Honestly, there aren’t a whole lot of laws that you should stay up-to-date with. But, there’s one major exception. Right now, there’s one law that’s making its way through Congress that has the potential to bring down the nauseating cost of housing. Here’s why every single person in America needs to know about the End Hedge Fund Control of American Homes Act.

America’s Housing Market

The cost of housing in America is nuts. If you’re currently renting or trying to buy a home then honestly just skip this section because it’s a bit depressing.

According to Redfin, a median-priced home in the U.S. was $412,000 as of September 2023–up handsomely from a median of $292,000 back in 2015.

In order to afford this median home, a report by Morningstar determined that you’d need to make at least $120,000, assuming a 30-year mortgage at 8% (the average mortgage rate at the time). This report also assumes that the buyer puts 20% down, which means coming up with a down payment of $82,400–which is another hurdle entirely but we’ll just leave that for now. After coming up with this down payment, your monthly payment would be $3,019.

Well, the median income in 2022 was around $75,000 per the Census Bureau. So, the TLDR is that the average person is nowhere close to being able to afford the average home. Even if you make $120k annually then you still need to save up $83k for a down payment to afford the median home, which means cutting out quite a few lattes from the ole budget.

One of the main reasons that homes are so expensive right now is because housing is in short supply. Literally, there are too many buyers and not enough houses on the market. This problem stems back to the 2008 Financial Crisis. But, it was exacerbated by the Covid-19 pandemic when the supply chains for raw materials that are used to make homes got clogged up–putting builders behind schedule.

Luckily, there’s a relatively simple solution to this problem. This brings us to the End Hedge Fund Control of American Homes Act. 

What is the EHFCAHA Act?

The End Hedge Fund Control of American Homes Act is a new bill that wants to ban hedge funds from owning residential homes. Yes, hedge funds are apparently legally allowed to buy normal homes.

Institutional investors have been scooping up single family homes across America for years. But, this trend has accelerated in the past few years. As of March 2023, investors accounted for 27% of all single-family home purchases, according to a report from CoreLogic.

For example, the investment fund Blackstone owns and manages over 300,000 units of rental housing in the U.S., making it the largest landlord in the U.S. In other words, major investment funds like Blackstone are outbidding Americans to scoop up single family homes and turn them into rentals.

In response, U.S. Sen. Jeff Merkley (D-Oregon) recently announced the End Hedge Fund Control of American Homes Act, which argues that institutional investors are driving up home prices and rents by reducing the number of single family homes on the market. This bill would stop institutional investors from buying single-family properties and force them to empty their residential real estate portfolios over a 10-year stretch. 

DNSM’s Take

Imagine you’ve worked your entire life to save up a down payment and finally found your dream home. You and your partner are giddy that all your hard work has paid off and you’re finally within striking distance of living the American Dream. You put in an offer at asking price to buy your dream home and are already daydreaming about moving in. But, you suddenly get out-bid by an investor who swoops in offers 20% above the asking price and pays all in cash. You then find out that this new buyer isn’t even a real person, it’s some nameless, faceless mega-corp. This has been a real scenario for thousands of Americans over the past few years.

It’s just absolutely ridiculous that billion dollar hedge funds are allowed to bid on the same properties that Mr and Mrs Average American. Aren’t there laws against someone buying a commercial property and turning it into your primary residence? So, why can a hedge fund buy a home and turn it into a commercial venture? Someone make this make sense please.

There 1000% needs to be some sort of stipulation on who can and can’t buy residential homes for investment purposes. But, this doesn’t mean we should squeeze out the Mom n’ Pop investors who are hustling to make some side income. Include a stipulation that once you reach a certain size you’re prohibited from purchasing more residential homes.

So, what are you supposed to do now that you know about this law? 

Honestly, the point of this post is really just to spread awareness. Talk about this topic with your friends. Bring it up at work. Share this blog on social media. You can even write to your senator if that’s your thing. But, one thing is for sure: We need to make it illegal for hedge funds to buy residential homes.

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