge fund, that means they don’t move out of the rental housing. And that rental housing supply is going to remain shorter and therefore at a higher market price,” noted Merkley at the hearing.

“We’re really concerned about renters, especially higher income renters who are staying in the market longer than they would otherwise and therefore driving up the cost because 30 percent of their income is higher and so they can pay more,” Peggy Bailey, Vice President for Housing and Income Security at the Center on Budget and Policy Priorities, said in response to Senator Merkley’s questions. “And so we really need to maintain affordability in the single family rental market for low-income families with kids.”

Merkley, along with U.S. Representative Adam Smith (D-WA-09), led the introduction of the End Hedge Fund Control of American Homes Act of 2023. This legislation responds directly and forcefully to the persistent and growing problem of hedge funds purchasing single-family homes. In the current housing market, this is a contributing factor that 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.

Following the 2008 housing crisis, large private equity firms and hedge funds bought substantial portfolios of foreclosed homes as an investment opportunity. The federal government enabled this growth through bulk sales of federally-backed mortgages and foreclosed properties. This decision excluded ordinary families and mission-driven non-profits from buying these homes and returning them to families in need of stable housing.

To meet investors’ return expectations, hedge funds and other investors maximize profits by imposing high rent increases, inflating fees, and delaying home maintenance and improvements, which diminishes the quality of housing over time.

  • The End Hedge Fund Control of American Homes Act would put an end to the harmful practice of hedge funds buying up single-family homes by banning hedge funds from owning single-family homes and requiring them to sell at least 10% of the total number of single-family homes they currently own to families per year over a 10-year period. After a 10-year full phase-out, all hedge funds will be completely banned from owning any single-family homes. 

A link to the hearing can be found here.

A summary of the End Hedge Fund Control of American Homes Act can be found here.