As the nation
continues to face a crisis of housing affordability, Oregon’s U.S. Senator Jeff
Merkley has introduced the End Hedge Fund Control of American Homes Act.
The legislation is
aimed at ending Wall Street ownership of residential housing.
While aspects of the
housing crisis— including a supply shortage—will take years to remedy, others
can be addressed immediately, according to Merkley, including a ban on hedge
funds and private equity firms owning and controlling large parts of the
American housing market, and in turn dedicate revenue from this bill for down
payment assistance to homebuyers.
“Everyone should
have a safe, affordable place to call home,” Merkley said. “In every corner of
the country, giant financial corporations are buying up housing and driving up
both rents and home prices. They’re pouring fuel on the fire of the affordable
housing crisis that so many of our communities are facing, leaving working
families behind. The housing in our neighborhoods should be homes for people,
not profit centers for Wall Street. It’s time for Congress to put in place
commonsense guardrails that ensure all families have a fair chance to buy or
rent a home in their community at a price they can afford.”?
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, according to a release from Merkleys’ office.
“Large scale
hedge fund investors are accelerating their harmful takeovers in recent
years,” the release states. “Data from 2021 show the fastest year
over year increase in hedge fund home purchases in 16 years. For example, in
2021, large hedge fund investors bought 42.8 percent of homes for sale in the
Atlanta metro area and 38.8 percent of homes in the Phoenix area.”
To meet investor’s
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 Merkley
release reads.
A 2018 study of
foreclosed homes in Atlanta found that hedge funds and investors were 68
percent more likely than small landlords to file for evictions, even after
controlling for property, tenant, and neighborhood characteristics.
A recent [http://2%29%09https/financialservices.house.gov/uploadedfiles/hhrg-117-ba09-20220628-sd002.pdf]House
Financial Services Committee report found that predatory hedge fund investors
targeted homes in neighborhoods with significantly larger Black populations and
approximately 30% more single mothers than the national average, with 12.9% of
households headed by single women with children under 18.
In order to meet
Americans’ housing needs and root out systemic inequities in the housing
market, the End Hedge Fund Control of American Homes Act bans hedge funds and
private equity investors from owning large numbers of homes by establishing a
$20,000 federal tax penalty for each single family home owned by a single
company and its affiliates over 100 homes.
The bill allows companies
with large portfolios to sell homes over several years to come into compliance
so there’s an orderly exit, and includes incentives to make sure buyers of
divested homes are ordinary people who will live in the home. The tax penalties
collected will be used to provide down payment assistance to homebuyers.
“We support Senator
Merkley’s proposal to address the impact of large investors in the housing
market. Often, these firms concentrate their purchases in communities of color,
limiting first-time homebuyer opportunities to families that already face
discrimination in the marketplace. The transfer of the tax revenues to
downpayment assistance programs further enhances the value of this bill,” said
Doug Ryan Vice President, Policy & Applied Research, Prosperity Now.
“In addition to
helping curb the consolidation of single family homeownership by Wall Street
firms, this legislation would go a long way in helping prospective first time
homeowners by providing the means for down payment assistance. Additionally,
limiting concentration in rental housing will likely result in lower rent
increases for tenants, which is crucial in this time of great economic
uncertainty,” said Chris Noble, Esq., Senior Policy Coordinator for the Private
Equity Stakeholder Project.
“Everyone deserves a
safe, stable, and affordable place to call home. Private equity firms, however,
have instead devised a business model that prioritizes profits over people,
regardless of the economic consequences that fall on our communities. The presence
of private equity firms engaging in the housing market is one of the most
concerning threats to financial stability among Oregonian families, especially
for renters, prospective homebuyers, and Oregonians living on low or fixed
incomes. This bold piece of legislation will help change the tide of our
national housing market and will protect families from predatory investment
practices that contribute to our ongoing housing and affordability crises here
in Oregon and in other communities across the country,” said Loren Naldoza,
Legislative & Communications Manager with Neighborhood Partnerships.
Merkley said he has
kept a steady drumbeat on the need for federal action to meet the Americans’
housing needs and to root out systemic inequities in the housing market.
That work has
included?urging the Federal Financial Institutions Examination Council to work
with the housing appraisal industry to address disparities in home valuations
for communities of color;?and pushing Senate leaders to deliver critical housing
assistance to Oregonians struggling to find shelter in the wake of last year’s
catastrophic wildfires.
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