Cutting the Hedges: The Bill to Ban Hedge Fund Home Buying

April 18, 2024 - 4 min read

Homes owned by people, not investors

For years, people have dealt with the lack of for-sale properties on the market.

The scarcity drives up competition and prices, often leaving droves of would-be home buyers with few options and likely fewer affordable ones. However, a bill introduced in Congress could soon help out borrowers.

The proposed End Hedge Fund Control of American Homes Act would stop institutional investors from buying single-family properties and force them to empty their residential real estate portfolios over a 10-year stretch. Here’s what you need to know.

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What is the End Hedge Fund Control of American Homes Act?

Introduced in 2023 by Senator Jeff Merkley (D-Ore.) and Representative Adam Smith (D-Wa.), the End Hedge Fund Control of American Homes Act is a bicameral bill aiming to increase the amount of for-sale supply in the housing market.

Hedge funds and other institutional investors stand as a major detriment for home buyers, as they use their huge capital reserves to scoop up available properties. This reduces the already-slim inventory in the marketplace, creating a more acute affordability crunch. Additionally, their abilities to outbid normal borrowers and offer all cash make house hunting more difficult.

“The housing in our neighborhoods should be homes for people, not profit centers for Wall Street. Yet, in every corner of the country, giant financial corporations are buying up housing and driving up both rents and home prices,” Sen. Merkley said. “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.”

Additionally, because these corporate entities have a goal of generating high profits for their investors, they inflate the housing prices — increasing the cost of living for their occupants and potentially for local properties through comp assessments and appraisals.

As currently written, the bill has a two-pronged approach: First, it would ban hedge funds from buying single-family homes going forward. Second, those hedge funds would have to sell at least 10% of the homes in their portfolios every year over a 10-year period. At the end of those 10 years, the portfolios must be empty.

Institutional investors — such as hedge funds, private equity firms, and endowments — owned an estimated 574,000 properties as of June 2022, according to the Urban Institute. For reference, data revealed a total of 754,846 active property listings in November 2023. Injecting over half a million single-family homes back into circulation would be a major boon for house hunters.

“Without access to housing, nothing else in your life works. Not your job, your health, your education or your family,” Rep. Smith said. “The housing crisis is devastating communities all across the country, and corporate executives are exploiting it to put more money in their pockets. This crisis has been exacerbated in recent years by an increasing number of large investors purchasing a significant percentage of single-family homes, squeezing out prospective buyers. Congress must take action to crack down on corporate greed and get hedge funds out of the single-family home market.”

Has the End Hedge Fund Control of American Homes Act been passed?

As of December 2023, the End Hedge Fund Control of American Homes Act has not been passed.

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Congress still needs to approve the proposed legislation before the President can sign it into law. There is no set timeline for the act to pass. It is possible that it could be passed in the near future, but it is also possible that it could be delayed or even defeated in the process.

Other policies in the legislative pipeline

Potentially more federal help for borrowers await the bureaucratic process. A trio of notable bills would improve home buyer conditions if passed into laws.

The Neighborhood Homes Investment Act would allot $16 billion for the building and rehabilitation of about 400,000 homes. The First-Time Home Buyer Tax Credit would provide up to $15,000 in refundable tax credit to first-time borrowers. Lastly, the Downpayment Toward Equity Act would give eligible first-time home buyers a $25,000 cash grant to put toward their purchase.

Help for first-time home buyers

Becoming a homeowner is a major financial milestone and one of the most impactful decisions you will make.

While these proposed bills have no guarantees when or even if they’ll pass, you have an array of programs to help you buy your first home.

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First-time home buyer mortgages

First-time home buyer loans are specifically designed with more favorable terms for the borrower, to make homeownership more attainable.

The table below offers a snapshot of these loans and their basic requirements:

ProgramMinimum Credit ScoreDown Payment RequirementOther Requirements
FHA Loans580 (with 3.5% down)3.5%-10%Mortgage insurance is required. Property must meet certain standards
Conventional 976203%At least one borrower must be a first-time home buyer. Private Mortgage Insurance may be required
Home Possible6603%Income limits apply. Homeownership education required
HomeReady6203%Income limits apply. Homeownership education required
USDA Loans6400%Must be in a USDA-eligible rural area. Income limits apply
VA LoansVaries by lender0%Available to veterans, active-duty service members, and certain members of the National Guard or Reserves

Broken down locally, every state has its own first-time home buyer program. These programs are specifically tailored to the needs of their markets and borrowers.

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Down payment assistance programs

Additionally, down payment assistance (DPA) can provide a big hand in clearing the financial hurdles to homeownership. The best part is you don’t necessarily need to be a first-time buyer to qualify for some DPA programs.

Every state has its own DPA to potentially take advantage of, found through local housing agencies, lenders, and city and state websites.

The bottom line

If passed, the End Hedge Fund Control of American Homes Act would give housing in the U.S. a much needed inventory boost and eliminate corporate buyers from the single-family marketplace.

But while we wait for the bill to progress, you should still explore your loan options and see if you qualify for financial assistance.

If you’re ready to take the steps to homeownership, contact a local lender today.

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Paul Centopani
Authored By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.
Aleksandra Kadzielawski
Reviewed By: Aleksandra Kadzielawski
The Mortgage Reports Editor
Aleksandra is the Senior Editor at The Mortgage Reports, where she brings 10 years of experience in mortgage and real estate to help consumers discover the right path to homeownership. Aleksandra received a bachelor’s degree from DePaul University. She is also a licensed real estate agent and a member of the National Association of Realtors (NAR).