Ed. note: This article first appeared in the Finance Docket newsletter. Enter your email below to view the full newsletter and subscribe.
With hospital consolidation blamed for increasing costs and decreasing quality—while boosting profits for private equity investors—more than a dozen states have moved to restrict the industry’s activity in the healthcare space. And, increasingly, Democrats and Republicans, from coast to coast, are coming together to denounce p.e. ownership of single-family homes.
Over the last few years, home affordability “has just totally collapsed,” according to Redfin senior economist Chen Zhao. Buying the typical American home now requires the typical American to make about $30,000 more per year than she actually does.
Obviously, a lot goes into why, particularly higher interest rates and restrictive local zoning laws. But those are hard or impossible to deal with. On the other hand, those tens of thousands of homes private-equity firms have bought up to place on the rental market may also be driving up prices, while simultaneously restricting supply. And they present an appealing legislative target.
Lawmakers on both sides of the aisle, in states as blue as New York and California to those as ruby-red as Nebraska and Ohio, have introduced legislation to restrict Wall Street firms from buying out the American Dream. Texas Gov. Greg Abbott, as fiercely partisan a right-winger as any, took the rare step of backing a Democratic effort to keep p.e. firms and hedge funds out of Lone Star State neighborhoods. The self-proclaimed champion of “free markets” explains, with less-than-admirable intellectual consistency, “corporate large-scale buying of residential homes seems to be distorting the market.”
For their part, the institutional investors and the rental industry generally aren’t much better at noticing their own logical difficulties: They argue that they give people the opportunity to rent in neighborhoods they couldn’t afford to buy in, without completing the circular reasoning that their paying top dollar for homes in those neighborhoods might be the reason why. Others argue that the buying spree is now essentially over, so no need to regulate, although no one seems to have told the Blackstone Group, the largest property buyer in the U.S. this year, including a $3.5 billion deal for single-family rental operation Tricorn Residential.
That later argument doesn’t do much to undermine some of the proposals, which would force those companies to sell the overwhelming majority of their stock. The Democratic-backed End Hedge Fund Control of Americans Homes Act in Congress would cap single-family holdings at 50; Minnesota’s bill would limit it to 20. Another approach is the brainchild of a Cincinnati-area Republican, even if it doesn’t sound like one: imposing punishing taxes on such companies. Claiming to fear rental companies building a monopoly on homes in certain neighborhoods, Ohio State Sen. Louis Blessing III claims his is “an antitrust in spirit bill.”
In spite of broad bipartisan support for such measures among the electorate, none of the bills has made much headway. But if owning a home remains out of reach for more and more Americans, the pressure in the housing market may well fall on big investors.
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