digest
Short Summary
Main recommendation: the hosts discuss a proposed bill, the Affordable Housing and Home Ownership Protection Act, which would add a per-property tax on investors owning more than 15 single-family homes, and speculate on how investors might react if it passes. The hosts argue the bill would push investors away from low-cost properties, reduce supply in low-income areas, and fail to address the real causes of housing unaffordability.
Key Points
- The proposed bill would charge a tax on each property purchase once an investor passes 15 properties: 1% of purchase price for 16 to 25 single-family homes, 3% for 26 to 100, and 5% above 100.
- The hosts say the 3% tier exceeds what most buyer's agents earn on a deal, and that it comes alongside proposed limits on sellers paying buyer's agent commissions.
- Roofstock researchers estimate large-scale landlords own about 450,000 of roughly 20 million US single-family rentals, under 2.5% of single-family rentals and under 0.5% of all single-family homes.
- Investors may shift toward larger, more expensive properties to maximize purchases before the threshold, leaving fewer cheap homes for first-time buyers and low-income renters.
- The hosts argue the real drivers of unaffordability include rising numbers of buyers reaching home-buying age and limited new construction, and that large hedge funds, not small investors, hold the financing advantage.
Details Worth Noting
- Concrete instructions: The hosts speculate that, if the bill passes, investors would need to reanalyze their portfolios to maximize their first 15 properties, but they do not present this as current actionable advice since the bill has not passed. The hosts also suggest that, if policymakers want affordability, they should incentivize home builders by reducing building regulations, which they say add about $93,000 to the average new home price (based on a May 2021 National Association of Home Builders estimate applied to a $394,000 average price).
- Kansas City example: Five companies own about 8,000 homes in the Kansas City area, out of about 300,000 homes on the market, roughly 2.7% of the stock.
- Closing costs: The hosts say the tax would appear as a new line item on closing statements, making cash-to-close higher and mortgages harder to obtain for affected investors.
- Fractionalized ownership: The hosts speculate that if individual ownership limits tighten, investors may pool money through corporations or group ownership structures, which could require new loan products, since residential applications currently allow up to four borrowers.
Bottom Line
The proposed tax targets a small share of the market and may worsen affordability for low-income areas by discouraging investment in lower-priced homes, so the hosts argue the better lever is expanding housing supply through builders.
