Congress wants to stop corporations from buying up too many single family homes : NPR
It is becoming more and more difficult to buy a house. The U.S. Congress believes one solution is to impose restrictions on corporate ownership of single-family homes. Will this really help?
MICHEL MARTIN, HOST:
Congress is trying to prevent large institutional landlords from buying too many single-family homes. The 21st Century ROAD to Housing Act passed the Senate with overwhelming bipartisan support. Its goal is to make housing more affordable. Our colleagues at Planet Money’s The Indicator, Darian Woods and Wailin Wong, wonder if this will actually be useful.
DARIAN WOODS, BYLINE: So let’s start with the story.
WAILIN WONG, BYLINE: Stephen Billings is a real estate professor at the University of Colorado Boulder. Stephen begins the story during the Great Recession of 2008, when homes across the country were in foreclosure.
STEPHEN BILLINGS: We’ve seen a lot of investors see an opportunity to buy things really cheap.
WOODS: These investors quickly realized that regularly collecting rent was actually more lucrative than selling the houses and flipping them.
WONG: Financiers would take a lot of properties with these steady cash flows and sell them as an investment product.
BILLINGS: It became a real boon for this whole industry because it generated tons of money.
WOODS: When real estate prices in general began rising significantly in the early 2020s, politicians from Democratic Sen. Elizabeth Warren to Republican Vice President JD Vance blamed institutional investors.
WONG: Stephen says there’s some truth here.
BILLINGS: Generally speaking, the massive presence of institutional investors will cause real estate prices to rise slightly.
WONG: But just some truth, because these companies represent a very small share of home purchases nationally: less than 1%. The main drivers of property prices are weak construction and low interest rates.
WOODS: Stephen also says that business owners actually tend to reduce rent prices by introducing more rental housing into the market. They also build a good portion of new home construction. About 7% of homes are built specifically to rent.
WONG: Laurie Goodman directs the Housing Finance Policy Center at the Urban Institute, a think tank. She is also involved in the housing sector as a consultant.
WOODS: Laurie is concerned that the Senate bill could backfire and make housing more expensive, because under this Senate housing bill, large institutional investors will have to sell these newly built homes within seven years.
LAURIE GOODMAN: Build-to-rent activity would cease. These are houses that probably wouldn’t be built otherwise. I mean, this is a bill designed to increase supply, and you’re actually removing activity that’s designed to do exactly that.
WONG: Adrianne Todman agrees. She is the CEO of the National Rental Home Council. This is an industry body that represents many institutional owners.
ADRIANNE TODMAN: This has a really unintended consequence of really crippling: having a chilling effect of building these units in the first place. I have been doing this job for a long time. This is never something anyone has said to anyone building apartment-style housing. But unfortunately, this is the concept that is currently being introduced to build-to-rent communities.
WONG: Weighing it all up, Stephen agrees that the 21st Century ROAD to Housing Act goes too far.
BILLINGS: It’s shocking. I will say this. I think I agree with some conservatives on this view that we need to allow more housing construction.
WONG: Overall, the evidence doesn’t show that institutional investors are a major driver of housing costs, but cracking down on companies that build new housing is likely to make affordable housing even more affordable.
WOOD: Darian Woods.
WONG: Wailin Wong, NPR News.
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