Facing voter angst over housing costs, Congress targets Wall Street landlords

Bipartisan majorities in both chambers of Congress have now voted in favor of restricting Wall Street’s footprint in the housing market — a popular move that could make it to the president’s desk before the November elections.

But the policy, which would ban investors who own a large stock of single-family homes from purchasing more, will likely do little to increase the availability of housing for American families or to cut costs for renters.

Large institutional investors own less than 1 percent of single-family homes and roughly 2 percent of single-family rentals, so most homes will be unaffected. And the housing stock they do buy is often in need of substantial, costly repairs. Private equity firms and other investors have the ability to purchase homes that an individual homebuyer might not want to take on, before making them available for rent or selling them at a profit.

Blocking institutional investors from snapping up more single-family housing could open up more inventory for individual homebuyers here or there, said Tobias Peter, a senior fellow and co-director of the American Enterprise Institute’s Housing Center. But since a lot of investor-owned housing is leased out, there might then be fewer options for renters, he added.

“So, it’s probably a wash,” Peter said.

Affordability is a top concern of both Democrats and Republicans heading into the midterm elections as the increasing cost of housing persists as a key issue for voters. Seven in 10 Americans support the kind of ban Congress is considering, according to a Bipartisan Policy Center/Advocus poll conducted last month.

The language aiming to limit Wall Street’s ownership of housing is one of more than 50 measures in the landmark bipartisan package designed to increase housing supply and homeownership. But it’s likely to be the most politically salient. President Donald Trump called for the ban in his State of the Union address.

“We want homes for people, not for corporations,” he said in that speech in February.

The White House did not respond to a request for comment.

Even if restricting Wall Street’s footprint in the housing market won’t lead to significant improvements to affordability, it’s still “absolutely” worth it to crack down on institutional investors to give voters a win over Wall Street, said Rick Ridder, a Democratic political strategist who is president of RBI Strategies and Research.

“It’s symbolic about who’s in charge, who’s making decisions, and more importantly, who is keeping you from fulfilling your dreams,” Ridder said. “And so often, voting is about fulfilling your dreams.”

While private equity firms own a small share of single-family homes across the country, there are some metropolitan areas where the ban could have a bigger effect on the local market.

Mega institutional investors in the single-family rental market — entities that own more than 1,000 properties — operate most heavily in the South. Atlanta has 72,000 of these properties, Phoenix has 33,000 and Dallas has 27,000, according to a report conducted by the Urban Institute.

Investors of all sizes overall own 20 percent or more of all single-family rental properties in Atlanta; Jacksonville, Florida; and Charlotte, North Carolina, which is significantly higher than the amount nationally of about 2 percent.

For cities with a high concentration of large institutional investors, a ban could help both buyers and renters, said Laurel Kilgour, research manager at the American Economic Liberties Project.

For individual homebuyers, these areas could have slightly more inventory and won’t have to go up against all-cash offers from private equity firms. And current renters living in single-family rental homes won’t have their units unexpectedly sold to a Wall Street firm, which often have a record of aggressive rent hikes, tenant evictions and maintaining properties in worse conditions, Kilgour said.

It is “significant” that a ban on institutional investors “stops this model from spreading to other cities that you know have not yet suffered through this trend,” she said.

There are minor gaps in how each chamber of Congress has approached the ban’s design. Beyond a blanket prohibition on purchases by large institutional investors — those who already own at least 350 single-family homes — the Senate version would require homes built as long-term rentals to be sold by institutional investors to individual homebuyers after seven years. That language received a large amount of pushback from the House and the industry out of concern that the measure could choke off funding for a notable chunk of new housing construction.

That’s a problem for a bill whose purpose is largely to help reduce a housing shortage of an estimated 5 million homes, which has pushed up costs for homebuyers and renters alike.

Beyond the ban, the bill takes a slew of steps to increase supply, such as making it easier to build manufactured housing and increasing eligibility for a federally funded program that supports building, buying and rehabilitating affordable housing.

Ken Wingert, chief advocacy officer for the National Association of Home Builders, said the bill would likely boost housing supply. But “it’s going to take time for that to happen.”

The federal government is also limited in the steps it can take to increase affordability in the market without steps from state and local governments, said Dennis Shea, executive vice president and chair of the Center for Housing Policy at the Bipartisan Policy Center.

“There’s no bill that will come out of Congress that’s going to solve the housing affordability crisis,” Shea said. “But this bill contains a number of very important items that can contribute to a solution.”

المصدر: Politico