Wall Street banned from Buying Houses?

It seems that the rich men north of Richmond have taken note that their constituents feel that housing prices are too high and that by darn it… They are going to do something about it. 

That’s why they released two pieces of legislation to deal with these greedy hedge funds driving up housing values. The two bills attacked the same route, but went at it in a different way. 

You have the “End Hedge Fund Control of American Homes Act of 2023” and the American Neighborhoods Protection Act”. It’s so cute how they come up with these names. For anyone who doesn’t think a name or title matters, then they really need to go look at the names of the legislation that our betters pass in Washington. 

IF… And that is an enormous IF. But IF one of these bills were to be passed, then would it actually do anything? Let’s take a look. 

But real quick. My name is Jeff Chubb and I am a retired investment banker turned real estate agent that has sold more than a 1,000 homes. If you have real estate questions, then I am here to help. 

We all know the deal. Affordability challenges have made it so that a lot of Americans can’t achieve the American Dream of Homeownership. But don’t worry, the Federal Government is here to help. It makes sense, because as we had discussed in a previous video, they are the majority of the reason as to why homeownership is out of reach for so many. 

Let’s talk about the End Hedge Fund Control act first. This bill would ban hedge funds from owning Single-Family houses and require them to sell at least 10% of the total number of Single Family houses that they currently own per year to families over a 10 year period. After that 10-year period, hedge funds would be completely banned from owning any single-family properties. Naturally they have to throw in tax penalties like $50,000 per single family home per year tax penalty or imposing a 50% tax on the fair market value of any future hedge fund purchase. Oh and the government would then use this tax revenue to go towards down payment assistance programs. 

We will break all of this down shortly. But first, lets take a look at what this “American Neighborhoods Protection Act” is all about. This bill would require corporations that own more than 75 single-family residences to pay $10,000 per home annually into a Housing Trust Fund to provide down payment assistance grants to families purchasing homes. 

Man these guys are idiots. Focusing on a tiny fraction of demand in the marketplace. It’s like we reserve a seat for all of our special idiots in Washington. It’s a special place alright…

According to Corelogic data, Investors bought up a ¼ of all properties this year. That’s a lot. But here is the issue. The majority of that buying activity was done by mom and pop investors. You know, the ones owning 3 to 9 properties. So these bills aren’t even dealing with the majority issue of the small lever of demand when it comes to housing. 

And we know why. Going after the greedy faceless Wall Street guys is a heck of a lot easier than going after the Greedy… Government… Guys. 

This is normally where someone would start screaming “But Black Rock” at the top of their lungs. First, it’s Blackstone who they mean. I am no lover of Black Rock, but they aren’t a player in this market segment. They own minority stock positions in some of the big players… But that would be a rather loose interpretation, no? 

So there are approximately 100 million houses in the United States. It’s estimated that funds own 350,000 to on the high end… 700,000 of those houses. So point 35 percent to point 7 percent. That’s hardly enough houses to be a market mover. 

Check this data out, The top 5 owners of single family houses own 317k units. Nationwide. 

Top 5 Owners of SFRs

# of Homes

Black Rock %

Vangaurd %

State Street %

Progress Homes (Preium Parnters)

85,000

-

-

-

Invitation Homes ($INVH)

83,000

6.60%

15.35%

6.13%

American Homes 4 Rent ($AMH)

59,000

5.27%

12.09%

4.25%

FirstKey Homes

50,000

-

-

-

Amherst Holdings

40,000

-

-

-

Proportional Equity Ownership of SFRs (Top 5 Only)

BlackStone

<30,000

BlackRock

8,587

Vanguard

19,874

StateStreet

7,595

*Data Courtesy of the Plain Bagel

 

Now I have heard politicians like RFK say that Institutions will own 60% of all homes by 2030. This would mean that they would need to own 60 million houses in 6 years. In other words, they would need to buy 59 million 300 thousand houses in the next 6 years. Or 9,883,333 house per year. 

Now I hate to be the guy to point out pesky facts… But in 2023, we won’t even sell 4 million units nationally. That math seems to be a little fuzzy math right there. 

Article that I am referencing: https://www.cnbc.com/2023/02/21/how-wall-street-bought-single-family-homes-and-put-them-up-for-rent.html 

Check this CNBC article out. I am thinking Kennedy was trying to reference this. 

It cites a MetLife Investment Management prediction that ‘Institutional investors may control 40% of U.S Single Family rental homes by 2030’. Hey Bob… That’s a percentage of rental properties, not the entire housing market. 

And this article cites another piece of legislation.. The “Stop Wall Street Landlords Act of 2022.” 

Here is what I thought was interesting. The article says “The prices in some Sun Belt markets have outpaced national figures for rent inflation. Between January 2020 and January 2023, rents for a two-bed detached home increased about 44% in Tampa, 43% in Phoenix and 35% near Atlanta”. 

Hey… Real quick question. If so many equity funds are buying single family houses and thereby depleting the market of sale opportunities and are then putting them on the market as a rental… How are they to blame for rental prices going up so much. 

I mean your reasoning for needing this is that SO many units are being pulled from the sales market to the rental market. If that was true, then wouldn’t that create a glut in the rental market? But rental prices aren’t going down. 

So if demand is outstripping supply on the purchase side and resulting in higher prices… But is also doing it on the rental side as well… Then wouldn’t it be safe to say that we have a supply side issue. Not a demand side issue. 

The irony of these idiots… I mean politicians taking the tax penalty revenue and putting it in down payment assistance programs is not lost on me either. By doing this, you are only INCREASING DEMAND. Which will the INCREASE PRICES. 

Article that I am referencing: https://fred.stlouisfed.org/series/HOUST

Take a look at this chart. This is Housing start data. Notice that HUGE cliff in 2006? And that really really long run up to 2022? Well it’s estimated that we need roughly 1.5 million housing starts per year to keep up with our population growth. Just throwing this out there. Would it be safe to say that under building for 10 to 13 years helped lead to this housing shortage and surge in pricing? 

Article that I am referencing:https://alternativehousingoptions.com/wp-content/uploads/2022/10/CC_CS_17471_MakingHomePossible_HousingSupplyShortage_Infographic-1243x2048.png

Freddie Mac who just may be part of the problem to high housing prices had an interesting stat. Not only are we under building houses, but take a look at what type of housing that we are building! 40% of all homes built in the 1980s were starter homes. In 2019 that number was 7%! 

They also cite that between 2018 and 2020 the housing supply shortage increased from 2.5 million to 3.8 million units. That’s pretty much an entire year of national housing sales. And this doesn’t even begin to account for the 3 to 4 million immigrants that have entered our country and need housing in the last couple of years. 

The answer isn’t limiting hedge funds in buying houses. If you want to do it, then fine. Do it so that you can pound on your chest and say that you did something that really in the end doesn’t move the needle one bit. 

If a politician was really serious about helping people and creating an environment of housing affordability, then they would do two things. First, they would cut the red tape on getting housing projects approved. Then they would create legislation that provides incentives to builders to build starter houses. These incentives most likely would be through tax deductions or credits. And the phrase there is Starter Houses. Maybe do a sliding scale where a starter house is considered… I don’t know… Making up a number here. 80% of the average sale price for a single family property in each market. And you can find all Thomas Graves Landing Condos For Sale by clicking here. 

But in the end, they aren’t serious. These clowns are just in it for the national headline or two. Something that makes them look good to their constituents. Because if they were really interested, then they would examine the real influencing factors of why we have high housing prices. You can too by watching this video on who’s to blame for high housing prices. 

If you are thinking of buying or selling a house, then reach out! I would love to help. 

Until next time.

 

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