In recent years, a growing number of state legislators have introduced and shown support for bills that aim to limit the number of real estate properties that can be owned by certain entities, a concept known as unit count control. This unit count control has garnered significant attention in the real estate community. One of the most prominent of these proposed bills is the End Hedge Fund Control of American Homes Act of 2023. Originally introduced by U.S. Sen. Jeff Merkley (Oregon) and U.S. Rep. Adam Smith (Washington), it has since been cosponsored by legislators in Minnesota, Georgia, and California.
The goal of this bill is to address concerns regarding the availability and affordability of housing, specifically single-family homes. It claims that larger real estate investors are making it difficult for middle-class homebuyers to find and afford homes in their communities. Therefore, the bill would limit the number of properties that large entities can own so that more homes would be available for individual homeowners.
With that being said, are the bill’s claims well-founded? Would the limits on real estate investors actually help to make housing more affordable and accessible? Would more families be able to purchase simply because larger entities stopped buying?
Impact on Real Estate Market
Single-family housing, especially single-family rentals, has become an increasingly vital part of the real estate market. Homeownership is becoming less attainable for the average American, due to a mixture of rising home prices and stagnant income. After the pandemic, more families started seeking out single-family rentals with more space than apartments, demonstrating a drastic change in buyers’ needs. Real estate investors have filled the gap by offering rentals to individuals and families who prefer renting or simply can’t afford to purchase their own homes. While real estate investors have provided these homes for renters, legislation seeks to cap properties owned by a single entity.
Current Legislative Trends
Besides the End Hedge Fund Control bill mentioned above, many states have passed or introduced laws that limit the foreign ownership of single-family homes, which means investors from outside the United States may not be able to purchase them at all or may be limited in how many they can purchase. One of the major concerns with these laws is that they are emerging in states that have historically been supportive of housing development and real estate investing, such as Texas, Tennessee, and Virginia.
Another growing trend in the real estate market includes build-to-rent (BTR) housing communities. In this case, investors build multiple single-family houses, typically with luxury amenities to mimic traditional gated communities. BTR housing has increased in popularity and some experts see BTR as the future of the real estate industry. However, real estate legislation would limit the ability of investors to own the number of houses in these communities. In addition, the Stop Wall Street Landlords Act of 2022 seeks to impose additional taxes and deny tax benefits to large investors who may be contributing to the development of these housing communities and other single-family housing units.
Legislative Implications for Investors
While real estate investors recognize that lawmakers are trying to address genuine issues related to housing affordability and supply, some argue that limitations on property ownership are not the right solution. In fact, they could do more harm than good. Unfortunately, the current proposed real estate legislation may inadvertently reduce the availability of rental housing, exacerbate affordability issues, and stifle investment in new housing developments.
For example, corporate investors may choose to purchase single-family homes and transform them into multi-unit buildings. When lawmakers limit investors’ ability to create new units, they reduce the number of units available to renters. This reduction in rental properties can drive up rents and make it harder for renters to find affordable housing. Additionally, restrictions may prevent investors from building new housing developments, such as BTR communities, further decreasing the number of houses available in a market already facing shortages.
Industry Response
To stop lawmakers from passing bills related to unit count control that could harm the real estate industry, leaders must be proactive in their response. Leaders can start by forming coalitions with other trade associations, such as home builders, realtors, and multifamily housing associations. Not only does this provide a united front against ill-informed lawmakers, but it also delivers insights into every aspect of the industry to help effectively communicate the potential negative impacts to legislators.
Local leaders and stakeholders play an especially important part in communicating with lawmakers and creating change through a grassroots approach. Getting to know people in your community, educating them on the negative impacts of these laws, and encouraging them to speak directly with local lawmakers can have a huge impact on a bill’s outcome.
Education is a crucial part of our response to unit count control laws. In many cases, lawmakers lack a deep understanding of the single-family rental housing market, especially as it has evolved significantly in recent years. Industry leaders can inform lawmakers on the potential negative impacts of ownership restrictions, while also highlighting the positive impact of private investors on the single-family rental market.
With a deeper knowledge of the industry’s dynamics, ownership structures, and economic impact, policymakers can make more informed decisions about the bills they are supporting. Industry leaders must educate lawmakers about property ownership, management practices, and the essential role these properties play in the broader housing market.
Get Involved
The National Rental Home Council (NRHC) is a trade association that advocates for the single-family rental industry. It uses proactive advocacy, education, and coalition-building to spread awareness and provide support to industry leaders and residents alike.
The NRHC’s State Chapter Program allows you to join with like-minded individuals in your area to advocate for local policies and represent the interests of real estate investors and single-family rental residents in your state. Building strong relationships with other leaders in your area allows you to share knowledge and offer support when needed. Current state chapters include Arizona, Florida, Georgia, North Carolina, and Texas, but NRHC members are located all over the country. Consider joining a state chapter or working with NRHC leaders to start a local chapter in your area.
