Should Congress Ban Hedge Funds From Buying Houses?

Last week, Democrats in Congress proposed two separate bills aimed at reshaping the housing market as a direct response to the increasing involvement of big investors, like hedge funds, in the residential real estate market. If you got outbid in the last few years by a cash buyer, there’s a good chance it was one of these large institutional hedge funds that were the buyer.

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There are 2 separate bills. The Senate bill would require hedge funds to sell off all their single-family homes over the next decade and bans them from buying any more single family homes.

The House has proposed a separate bill targeting any investor owning more than 75 homes. This bill wouldn’t require anyone to sell their homes, but would require hedge funds to pay an annual fee of $10,000 per home they own, with the funds going to a down payment assistance fund. 

Investors currently account for 26% of all single-family home purchases, but they’re not all hedge funds. Hedge funds only account for around 3% of the homes owned in America, the rest are mom-and-pop investors - every day people. Someone who maybe rented out their old home instead of selling it and bought a new one. The current surge in investor activity has played a roll in increased rents and home prices, making it tougher for families to find affordable housing.

The price of homes are based on supply and demand and the run up in prices is more a factor of lack of supply which definitely needs to be addressed as well. These bills address the demand aspect and take out some demand from the market which may lead to a drop in prices. It’s just too hard for average families to compete with limitless cash offers.

I personally think these would be a good thing as it would give normal families a chance to get on the home ownership ladder, but I’d bet almost anything these bills never become law.

What do you think of these bills? Should the government get involved in who can buy or sell a house in America? Leave a comment and let me know your thoughts!