States Consider Capping Home Purchases by Large Investors

Emily Alvarado, a Democratic state senator in Washington, bought her home in West Seattle more than a decade ago. If she were buying today, she says, she’s not sure she’d be able to afford a house anywhere in her district.

The biggest reason is a lack of supply. Not enough housing has been permitted and built to keep prices affordable for working people, she says. Another reason is that, even when a home is available, potential buyers are sometimes competing with large corporate investors, who own hundreds of properties and can get a leg up in bidding by offering cash. The share of homes bought by investors increased by nearly 50 percent in Washington between 2018 and 2021, according to a bill Alvarado recently filed.

“We certainly need more homes to be built, but we also know that there are activities that happen in the market that make it hard for regular people to buy,” Alvarado says.

Alvarado’s bill would prevent investors that own more than 25 single-family homes from buying any more in Washington, unless they’re intending to make improvements to bring them into compliance with building codes or to add additional living units. The bill is one of at least half a dozen that have been filed in state legislatures this year relating to the rise of corporate homeownership, which surged during the COVID-19 pandemic. The share of single-family homes sold to investors rose from just over 10 percent in the first quarter of 2020 to more than 20 percent in the first quarter of 2022, according to a Redfin study. The trend has tapered off a bit since then, but is still substantially higher than it was before the pandemic.

The overall share of single-family homes owned by corporate investors is still relatively small. Large investors — entities holding more than 100 homes — owned about 574,000 single-family rentals as of June 2022, according to an Urban Institute study. That’s about 3.8 percent of the total supply of single-family homes for rent in the U.S. But investor activity is concentrated in certain high-growth metropolitan areas in the Sun Belt.

The largest investors, those holding more than 1,000 homes, own more than 70,000 single-family rentals in metropolitan Atlanta, for example. Investors own more than 28 percent of the single-family rentals in the region, accounting for 10 percent of the entire rental market. Earlier this year, Georgia state Rep. Phil Olaleye, a Democrat, introduced the Protect the Dream Act, which would bar single-family home sales to businesses that already own more than 25 homes in a single county or have more than a certain amount in assets. Olaleye says the increasing consolidation of the single-family rental market by a few companies puts more people at risk of eviction, undermines social cohesion in communities, and could create “a generation of renters” who don’t benefit from the wealth-building that comes from homeownership.

“Georgia has become literally ground zero for corporate investment in housing,” Olaleye says. “These are homes that otherwise would be in the hands of people and provide a level of stability [that comes with] a 30-year mortgage … Now those same families are having to be on the receiving end of persistent yearly rent increases.”

While the bill has Republican co-sponsors, Olaleye isn’t confident it will pass this session. But he hopes the conversation will lead to “a legislative solution that makes sense.”

Lawmakers have been talking about restricting corporate ownership of homes since the trend began to spike in the early 2020s. North Carolina Democrats tried to pass a similar measure in 2023, but it was sidelined by the Republican majority. “To say that someone is limited in how much land they could own, that’s pretty big government, and we’re not going to go there,” Tim Moore, the former speaker of the North Carolina House, told a reporter at the time. Minnesota Democrats failed to pass a similar bill last year. In addition to Washington and Georgia, lawmakers in New York, Virginia, Texas, Utah and Kentucky have backed related efforts this year. At the federal level, Sen. Jeff Merkley of Oregon and U.S. Rep. Adam Smith of Washington are backing legislation to discourage hedge funds from buying single-family homes.

Despite the recent rise in investor purchases, it isn’t clear exactly how they affect housing affordability.

“There is a correlation between areas of the country that have a lot of institutional single-family operators and larger increases in home prices, but correlation is not causation. They target fast-growing areas,” says Laurie Goodman, founder of the Housing Finance Policy Center at the Urban Institute. In many cases, she says, investors are buying dilapidated homes that first-time homebuyers don’t have the means to repair anyway. Rather than trying to kick the largest investors out of the market, lawmakers should focus on regulating their rental practices to promote better experiences for their tenants, Goodman says.

Still, for many lawmakers, the rise in corporate ownership of single-family homes is inimical to what they see as the purpose of homeownership — a way to build wealth for individuals and stability in communities that’s deeply tied to the concept of the American dream. Adam Moore, a Kentucky state representative who’s backed a bill that would bar most single-family sales to investors with more than 50 properties, says the rising cost of housing has already put homeownership out of reach for many of his fellow millennials. The presence of large corporations paying cash makes it that much harder for first-time buyers. There’s been some bipartisan interest in his bill, but he doesn’t expect it to pass this session.

“Houses should be homes,” Moore says. “I understand that property is an investment. I want that to be an investment that families make for themselves.”