By ERIN FLYNN JAY
A bicameral bill that would force hedge funds out of the single-family home market is supported by some industry leaders.
Last month, U.S. Sen. Jeff Merkley (D-OR) and U.S. Rep. Adam Smith (D-WA) introduced the End Hedge Fund Control of American Homes Act of 2023. If passed, it would force hedge funds to sell at least 10% of the total number of single-family homes they currently own to homebuyers every year for a 10-year period.
After a 10-year full phase-out, all hedge funds will be completely banned from owning any single-family homes.
In a YouTube video, Merkley said rents are sky-high and families can’t afford to buy a home in their chosen community.
“Hedge funds and big financial corporations are fueling the fire,” Merkley said.
The Mortgage Note asked industry leaders what their reaction to the proposed legislation is.
Marty Zankich, owner of Chamberlin Real Estate School, said the bill offers a balanced solution that addresses both skyrocketing rents and the role of hedge funds.
“The bill rightly acknowledges the link between hedge funds’ profit motives and rising housing costs,” said Zankich. “Their focus on maximizing returns for investors has fueled demand and driven prices beyond the reach of many families. By limiting their involvement in the single-family home market, the bill aims to create a more equitable landscape where homeownership and affordable rentals remain attainable for all.”
With only 15% of American renters able to afford the median-priced home, the need for intervention is clear, he said.
“Hedge funds should leave the single-family home market,” said Zankich. “The bill recognizes this urgency and proposes a measured approach that protects families without unduly burdening hedge funds. It’s important to acknowledge that the bill avoids a simplistic ‘punishment’ approach toward hedge funds.”
Instead, Zankich said it seeks to regulate their participation in the single-family market, allowing them to continue investing in other areas like currencies and derivatives. This ensures a win-win scenario where families gain access to affordable housing and hedge funds maintain their diverse investment portfolios.
With the bill’s focus on affordability, responsible market practices, and a balanced approach towards a more equitable housing landscape, Zankich believes that it’s going to be supported by other lawmakers.
“A necessary and timely intervention”
James Heartquist, owner of We Buy Houses Arizona, said the proposed bill is a necessary and timely intervention to address the housing affordability crisis and the predatory practices of hedge funds in the housing market.
Hedge funds have been buying up single-family homes at an alarming rate, especially in the aftermath of the 2008 financial crisis and the COVID-19 pandemic, he said.
“They have been exploiting the low interest rates, the limited supply, and the high demand for housing, and driving up the prices and rents for ordinary Americans,” said Heartquist. “They have also been targeting vulnerable communities, such as Black families and single mothers, and imposing harsh conditions, such as evictions, fees, and poor maintenance, to maximize their profits.”
Heartquist said these practices “have contributed to the racial and economic disparities in homeownership and wealth and have undermined the stability and well-being of millions of families.”
Heartquist said that hedge funds are not interested in providing quality and affordable housing for families, but rather in exploiting the market conditions and extracting profits from renters and homeowners.
“They have also been neglecting the maintenance and improvement of the homes they own, and imposing unfair and abusive terms on their tenants,” added Heartquist. “Hedge funds have been harming the social and economic fabric of the communities they invest in and widening the gap between the rich and the poor.”
Heartquist predicts the bill, despite facing some uncertainty and opposition, will pass.
“More people are getting to understand the reasoning behind it as it continues to be dissected by politicians and civilians alike,” he said. “Eventually, the majority will embrace it; then it will sail through smoothly.”
Andy Kolodgie, owner of Sell My House Fast, said the proposed bill would demotivate investors in the market.
But that’s not necessarily a bad thing, according to Kolodgie.
Kolodgie said that the acquisition of single-family houses by hedge funds – particularly in the current housing market – adds nothing to the communities where these homes are situated. They only benefit investors while making it hard for potential homebuyers, he said.
“Hedge funds shouldn’t be a barrier for anyone looking to purchase a home in their neighborhood. They should not be allowed to invest in single-family homes as this will encourage more people to buy properties and counteract the massive investor landlord model that is becoming more and more prevalent,” said Kolodgie.
However, Kolodgie doubts the bill will be passed in the divided Congress due to a lack of bipartisan support and the country’s housing affordability issues.
The bill has been referred to the Committee on Finance.
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