Lawmakers eye tax changes to tackle institutional investors in housing - Semafors

Lawmakers eye tax changes to tackle institutional investors in housing - Semafors

Lawmakers Explore Tax Reforms to Address Institutional Influence in Housing Market

Legislators are advancing proposals to curb the growing role of institutional investors in the U.S. housing market, with a focus on tax policy changes and regulatory measures. The debate follows rising concerns that large investment firms, including private equity and hedge funds, are exacerbating housing affordability challenges by outbidding individual buyers and driving up rents according to CBS News.

A bipartisan bill, the Homes for American Families Act, introduced by Senators Josh Hawley (R-Mo.) and Jeff Merkley (D-Ore.), seeks to amend the Sherman Antitrust Act to prohibit investment firms with over $150 million in assets from purchasing single-family homes, condominiums, or townhouses. The legislation would empower the Justice Department's antitrust division to enforce the ban. Separately, Senate Democrats, led by Elizabeth Warren (D-Mass.) and Merkley, unveiled the American Homeownership Act, which aims to eliminate tax deductions for depreciation and mortgage interest on properties owned by entities with 50 or more homes. The bill would redirect savings from these tax changes to fund affordable housing initiatives and homeownership programs according to Senate Democrats.

Tax incentives for institutional investors have become a focal point of the discussion. Treasury Secretary Scott Bessent acknowledged during a congressional meeting that current tax rules disproportionately benefit corporate landlords, enabling them to outcompete individual buyers with all-cash offers according to Semaphor. Republican lawmakers, however, have expressed caution about market intervention, with some arguing that restricting investment could reduce housing supply according to Semaphor.

The White House has signaled support for legislative efforts to address the issue, encouraging collaboration between chambers to finalize a unified approach. Meanwhile, industry stakeholders warn of potential unintended consequences, as private equity firms and real estate groups lobby against measures they argue could destabilize housing markets according to Semaphor.

Federal data shows large institutional investors own 3.8% of single-family rental homes nationwide, with higher concentrations in regions like Atlanta and Charlotte according to CBS News. Advocates for reform argue that curbing corporate dominance in housing is critical to restoring affordability, while opponents emphasize the need for balanced solutions that address underlying housing shortages according to Senate Democrats.

As lawmakers weigh competing proposals, the outcome of these debates could reshape tax policies and regulatory frameworks governing residential real estate investment.