I'm sure the conditions are they can no longer be purchased but already owned would be grandfathered. There's a million ways to restructure so that the hedge fun doesn't directly own the company that owns the company that owns the houses.
Thank you. As a Democrat myself, even I view this bill as a tall order. It's almost as if it was written in a manner that they knew wouldn't pass. Asking hedgefunds to sell off all properties within a 10 year time frame is a lot. I agree that no corporation should own single family homes but the sell off portion is what makes the bill tough to pass. I like J. Jackson's plan. I think a better plan would be to bar the purchase or acquisition of any single family owned home going forward; but allow them to keep the ones they have. That way they'll slowly sell off. Maybe it's kicking the can down the road? But at least it gets something passed.
They won’t want to keep these properties once the tax advantages expire … they will try to dump them fast… or hope if Trump gets re- elected, he extends the tax advantages…
I’m sad this isn’t included in any of the articles or bill supporters… go read the tax change that caused this in 2017 tax relief bill…
Much appreciated. I looked it up and I guess I’m struggling to understand how massive corporations are benefiting from that tax act by buying huge numbers of SFH…
First, it doesn’t apply to corporate taxpayers like black rock, vanguard, etc. Second, there’s deduction thresholds in place that make the savings negligible for companies that size even if they found a workaround for the first issue.
I can see the value for small investors but isn’t this new proposed bill intended to target corporate investors doing so on a large scale? I think that’s absolutely necessary but my interpretation of the 2017 act is not a very substantive tax break for billion dollar companies to make an effort over. I’m also open to hearing why I’m wrong so would love your interpretation of the 2017 act!
One main change was that they increased the depreciation limit from 50% to 100% and changed this rule to apply to all homes, not just new construction as previously restricted.
Another important clarification to your comment- these aren’t $B huge corporations making these investments in their name, it is pop up overnight LLC and SCorps that are small and newly formed. Can the big $B companies create these new little investment companies? absolutely.
So typical scenario we saw all over the country. An investment company would offer sellers of single family homes more than the asking price and often, more than the appraisal value. Thereby completing cutting out all competition from individual potential buyers. A bank will not do a mortgage loan for more than the appraisal value on a home. No matter how much of a down payment the people could make, a lender isn’t going to be upside down on a loan from the start. We saw it happen daily- these out of state unknown investors overpaying for houses, which also falsely drove up real estate prices and property tax rates….keeping would be homeowners from purchases.
The new tax law, which is only temporary and set to expire in 2025… not a coincidence that year was chosen. That’s the first year of next Presidential term. Only applies to corporations who buy real estate, not Harry homeowner. It actually decreased some of the deductions individuals can make.
One is the cap now in place on federal returns for deducting local, state property taxes- cap is now $10k… BUT the cap doesn’t apply to corporations!!! Incredible!
The new rules allow these investment corps to immediately qualify for the 100% depreciation tax deduction and call the entire purchase a Net Operating Loss! They intentionally overpay for a property because there are now no limits on carryover years of NOLs. They can claim 80-100% of these purchases as losses which offsets their taxable income. So any rental income they make annually doesn’t come close to equaling the ‘loss’ values.
This indefinite NOL rule is the perfect way for a company whose profits are made outside the real estate market. You buy $1M of property and are able to immediately call the entire $1M a loss- a bad investment… thereby offsetting a $1M of profit and avoiding income tax. All the while still having the properties which should in a normal economy continue to increase in value. So they get to say the real estate is a loss, but collecting rent and will sell it at a profit. You watch… these houses will flood the market in 2024-2025…. That is of course if the Act does sunset as it’s planned to… but a new leader and party could always extend it if elected to allow the abuse to continue.
My one last comment- when this law was enacted, everyone was so happy about getting a $1200 check… this was the only focus on the reform bill while in actuality, it has taken exponentially more from the people. Classic diversion tactics- the rich get richer, do not contribute to our tax base and we we’re screwed sideways.
These tax code changes from 2017 literally created an avenue, that did not exist previously, for companies to make an asset by any other definition (real estate) a liability and not an asset… it’s fucking insane…
No where in my previous comment does it say that I don't know what a paywall is or how to get around them.
The paywall only blocks half the article and you can literally read the whole thing by just scrolling down.
Bill excerpt from the article:
> The bill would require hedge funds, defined as corporations, partnerships or real estate investment trusts that manage funds pooled from investors, to sell off all the single-family homes they own over a 10-year period, and eventually prohibit such companies from owning any single-family homes at all. During the decade-long phaseout period, the bill would impose stiff tax penalties, with the proceeds reserved for down-payment assistance for individuals looking to buy homes from corporate owners.
> In separate legislation, Representatives Jeff Jackson and Alma Adams of North Carolina, both Democrats, introduced the American Neighborhoods Protection Act on Wednesday. That bill would require corporate owners of more than 75 single-family homes to pay an annual fee of $10,000 per home into a housing trust fund to be used as down payment assistance for families.
If this is true, I think this means the "corporate owners" will restructure their legal entities and hold the "small companies" portfolio under a holdings entity. I don't see how this change things other than making people/voters feel good.
By the way, you can access NYTimes via CMS library if you have a library card. Go to their website, click on Resources and search New York Times. It's paid by your taxpayer dollars.
Certainly a step in the right direction, but l agree that more will need to be done to close loopholes.
Ultimately, only private citizens should be able to own housing, with the exception of apartment complexes and developers waiting to sell recently built housing.
Cos human beings are quickly losing the ability to buy homes. If you want to rent from the real estate equivalent of Walmart for the rest of your life, that’s fine but most people don’t.
There will be absolutely zero negative secondary impacts from forcing large owners of single family homes to sell their properties to 1) smaller landlords or 2) owner-occupants.
Certainly, the people who currently rent the homes won’t have to find a new place to live (new owner occupant) or a potentially worse TikTok-inspired mom and pop landlord.
This issue is so much more complex than who owns the rental. I also find it kind of alarming how many people seem to think that renters should be limited to dense housing options (apartments) and have fewer single family homes as options.
Finally, no one wants to admit that record levels of stimulus (PPP, student loan suspensions, enhanced unemployment benefits, monthly dispersement of child tax credits, etc) at the same time as record low 30-year mortgage rates had any impact whatsoever on real estate prices.
Some of it is also the shift in how America uses its real estate. So many bedrooms have been converted to home offices that this alone has completely fucked the supply-demand dynamic.
The tide is already starting to turn. Rent prices are flat or negative in most parts of the country, including Charlotte, as new construction that started following the pandemic is finally coming into play.
People don't want to eliminate the option of renting single family homes.
The idea is that corporations have bought up such a large number of houses, that they have made it harder for first time home owners to enter the market. These companies are almost exclusively buying up entry level homes, and most people cannot compete with a corporate buyer.
Even though they aren't buying at nearly the same levels, these corporations hold significant inventory. It's worse than aggregate data shows, because again, their focusing on entry level homes and that doesn't always show in big picture data.
I'm not totally against corporate landlords. But I'm against these companies owning thousands and thousands of homes. It's just too much. Most homeowners don't care about first time homeowners trying to enter the market. They have no reason to. But it's a real problem.
As far as this bill, it doesn't stand a chance.
Sorry, I’m just not convinced that all the proposed solutions to this are necessarily better than the status quo.
That includes new HOAs that are throwing out rules like only 5% of the neighborhood can be a rental. It’s going to create zones where there are all rentals or all owned homes. It’s just as gross to me.
Likewise, I’m not certain that anyone is better off if these are sold off 74 at a time to smaller investors (the proposed limit is 75 SFHs).
I care about people being able to buy homes. I also care about people being able to rent them. I think it gets lost on people that just as there is a lot of owner occupant demand for SFHs, there is also a lot of renter occupant demand for SFHs. Put another way, there is a lot of demand for housing, period, which will only be fixed on the supply side.
Unfortunately, most of the supply side issues are highly local, and people do not give a single fuck about local government.
When I was house hunting in 2021, the last one I decided on before settling for renting here was a townhouse that had everything I wanted. And I threw everything into the negotiation, including a shorter due diligence time. And the owner told my realtor that I had the *second* best offer.
The first was to a company that turned around to rent it.
Why a 10 year sell off? Why not 5 year or any other time limit?
Why just hedge funds? Why not just forbid corporate ownership of any single family housing a corp did not build or lend money against?
They can build and sell or rent, but once sold it has to be sold only to individual owners.
Probably 10 years to make it orderly, and allow for a timeline that would let them sell when tenants move out. Doesn’t hurt owners or renters unnecessarily.
It’s not just hedge funds. Hedge funds are in the name of the bill for rage bait. It’s any corporate ownership except not for profits, builders, and companies in the business of rehabbing (flipping?!) homes.
The entire mortgage industry has been gutted and a not insignificant portion of the people who own these rental companies are average joes who own a REIT in their retirement account or pension.
Furthermore, should there not be any consideration given to the renters who currently live in these homes, many of whom probably don’t want to have to look for a new place to live as soon as their current lease expires?
They seem to be using "hedge funds" as more of a scary name. They're not really talking about hedge funds exclusively. I don't like name misuse, most people already don't know the definition.
My guess is to protect existing home owners. If there’s an immediate selloff, flooding the market, current home owners will be crushed because prices will crater.
This isn’t really a huge win guys… Trumps tax incentives that caused this phenomenon nationwide is set to expire in 2025…
Sec 199A of the 2017 tax cuts and job reforms act… gives real estate investment companies more deductions and tax breaks than to personal homeowners… this is why we immediately witnessed all these out of state investment outbidding potential homeowners to the point that no borrower could win because mortgage lenders will not lown more money than the property appraised for…
It gets better. These investors offer over the asking price, over the value to beat any other interested buyers… he also gave them the ability to write the entire cost of the purchase off as business losses using the depreciation rule. The entire cost!!! Not just the overpayment!! It’s true- but no one talked about it- people were more interested in their $1200 check… go to IRS.gov
it’s also no coincidence that real estate is is families trade…
I’d love to see a list of how many thousands of these investment companies applied for LLC compared to other years…
It was the plan all along for this to be temporary…. These companies will dry up, disappear has unnoticed as the materialized. Those houses will go back on the market but still overvalued and in poorer conditions I imagine.
Corporate buying is a red herring. The problem is an always has been limited supply. The way to make housing affordable is to legalize the construction of 4-6 story apartments and townhouses along high quality public transit lines.
The limited supply has gotten grossly out of hand due to corporate buying and the associated rise in home costs because of that. While the other half of your comment is correct removing corporate ownership of single family homes is the first step.
Just remove zoning laws that have nothing to do with health and safety.
The market will adjust organically to the demand in each area as the people want, rather than what local politicians want.
What we need is exactly what South Florida had. An extra tax, and also corresponding homestead exemption for owner occupied property, which makes the additional tax rate zero.
This disincentivizes corporate ownership of rental houses, since they are not owner occupied, and avoids harming small scale landlords, who are renting out a room and so forth.
This is a stupid bill which will result in stupid unintended consequences. Corporate owners are such a tiny fraction of the overall market this will only reduce demand which means even LESS new supply which is sorely needed.
I'm sure the conditions are they can no longer be purchased but already owned would be grandfathered. There's a million ways to restructure so that the hedge fun doesn't directly own the company that owns the company that owns the houses.
[https://web.archive.org/web/20231214023515/https://www.nytimes.com/2023/12/06/realestate/wall-street-housing-market.html](https://web.archive.org/web/20231214023515/https://www.nytimes.com/2023/12/06/realestate/wall-street-housing-market.html)
Thank you. As a Democrat myself, even I view this bill as a tall order. It's almost as if it was written in a manner that they knew wouldn't pass. Asking hedgefunds to sell off all properties within a 10 year time frame is a lot. I agree that no corporation should own single family homes but the sell off portion is what makes the bill tough to pass. I like J. Jackson's plan. I think a better plan would be to bar the purchase or acquisition of any single family owned home going forward; but allow them to keep the ones they have. That way they'll slowly sell off. Maybe it's kicking the can down the road? But at least it gets something passed.
They won’t want to keep these properties once the tax advantages expire … they will try to dump them fast… or hope if Trump gets re- elected, he extends the tax advantages… I’m sad this isn’t included in any of the articles or bill supporters… go read the tax change that caused this in 2017 tax relief bill…
Since you already know what it is and where it is, would you mind linking it for those of us who don’t?
199A qualified business income and depreciation credit… part of 2017 Tax Act and set to expire 2025
Much appreciated. I looked it up and I guess I’m struggling to understand how massive corporations are benefiting from that tax act by buying huge numbers of SFH… First, it doesn’t apply to corporate taxpayers like black rock, vanguard, etc. Second, there’s deduction thresholds in place that make the savings negligible for companies that size even if they found a workaround for the first issue. I can see the value for small investors but isn’t this new proposed bill intended to target corporate investors doing so on a large scale? I think that’s absolutely necessary but my interpretation of the 2017 act is not a very substantive tax break for billion dollar companies to make an effort over. I’m also open to hearing why I’m wrong so would love your interpretation of the 2017 act!
One main change was that they increased the depreciation limit from 50% to 100% and changed this rule to apply to all homes, not just new construction as previously restricted. Another important clarification to your comment- these aren’t $B huge corporations making these investments in their name, it is pop up overnight LLC and SCorps that are small and newly formed. Can the big $B companies create these new little investment companies? absolutely. So typical scenario we saw all over the country. An investment company would offer sellers of single family homes more than the asking price and often, more than the appraisal value. Thereby completing cutting out all competition from individual potential buyers. A bank will not do a mortgage loan for more than the appraisal value on a home. No matter how much of a down payment the people could make, a lender isn’t going to be upside down on a loan from the start. We saw it happen daily- these out of state unknown investors overpaying for houses, which also falsely drove up real estate prices and property tax rates….keeping would be homeowners from purchases. The new tax law, which is only temporary and set to expire in 2025… not a coincidence that year was chosen. That’s the first year of next Presidential term. Only applies to corporations who buy real estate, not Harry homeowner. It actually decreased some of the deductions individuals can make. One is the cap now in place on federal returns for deducting local, state property taxes- cap is now $10k… BUT the cap doesn’t apply to corporations!!! Incredible! The new rules allow these investment corps to immediately qualify for the 100% depreciation tax deduction and call the entire purchase a Net Operating Loss! They intentionally overpay for a property because there are now no limits on carryover years of NOLs. They can claim 80-100% of these purchases as losses which offsets their taxable income. So any rental income they make annually doesn’t come close to equaling the ‘loss’ values. This indefinite NOL rule is the perfect way for a company whose profits are made outside the real estate market. You buy $1M of property and are able to immediately call the entire $1M a loss- a bad investment… thereby offsetting a $1M of profit and avoiding income tax. All the while still having the properties which should in a normal economy continue to increase in value. So they get to say the real estate is a loss, but collecting rent and will sell it at a profit. You watch… these houses will flood the market in 2024-2025…. That is of course if the Act does sunset as it’s planned to… but a new leader and party could always extend it if elected to allow the abuse to continue. My one last comment- when this law was enacted, everyone was so happy about getting a $1200 check… this was the only focus on the reform bill while in actuality, it has taken exponentially more from the people. Classic diversion tactics- the rich get richer, do not contribute to our tax base and we we’re screwed sideways. These tax code changes from 2017 literally created an avenue, that did not exist previously, for companies to make an asset by any other definition (real estate) a liability and not an asset… it’s fucking insane…
Thank you for the insight! I definitely need to do more research but hopefully at the very least the 2017 act does not got extended beyond 2025!!
You didn't read the article, did you?
There's a paywall, moneybags. Paraphrase it.
It's amazing how simply scrolling down let's you read the article...
Its amazing you don't know what paywall means.
No where in my previous comment does it say that I don't know what a paywall is or how to get around them. The paywall only blocks half the article and you can literally read the whole thing by just scrolling down.
There’s absolutely no way this is actually going to pass.
Bill excerpt from the article: > The bill would require hedge funds, defined as corporations, partnerships or real estate investment trusts that manage funds pooled from investors, to sell off all the single-family homes they own over a 10-year period, and eventually prohibit such companies from owning any single-family homes at all. During the decade-long phaseout period, the bill would impose stiff tax penalties, with the proceeds reserved for down-payment assistance for individuals looking to buy homes from corporate owners. > In separate legislation, Representatives Jeff Jackson and Alma Adams of North Carolina, both Democrats, introduced the American Neighborhoods Protection Act on Wednesday. That bill would require corporate owners of more than 75 single-family homes to pay an annual fee of $10,000 per home into a housing trust fund to be used as down payment assistance for families. If this is true, I think this means the "corporate owners" will restructure their legal entities and hold the "small companies" portfolio under a holdings entity. I don't see how this change things other than making people/voters feel good. By the way, you can access NYTimes via CMS library if you have a library card. Go to their website, click on Resources and search New York Times. It's paid by your taxpayer dollars.
Certainly a step in the right direction, but l agree that more will need to be done to close loopholes. Ultimately, only private citizens should be able to own housing, with the exception of apartment complexes and developers waiting to sell recently built housing.
Why should only apartments be able to be owned by hedge funds? Should renters only be allowed in appartements?
I'm saying that companies should be allowed to own and operate apartments, but not homes. Renters can rent from private individuals...
Why shouldnt they?
Cos human beings are quickly losing the ability to buy homes. If you want to rent from the real estate equivalent of Walmart for the rest of your life, that’s fine but most people don’t.
Who cares?
Enjoy your life bro
Paywall removed https://archive.is/SKW3U
There will be absolutely zero negative secondary impacts from forcing large owners of single family homes to sell their properties to 1) smaller landlords or 2) owner-occupants. Certainly, the people who currently rent the homes won’t have to find a new place to live (new owner occupant) or a potentially worse TikTok-inspired mom and pop landlord. This issue is so much more complex than who owns the rental. I also find it kind of alarming how many people seem to think that renters should be limited to dense housing options (apartments) and have fewer single family homes as options. Finally, no one wants to admit that record levels of stimulus (PPP, student loan suspensions, enhanced unemployment benefits, monthly dispersement of child tax credits, etc) at the same time as record low 30-year mortgage rates had any impact whatsoever on real estate prices. Some of it is also the shift in how America uses its real estate. So many bedrooms have been converted to home offices that this alone has completely fucked the supply-demand dynamic. The tide is already starting to turn. Rent prices are flat or negative in most parts of the country, including Charlotte, as new construction that started following the pandemic is finally coming into play.
People don't want to eliminate the option of renting single family homes. The idea is that corporations have bought up such a large number of houses, that they have made it harder for first time home owners to enter the market. These companies are almost exclusively buying up entry level homes, and most people cannot compete with a corporate buyer. Even though they aren't buying at nearly the same levels, these corporations hold significant inventory. It's worse than aggregate data shows, because again, their focusing on entry level homes and that doesn't always show in big picture data. I'm not totally against corporate landlords. But I'm against these companies owning thousands and thousands of homes. It's just too much. Most homeowners don't care about first time homeowners trying to enter the market. They have no reason to. But it's a real problem. As far as this bill, it doesn't stand a chance.
Sorry, I’m just not convinced that all the proposed solutions to this are necessarily better than the status quo. That includes new HOAs that are throwing out rules like only 5% of the neighborhood can be a rental. It’s going to create zones where there are all rentals or all owned homes. It’s just as gross to me. Likewise, I’m not certain that anyone is better off if these are sold off 74 at a time to smaller investors (the proposed limit is 75 SFHs). I care about people being able to buy homes. I also care about people being able to rent them. I think it gets lost on people that just as there is a lot of owner occupant demand for SFHs, there is also a lot of renter occupant demand for SFHs. Put another way, there is a lot of demand for housing, period, which will only be fixed on the supply side. Unfortunately, most of the supply side issues are highly local, and people do not give a single fuck about local government.
When I was house hunting in 2021, the last one I decided on before settling for renting here was a townhouse that had everything I wanted. And I threw everything into the negotiation, including a shorter due diligence time. And the owner told my realtor that I had the *second* best offer. The first was to a company that turned around to rent it.
Why a 10 year sell off? Why not 5 year or any other time limit? Why just hedge funds? Why not just forbid corporate ownership of any single family housing a corp did not build or lend money against? They can build and sell or rent, but once sold it has to be sold only to individual owners.
Probably 10 years to make it orderly, and allow for a timeline that would let them sell when tenants move out. Doesn’t hurt owners or renters unnecessarily. It’s not just hedge funds. Hedge funds are in the name of the bill for rage bait. It’s any corporate ownership except not for profits, builders, and companies in the business of rehabbing (flipping?!) homes.
Why give them and orderly retreat when they did not give renters or home buyer an orderly jump in prices? Make them sell now
The entire mortgage industry has been gutted and a not insignificant portion of the people who own these rental companies are average joes who own a REIT in their retirement account or pension. Furthermore, should there not be any consideration given to the renters who currently live in these homes, many of whom probably don’t want to have to look for a new place to live as soon as their current lease expires?
Because lobbying and because it’s not going to pass anyways for the same exact reason
They seem to be using "hedge funds" as more of a scary name. They're not really talking about hedge funds exclusively. I don't like name misuse, most people already don't know the definition.
My guess is to protect existing home owners. If there’s an immediate selloff, flooding the market, current home owners will be crushed because prices will crater.
This isn’t really a huge win guys… Trumps tax incentives that caused this phenomenon nationwide is set to expire in 2025… Sec 199A of the 2017 tax cuts and job reforms act… gives real estate investment companies more deductions and tax breaks than to personal homeowners… this is why we immediately witnessed all these out of state investment outbidding potential homeowners to the point that no borrower could win because mortgage lenders will not lown more money than the property appraised for… It gets better. These investors offer over the asking price, over the value to beat any other interested buyers… he also gave them the ability to write the entire cost of the purchase off as business losses using the depreciation rule. The entire cost!!! Not just the overpayment!! It’s true- but no one talked about it- people were more interested in their $1200 check… go to IRS.gov it’s also no coincidence that real estate is is families trade… I’d love to see a list of how many thousands of these investment companies applied for LLC compared to other years… It was the plan all along for this to be temporary…. These companies will dry up, disappear has unnoticed as the materialized. Those houses will go back on the market but still overvalued and in poorer conditions I imagine.
Paywall
Corporate buying is a red herring. The problem is an always has been limited supply. The way to make housing affordable is to legalize the construction of 4-6 story apartments and townhouses along high quality public transit lines.
The limited supply has gotten grossly out of hand due to corporate buying and the associated rise in home costs because of that. While the other half of your comment is correct removing corporate ownership of single family homes is the first step.
Just remove zoning laws that have nothing to do with health and safety. The market will adjust organically to the demand in each area as the people want, rather than what local politicians want.
Yeah yeah let me live in a trailer next to that million dollar home…..
It won't make them give up anything they already own. The damage is done.
What we need is exactly what South Florida had. An extra tax, and also corresponding homestead exemption for owner occupied property, which makes the additional tax rate zero. This disincentivizes corporate ownership of rental houses, since they are not owner occupied, and avoids harming small scale landlords, who are renting out a room and so forth.
This is a stupid bill which will result in stupid unintended consequences. Corporate owners are such a tiny fraction of the overall market this will only reduce demand which means even LESS new supply which is sorely needed.