LEGISLATION
PREDATORY INVESTMENT
What’s Really in the Stop Predatory Investment Bill? WE MUST ENSURE THE BILL DOES NOT CONTAIN UNINTENDED CONSEQUENCES FOR SMALL REAL ESTATE INVESTORS.
By Aaron Chapman
enate Democrats have proposed new legislation referred to as the Stop Predatory Investment Act. On the surface, it does look like something that could be beneficial to the real estate investor as well as the homeowner because it appears they are trying to target hedge fund behemoths and prevent them from taking advantage of tax benefits by owning significant amounts of real estate. PURPOSE According to Jonathan Payne, the executive director of the National Association of Local Housing Finance Agencies (NALHFA), the idea behind the bill is to maintain “The long-term affordability and stability of our communities, enabling local governments to protect single-family affordable housing and preserve the well-being of low-income individu- als and families.” Supporters of this bill recognize that small investors own a lot of rental housing but that institutional investors have increased their purchases of single-family homes. It is true that big investors have been taking advantage of the hous- ing opportunities and buying large blocks of homes. Those actions have affected inventory and affordability. S
Still, we would like to see the depth of this bill to really understand what parameters are being proposed. When you start digging into the exceptions, you start to find that the proposed legislation significantly benefits the extremely large buyers and limits individuals from trying to build a substantial business on a more local scale. The large Institutional investors are not the ones who make up the bulk of single-family rental proper- ties. The vast majority are owned by smaller operations. CoreLogic data shows that nearly half (49%) of in- vestment property purchases in third quarter 2022 were made by small mom-and-pop investors—those with fewer than 10 properties. The other half were made up of medium-sized investors (11-100 properties) at
33%, large investors (101-1000) at 8%, and mega investors (more than 1000) at 11%. Everybody who invests in real estate or has an interest in investing in real estate should pay close attention to what this bill contains. Take the time to read and understand it when the actual bill is produced. If the “mega Investors” own such a small amount, it could be they are not the actual target. There could be some harsh, unintended consequences if this bill passes. WHAT YOU CAN DO Read the bill, understand its impact, ask questions, and make your voice heard to those pushing it. The chart provides a list of the bill’s sponsors. •
34 | think realty magazine :: september – october 2023
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