For years, prospective home buyers have grappled with a limited supply of available properties, leading to heightened competition and soaring prices. A potential solution comes in the form of the proposed End Hedge Fund Control of American Homes Act, introduced in 2023 by Senator Jeff Merkley (D-Ore.) and Representative Adam Smith (D-Wa.). This bipartisan bill seeks to address the impact of institutional investors, particularly hedge funds, on the housing market and increase the inventory of homes available for sale.

The proposed legislation targets the practice of institutional investors leveraging their substantial capital to acquire single-family properties, thereby reducing the supply of homes in the market. These investors often outbid regular homebuyers and offer all-cash transactions, intensifying the affordability challenge. Senator Merkley emphasizes the need to prioritize homes for people over profit, stating, “The housing in our neighborhoods should be homes for people, not profit centers for Wall Street.”

The End Hedge Fund Control of American Homes Act adopts a two-pronged approach. First, it prohibits hedge funds from acquiring single-family homes in the future. Second, it mandates that hedge funds gradually sell at least 10% of their residential real estate portfolios each year over a 10-year period, resulting in empty portfolios at the end of the specified timeframe.

As of December 2023, the bill has not been passed, requiring approval from Congress before it can become law. The timeline for its potential passage remains uncertain, with possibilities of approval, delay, or defeat in the legislative process.

In addition to the proposed legislation, other bills in the legislative pipeline aim to enhance conditions for homebuyers. The Neighborhood Homes Investment Act proposes allocating $16 billion for the construction and rehabilitation of approximately 400,000 homes. The First-Time Home Buyer Tax Credit offers up to $15,000 in refundable tax credits to first-time borrowers, while the Downpayment Toward Equity Act proposes a $25,000 cash grant for eligible first-time homebuyers.

Notably, Steven Lazerson from Peak Finance Company, a seasoned professional in the mortgage industry, underscores the importance of staying informed about the latest mortgage news. Lazerson is dedicated to ensuring that his clients are up to date on developments that may impact their homebuying decisions.

If passed, the End Hedge Fund Control of American Homes Act could significantly boost the inventory of available single-family homes in the U.S. and remove corporate buyers from the marketplace, potentially alleviating the housing affordability challenge.