Proposed Legislation in Congress Takes Aim at Real Estate Investors—Here’s Why It Could Pose Significant Issues

Real estate investors appear to be under attack from every side these days. Not only have interest rates, property taxes and construction costs all seen significant increases since only recently; more legislation is also being passed that makes investing and managing real estate harder and more expensive than ever.

Of course, most of this legislation will hurt real estate investors while compounding existing problems further.

I have discussed rent control and tenant screening restrictions extensively elsewhere. Today’s bill has not passed or even come out of committee; should it become law, however, it could prove detrimental to real estate investors and could well become one of the most damaging pieces of legislation yet.

The Affordable Housing and Homeownership Protection Act was proposed by Senators Tina Smith, Jack Reed, and Tammy Baldwin and aims to “help Main Street compete with Wall Street”. According to Senator Tina Smith’s press release today:

Low-income Americans are especially struggling; according to estimates by the National Low Income Housing Coalition, 73% of extremely low-income households spend over 50% of their income on housing costs, leading to homelessness rising 15-15% since 2019.”

What is to blame? Us, unscrupulous real estate investors:

Investors are purchasing an increasing share of single-family homes sold each year–many which they then rent out as rentals–preventing more families from becoming homeowners and driving up rents. Most households simply cannot compete against these large investors – typically private equity and institutional funds that have access to large capital pools – who use their financial might to make all-cash offers, waive contingencies, and offer concessions that individuals simply cannot match. Through November, over one out of every four single-family homes sold during 2023 were bought by investors rather than hardworking households- a 69% increase from investors’ pre-pandemic share of home purchases.”

Therefore, this bill proposes taxing real estate investors whenever they purchase single-family residences at a graduated rate depending on how many properties they own – including mom-and-pop investors who have 15 rentals each.