In recent years, there has been a significant surge in firms' investment in single-family homes, prompting concerns about its impact on the housing market. Now, lawmakers across the United States are pushing for legislative measures to rein in corporate ownership of residential properties and safeguard the interests of ordinary homebuyers.
Democrats in both the U.S. Senate and House have introduced bills aimed at compelling large owners of single-family homes to sell their properties to individual buyers. Meanwhile, a Republican-sponsored bill in the Ohio state legislature seeks to drive out institutional owners through heavy taxation. Similar legislative efforts are underway in states like Nebraska, California, New York, Minnesota, and North Carolina.
The primary concern voiced by these lawmakers is that institutional investors, who have scooped up hundreds of thousands of houses to rent out, are contributing to the scarcity of homes for sale and driving up home prices. They argue that investor buying has made it increasingly challenging for first-time buyers to compete, especially against firms offering all-cash deals.
During the pandemic peak in 2022, investors of all sizes spent billions of dollars buying homes, with more than one in every four single-family homes sold being acquired by institutional buyers. While their activity has slowed recently due to rising interest rates and tighter supply, concerns persist about their influence on the market.
Companies involved in buying single-family homes argue that they provide renters with opportunities to live in desirable neighborhoods where they otherwise couldn't afford to buy. However, legislators and officials at all levels of government have become more active on housing issues, passing measures to fund more affordable housing, streamlining zoning laws, and making the eviction process more tenant-friendly.
Interestingly, calls to block large companies from buying homes come from both sides of the political spectrum. Even Republican Governor Greg Abbott of Texas has expressed concern about the distortion of the housing market by corporate buying, emphasizing the need to protect Texas families.
Advocates for the single-family rental industry oppose such legislation, attributing rising prices to an undersupply of new construction homes rather than institutional investment. They also highlight that institutional investors own only a small percentage of American rental homes, estimated at 3% to 5%.
Nonetheless, in some American cities, institutional investors hold a much larger share of homes than the national average. For example, in Atlanta, nearly 11% of all rental homes in the five-county area are owned by just three real estate companies.
In response to these concerns, proposed bills seek to limit rental-home ownership for large companies, capping ownership at no more than 50 homes in many cases. Some states, like Minnesota, are considering even stricter limits, such as capping ownership at 20 homes.
Critics of regulation argue that many of the largest investors have already completed their purchases and are not actively buying more homes. Instead, smaller investors owning between 10 and 99 homes have increased their share of home buying this year. Nevertheless, lawmakers remain committed to addressing the growing dominance of institutional investors in the housing market to ensure fairness for all homebuyers.