WSJ: Wall Street Has Spent Billions Buying Homes. A Crackdown Is Looming.

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Wall Street went on a home-buying spree. Now, more lawmakers want to stop it from ever happening again.

Democrats in the U.S. Senate and House have sponsored legislation that would force large owners of single-family homes to sell houses to family buyers. A Republican’s bill in the Ohio state legislature aims to drive out institutional owners through heavy taxation.

Lawmakers in Nebraska, California, New York, Minnesota and North Carolina are among those proposing similar laws.

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These lawmakers say that investors that have scooped up hundreds of thousands of houses to rent out are contributing to the dearth of homes for sale and driving up home prices. They argue that investor buying has made it harder for first-time buyers to compete with Wall Street-backed investment firms and their all-cash offers.

Investors of all sizes spent billions of dollars buying homes during the pandemic. At the 2022 peak, they bought more than one in every four single-family homes sold, though more recently their activity has slowed as interest rates rose and supply became tighter. Two of the largest home-buying firms, Invitation Homes and AMH, are publicly traded companies, while a number of other companies, backed by private equity, hold portfolios of tens of thousands of homes nationwide.

Companies that buy single-family homes say their businesses provide renters the opportunity to live in desirable neighborhoods where they otherwise couldn’t afford to buy.

With home prices and rents near record highs around the U.S., legislators and officials at all levels of government have become more active on housing issues. States have passed new measures to fund more affordable housing, to allow builders to bypass local zoning laws and to make the eviction process more favorable to tenants.

Most calls to block large companies from snapping up homes come from liberals, but some conservatives also show an inclination to crack down.

This “corporate large-scale buying of residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home,” Republican Gov. Greg Abbott wrote on X last month. “This must be added to the legislative agenda to protect Texas families.”

Close to equal numbers of voting-age Republicans and Democrats said they would support a measure to block Wall Street firms from buying homes, according to a new study funded by the University of California, Santa Barbara, and the Manhattan Institute, a conservative think tank.

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Advocates for the single-family rental industry, such as the National Rental Home Council, oppose such legislation and blame rising prices on an undersupply of new-construction homes. They also point to the relatively low number of homes owned by institutional investors, defined as those companies with portfolios of 1,000 homes or more. Some research estimates these companies own 3% to 5% of American rental homes.

In some American cities, institutional investors hold a much larger share of homes than they hold nationally. In Atlanta, nearly 11% of all rental homes in the five-county area are now owned by three real-estate companies, a recent study by researchers at Georgia State University found. A 2022 analysis by the U.S. Department of Housing and Urban Development said 21% of Atlanta rental homes were owned by some large institution.

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The bills in the House and Senate would cap rental-home ownership at no more than 50 homes for many companies, requiring them to sell off any more they already own. A bill in Minnesota, meanwhile, would limit ownership to 20 homes.

Bills to block landlords in the Ohio and Nebraska state legislatures were written in response to a small number of investors buying up hundreds of homes in a handful of Cincinnati and Omaha neighborhoods.

Louis Blessing III, a Republican representing suburbs of Cincinnati in the Ohio Senate, introduced a bill to tax large landlords so heavily that they would likely feel compelled to sell their properties. Blessing said he is concerned about real-estate companies developing monopoly power in some neighborhoods, while putting starter homes further out of reach for home buyers.

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