In general, not a bad idea. Devil’s in the details - what about trusts/family corps; or small S-corps? I have S-corp clients that have multiple (less than 50) units. Would they face the same restriction?
Blackstone fell 5% on the news.
It’s not an especially good idea, though. These types of institutional purchasers own a small fraction of homes (about 2%), and have been net sellers lately:
Small Investors Dominate The Single-Family Home Market – NMP
The share of investor-owned single-family homes has markedly increased, but not because of big institutional owners. It’s been owners of a small number of properties.
For that, I don’t think you look to Blackstone and other easy-to-hate guys. I think you look to the tax code and Airbnb. The 2017 changes to the tax code eviscerated the tax advantages to owner-occupied homes, while Airbnb (and similar sites) created an entire new investor use for SFR properties.
We’ve radically altered the economic landscape for SFR properties, so it’s no wonder that we’re shifting away from the owner-occupied model….
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Of course, when you look at ALL homes owned, even those in rural areas where such purchases are virtually non-existent, the percentage will be small - but this is a problem of concentrated buying in select communities. ALL homes do not go on sale every year so it is really about the percentage of the supply being sold annually that is being removed from that market - not about final long-term ownership.
Take Dallas for example, Invitation Homes owns more than 11,000 homes in the Dallas area - roughly 2% of the total market. That stock, that supply of homes was quickly hoovered up in a short period of time. If we assume 10% of all homes in Dallas go up for sale every year (About 50k - I think a generous number), and 11,000 have been removed in a short period of time by institutional investors, then the impact is more severe and acute than just a “2% ownership” statistic.
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But is that true? Were that many homes quickly hovered up in a short period of time? Almost certainly not.
First point - Invitation Homes doesn’t have 11,000 homes in the Dallas market. Per the web, they own about 3,000. Second, Invitation Homes got started in 2005; it’s been accumulating homes for close to two decades.- and has been significantly active in Dallas since at least 2016. They don’t appear to buy more than a few thousand homes per year nationwide in their peak years, and most years they buy less than that. It’s highly unlikely that even these 3,000 homes were removed “in a short period of time” by institutional investors - and if that inventory was assembled over the last 10 years (which is likely), then we’re not talking about more than a few percentage points of volume. I don’t think you’re looking at anything materially more “severe and acute” than 2%
Plus, I’m not sure that the broader point about these home purchases being concentrated in select communities is all that valid either. Sure, most will be in urban areas - but nearly all homes are in urban areas, so it mostly will line up. I’s very, very unlikely that large institutional investors like Invitation are buying enough Dallas homes to have any material impact in the market.
Again, I think we’re just seeing single-family homes moving closer to what we’ve seen for centuries with apartments - people being more willing to rent rather than own, which means that the unit is owned by an investor (like nearly all apartment units) than the owner. And that’s because of macroeconomic reasons, more than anything else. Changes to the tax code combined with historically lower interest rates (even now) have vastly reduced the tax advantages to a home being owned rather than rented. Technological advances have narrowed the transaction costs to renting SFR properties compared to apartment buildings. Airbnb plays a factor as well, as SFR properties can now be used for hotel purposes more easily. So this is a trend that’s likely to continue going forward.
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Invitation Homes, headquartered in Dallas, has more than 11,000 properties in the area. Progress Residential, headquartered in Scottsdale, Arizona, has nearly the same. American Homes 4 Rent, headquartered in Las Vegas and renamed AMH in January 2023, has over 5,000.
Maybe they own less today but that was the claim in 2023.
Food for thought:
Without question - which is why some communities have been fighting back on that point.
Ah, I see the confusion. “The area” in that quote isn’t Dallas. It’s Atlanta. That’s from the discussion of the Atlanta-Journal Constitution analysis of the greater Atlanta housing market. In 2023, they owned about 2,900 homes in the Dallas-Fort Worth area:
Invitation Homes buys 1,900 homes, mostly in the Sun Belt, for about $650 million
BTW, I should acknowledge my bias here. I have some antipathy towards critics of investor-owned housing, based on my experience as a zoning lawyer.
In my practice, I often am seeking zoning approvals for new developments. Sometimes those projects involve multi-family housing, often in areas near existing single-family homes. SFR owners often object to having multi-family near them…but also a lot of the time what they want to be assured of is that the units will be condos, and not rental apartments. And nearly all of the time that they want the units to be condos is to have some assurance that they won’t be rented to Those People - people from a different socio-economic class than the homeowners.
Investor-owned single-family housing doesn’t affect the housing market. Every home they buy gets lived in by a family that would otherwise be in the overall housing market. But it does differentially affect the rental vs. owned-housing markets. People of higher socio-economic status have the ability to live in either rental or owned housing, while people from lower socio-economic classes typically can only rent. When investors looking to move SFR from owner-occupied to rental enter the market, it means that people that are in upper level socio-economic classes looking to buy a home now face more competition for those homes, because now they’re available (through rental) to people who can afford the homes as rentals but don’t have the credit or other capital to be able to buy. Demand in the SFR market rises a tiny bit, and demand in the rental apartment market falls a tiny bit. And people from upper socio-economic classes don’t like that one bit - they like SFR only being available for them to buy, not for other people to try to rent.
So I tend to view these debates a little bit through those equity/class lenses. Keeping SFR housing stock locked for only those people who have the wherewithal to buy, and forcing everyone else into apartments, just so the people who can afford to buy outright can get slightly cheaper homes….that doesn’t seem a worthwhile or just goal to me. But again…that’s a bias, because I’ve overheard some really nasty conversations among homeowners in late night commission chamber hearings about the different “sorts” who will rent vs. buy.
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Localities are in the position to make changes, not the federal government. Land use regulation reforms are desperately needed to address the US housing shortage. Updating zoning and land use laws = Building more housing = Reducing rents AND prices.
https://www.goldmansachs.com/insights/articles/the-outlook-for-us-housing-supply-and-affordability
How can the U.S. govt regulate home sales? This is not interstate commerce.
Yes, they can encourage home ownership with various home loan policies. But those are for individuals, not corporations.
Mostly this should be covered by state regulations. Expect fed regs to be tested in court.
A corporation located in Dallas, Texas is buying homes in California, Florida, Arizona, Georgia, Texas, North Carolina, Colorado, Nevada, Washington, Illinois, and Minnesota and it isn’t “interstate commerce”?
Please explain. Thanks.
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I say that is a stretch. Name another U.S. corporation whose investments are limited by the feds.
I mean, the most obvious answer is all the corporations that are involved in broadcasting. The feds limit the number of local stations they can own. If @Goofyhoofy stops by he might know more about that. Similar regulations apply to banks.
Under Wickard grain grown on a local farm for local use is considered to have an effect on interstate commerce, and therefore can be regulated - so under current SCOTUS jurisdiction the scope of “interstate commerce” is quite expansive. Granted, the current Court probably takes a dim view of the very broadest views on that, but even so. Given the federal government’s massive role in housing ownership (more than 70% of mortgages are either federal loans or the government-sponsored Freddie/Fannie), I don’t think the feds would have too much trouble putting regulation of housing ownership into the Interstate Commerce Clause power.
The real authority question is how the Administration could do this without legislation from Congress. They’ve typically relied on using the Executive levers that already exist in a lot of areas….but mostly when trying to change the behaviors of either government or of private parties that rely heavily on the government on an ongoing basis. Not sure that gives them much of a handle on the big home investment groups, though.
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You’re kidding, right? Try googling your question.
I’ll give you just one, of likely hundreds of such restrictions: the so-called Volcker Rule prohibits banks on how they invest their own money (not even client money).
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FCC regulates broadcasting due to we all share the same radio frequencies. The same seems not to apply to cable broadcasting. I notice ads for Jim Beam, Ketal One, and Crown Royal on cable channels. Not on broadcasting.
Yes Feds can regulate govt mortgage plans but corporate investments do not use govt funds.
Banking and finance are a special area. Most articles of incorporation are issued by states and allow “any lawful activity.” The constitution limits the power of Congress to regulate the states.
They are not regulating the states. They are regulating interstate commerce.
I recommend you spend some time researching such before commenting further so you have an informed opinion.
Whether this can be done via EO is an open question but certainly Congress has the ability to regulate such activity based on the Commerce Clause.
I will remind readers that the Federal Reserve Board, not Congress, recently regulated mortgage loan compensation:
Today, lenders commonly pay loan originators more compensation if the borrower accepts an interest rate higher than the rate required by the lender (commonly referred to as a “yield spread premium”). Under the final rule, however, a loan originator may not receive compensation that is based on the interest rate or other loan terms. This will prevent loan originators from increasing their own compensation by raising the consumers’ loan costs, such as by increasing the interest rate or points. Loan originators can continue to receive compensation that is based on a percentage of the loan amount, which is a common practice.
The final rule also prohibits a loan originator that receives compensation directly from the consumer from also receiving compensation from the lender or another party.
The Fed exercises more authority in lending that it does in other lines of business so it would be even easier for the government to prohibit a corporation from certain transactions.
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Technically, it doesn’t - at least not in a way relevant here. This wouldn’t involve a question of whether the Constitution limits Congressional action here, but rather whether the affirmative grant of power to Congress covers a regulation like this. This isn’t a “clash of powers - who wins?” case, but “does Congress have the power in the first place?” case.
Banking and finance and broadcasting aren’t special areas. The federal government’s right to regulate that is based on the Interstate Commerce Clause also. The feds have been allowed to regulate those things because they affect interstate commerce. Heck, it’s why we have national labor laws and national minimum wage as well. All of those things are under the Commerce Clause.
The extent of Commerce Clause power is one of the areas where the Court’s jurisprudence doesn’t necessarily track what people unfamiliar with the case law might think. Basically, almost everything that involves business falls inside Congress’ Commerce Clause power, no matter how local it might seem (and no matter whether it’s also regulated by states). Heck, even nonbusiness stuff falls inside that power. You might be interested in Gonzalez v. Raich, which held that a woman’s use of cannabis in her own home that she grew on her own property that was legal under California law could still be regulated by the feds under Commerce Clause authority. It basically killed off the last remaining limits on the scope federal regulatory authority under the ICC.
TL;DR - the Constitution as applied by SCOTUS doesn’t limit Congress’ authority nearly as much as you might think, and certainly they can regulate this if they choose, regardless of what states do.
Gonzales v. Raich | 545 U.S. 1 (2005) | Justia U.S. Supreme Court Center
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For years we have held the federal minimum wage law applies only when company does business out of state. When goods and services cross state lines easily applies. When money crosses state lines less clear.
If courts have decided it applies to all businesses ok. News to me.
Nope. It applies to every company with annual sales of $500,000 or more (subject to various exceptions that aren’t relevant to this discussion).
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If federal minimum wage applies to farmers and ranchers no surprise it’s at $7.20/hr and has not been raised in years. Just watched video That ag is very powerful in the Senate.
Minimum wage has exclusions for certain farmhands, and for farms below a certain size. And of course there are the illegal immigrants who will work for practically anything, including piecework rates for filling baskets or other compensation methods.
That’s why after a week or so of ICE raids and complaints by farmers, Trump told ICE to lay off the farm workers, in a not-at-all surprising twist of “the law applies to everyone, except when I say it doesn’t.”
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Yes, and no doubt there is lots of gray market work out there. Paid cash w no records, withholding, benefits, Social Security.
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