For years, the scarcity of homes for sale has driven up competition and prices, leaving many potential homebuyers with limited and often unaffordable options. A recent legislative proposal known as the “End Hedge Fund Control of American Homes Act” seeks to address this issue by restricting institutional investors, particularly hedge funds, from purchasing single-family properties.

Introduced in 2023 by Senator Jeff Merkley (D-Ore.) and Representative Adam Smith (D-Wa.), the bipartisan bill aims to increase the availability of homes in the housing market by preventing large investors from monopolizing residential real estate. Hedge funds and other institutional investors have been a significant obstacle for individual homebuyers, using their substantial capital to acquire properties, thereby reducing the already-limited inventory and exacerbating affordability challenges.

Senator Merkley emphasizes the bill’s intent to ensure that housing serves as homes for people rather than profit centers for Wall Street. He stated, “It’s time for Congress to put in place commonsense guardrails that ensure all families have a fair chance to buy or rent a decent home in their community at a price they can afford.”

The proposed legislation employs a two-pronged approach: first, it prohibits hedge funds from acquiring single-family homes in the future, and second, it mandates that these funds gradually sell at least 10% of their residential real estate portfolios annually over a 10-year period. At the end of the specified timeframe, these portfolios must be entirely divested.

As of June 2022, institutional investors owned an estimated 574,000 properties, significantly impacting the housing market. If the bill becomes law, injecting over half a million single-family homes back into circulation could alleviate the housing shortage and benefit potential homebuyers.

Congress must approve the legislation before it can be signed into law by the President. While there is no set timeline for the act to pass, it presents a potential solution to the housing crisis, although its fate remains uncertain.

In addition to this proposed legislation, other bills are in the legislative pipeline, offering potential federal assistance to homebuyers. The Neighborhood Homes Investment Act proposes allocating $16 billion for building and rehabilitating approximately 400,000 homes. The First-Time Home Buyer Tax Credit aims to provide up to $15,000 in refundable tax credits, while the Downpayment Toward Equity Act suggests a $25,000 cash grant for eligible first-time homebuyers.

For those navigating the ever-changing mortgage market, Mike Stoy with Epic Mortgage is a go-to expert. As the housing landscape evolves, staying informed is crucial, and Mike can provide valuable insights to help individuals make informed decisions about their mortgages.

While these legislative proposals are not guaranteed to pass, there are existing programs and resources to support first-time homebuyers on their journey to homeownership.