US Lawmakers Mull Banning Wall Street From Buying up Single-Family Homes Amid Housing Crisis

Lawmakers in the United States are now considering banning Wall Street firms and investors from scooping up single-family homes in a bid to resolve the country's housing crisis. 

Democrats in the U.S. Senate and House of Representatives have recently sponsored a bill to put an end to the controversial practice. Dubbed the End Hedge Fund Control of American Homes Act, the bill would require hedge funds-defined as corporations, partnerships, or real estate investment trusts managing funds pooled from investors-to sell all the single-family homes they own over a 10-year period, as first reported by The Wall Street Journal.

Should the bill pass, it would impose stiff tax penalties on Wall Street firms owning single-family homes, with the proceeds reserved for down-payment assistance for individuals looking to purchase a house from corporate owners. It would also ban Wall Street firms and investors from purchasing single-family homes. 

Separately, lawmakers in California, Minnesota, Nebraska, New York, North Carolina, and Ohio are proposing similar laws. 

Why Are Lawmakers Banning Wall Street From Owning Single-Family Homes?

The country is currently facing a housing affordability crisis caused by elevated mortgage rates and a lack of supply in the market, which keep home prices high, boxing out many first-time buyers. In addition, first-time buyers who can afford a home are also presented with the challenge of competing against Wall Street firms who are able to offer cash to sellers, The Journal noted.

As of 2022, Wall Street investors and firms own 3% of all single-family rentals nationwide. However, they owned more in markets where homes were more affordable. For instance, institutional firms owned 20% of all single-family homes in Charlotte in the same period, per the Urban Institute. 

Furthermore, Wall Street has bought 26% of all single-family homes that sold in June 2023 despite a slow housing market, according to data analytics company CoreLogic.

Wall Street investors ramped up their purchase of single-family homes during the pandemic boom in 2022. At the time, over one in every four single-family homes were bought by institutional investors, the New York Post reported. 

That being said, many experts say Wall Street investors are not unlikely the reason why Americans are facing challenges owning single-family homes. 

"Housing has been unaffordable long before these Wall Street firms came into the marketplace," Tobias Peter, a senior fellow and co-director of the American Enterprise Institute's housing center, said, as quoted by Fortune. 

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