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Legislation Introduced to Curb Predatory Practices in the SFR Marketplace

U.S. Sen. Sherrod Brown, Chair of the Senate Banking, Housing, and Urban Affairs Committee; along with Sen. Ron Wyden, Chair of the Senate Finance Committee; and Sens. Tina Smith, Jeff Merkley, Jack Reed, John Fetterman, Elizabeth Warren, and Tammy Baldwin have introduced a new bill to restrict tax breaks for big corporate investors that buy up homes.

The Stop Predatory Investing Act would prohibit an investor who acquires 50 or more single-family rental homes from deducting interest or depreciation on those properties.

The National Association of Realtors (NAR) reported that institutional buyers bought more than 13% of homes sold in 2021, with purchase rates as high as 28% in Texas and 19% in Georgia. CoreLogic data has found that while small investors own a large number of rental homes, large, institutional investors increased their purchases at the height of the pandemic and have continued to purchase a significant share of single-family homes.

The Stop Predatory Investing Act restricts tax breaks for private equity and large investors that currently give them an advantage in the market for affordable single-family homes, and helps make homeownership a reality for more families across the country.

Specifically, the Stop Predatory Investing Act will:

  • Prohibit an investor who acquires 50 or more single-family rental homes from deducting interest or depreciation on those properties.
  • Incentivize big investors to sell single-family rental homes back to homeowners or nonprofits in the community.
  • Support affordable rental housing and the construction of new housing supply by allowing owners to continue to take deductions on properties that are financed using Low-Income Housing Tax Credits or that are newly constructed for rental.
  • Protect renters who live in existing single-family rental housing by not disallowing deductions for single-family rental homes purchased before enactment.

“The predatory practices of institutional investors who buy out single-family homes is a rapidly developing issue in affordable housing policy, and one that must be addressed head-on to protect the rights of tenants and help preserve the nation’s supply of affordable housing,” said National Low Income Housing Coalition (NLIHC) President and CEO Diane Yentel. “I applaud Sen. Brown for his vision and leadership in introducing the ‘Stop Predatory Investments Act’, which will help ensure investors do not buy up available properties only to raise rents and displace tenants.”

In 2021, 16% of homes in Cleveland, Ohio were purchased by investors, with one zip code reaching 70%. In Cincinnati, investors purchased 15% of homes and nearly 50% of homes in some communities, and a single company bought 29 homes on a single street.

The Stop Predatory Investing Act is supported by the National Association of Local Housing Finance Agencies, Americans for Financial Reform (AFR), Enterprise Community Partners, the Local Initiatives Support Corporation (LISC), the National Community Stabilization Trust (NCST), the National Housing Law Project (NHLP), the National Low Income Housing Coalition (NLIHC), and the National Housing Resource Center (NHRC).

“NALHFA has been working diligently with Sen. Brown for the last several months and commend his leadership in introducing the Stop Predatory Investing Act,” said NALHFA Executive Director Jonathan M. Paine, CAE. “This legislation represents a critical step in safeguarding the long-term affordability and stability of our communities, empowering local government to protect single-family affordable housing stock, and preserve the well-being of low-income individuals and families. Sen. Brown’s efforts will aid equitable and sustainable housing solutions that prioritize the needs of our communities over profit-driven interests."

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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