Dec 01, 2022
As millions of Americans struggle to afford rent and mortgage rates, U.S. Sen. Jeff Merkley on Wednesday unveiled legislation intended to stop major Wall Street investors and hedge fund predators from continuing to exacerbate the nation's housing crisis.
"Everyone should have a safe, affordable place to call home."
"Everyone should have a safe, affordable place to call home," the Oregon Democrat said in a statement. "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," Merkley asserted. "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."
Merkley's End Hedge Fund Control of American Homes Act aims to prevent rich investors from taking advantage of renters and limiting homeownership by creating a $20,000 federal tax penalty for each single-family home owned in excess of 100--money that would go toward helping first-time homebuyers with down payments.
"Following the 2008 housing crisis, large private equity hedge funds bought large portfolios of foreclosed homes," notes a fact sheet from his office. "Regrettably, the federal government enabled this growth through bulk sales of federally-backed mortgages and foreclosed properties."
"While some of our housing challenges, including a supply shortage, will take years to remedy," the document states, "others can be addressed immediately, including a strong ban on hedge funds owning and controlling large parts of the American housing market."
Even implementation of Merkley's plan would take some time, given how much housing is already owned by Wall Street. Recognizing the need for "an orderly exit from the housing investment market," the bill would allow for sales over the next several years.
As the fact sheet details:
- Hedge funds and investors must sell at least 10% of the total number of single-family homes to families (not companies or any other businesses) per year. And they are banned from selling any single-family home to other corporations.
- The definition of an investor includes any taxpayer, whether they are a hedge fund, and private equity investor, a real estate investment trust (REIT), an individual, or any other business entity.
- To ensure this tax penalty focuses on problematic actors, this legislation excludes nonprofit organizations, public housing agencies, and other government entities as well as home builders.
Various advocates and experts spoke out in support of the bill Wednesday, including Doug Ryan, vice president of policy and applied research at Prosperity Now, who pointed out that "often, these firms concentrate their purchases in communities of color, limiting first-time homebuyer opportunities to families that already face discrimination in the marketplace."
Chris Noble, senior policy coordinator for the Private Equity Stakeholder Project, welcomed that the bill would direct tax penalties toward helping first-time homebuyers and highlighted that "limiting concentration in rental housing will likely result in lower rent increases for tenants, which is crucial in this time of great economic uncertainty."
Like Merkley, Loren Naldoza, legislative and communications manager at Neighborhood Partnerships--and a former legislative aide to the senator--stressed that everyone deserves "safe, stable, and affordable" housing.
"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," he said. "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," Naldoza added, "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."
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