An Ohio senator is introducing legislation to curb the number of single-family homes in Cincinnati and throughout the country being bought up by large investors.
Senator Sherrod Brown’s bill, the Stop Predatory Investing Act, would prohibit an investor who obtains 50 or more single-family rental homes after the bill’s enactment from deducting interest or depreciation on those properties. The bill is also backed by senators Ron Wyden, D-Oregon; Jeff Merkley, D-Oregon; Jack Reed, D-Rhode Island; Tina Smith, D-Minnesota; Elizabeth Warren, D-Massachusetts; John Fetterman, D-Pennsylvania; and Tammy Baldwin, D-Wisconsin.
The Stop Predatory Investing Act comes as the country faces a growing housing shortage, especially in terms of affordable housing. According to the National Low Income Housing Coalition, the United States is now facing a shortage of 7.3 million affordable housing units. And in Ohio, there are only 40 units available for every 100 Ohioans seeking affordable housing, according to a recent Gap report from the Coalition on Homelessness and Housing in Ohio.
Those seeking to buy single-family, owner-occupied homes, especially first-time buyers, have struggled within the last few years as well, with large investors placing their sights on smaller and more affordable or moderately priced homes. During the pandemic, large, institutional investors dramatically increased their purchases of single-family homes. According to the 2022 State of the Nation’s Housing report from the Joint Center for Housing Studies of Harvard University, from September 2020 to September 2021, the share of investor purchases made by large investors with portfolios of 100 or more properties grew from 14% to 26%. And these investors are able to out-compete families with technology and all-cash offers on their side.
In a press release, Brown stated two big investors own more than 12,000 homes in just three Ohio markets and other big investors don’t report the number of homes they own. He says his bill aims to dismantle the core of what makes investing in a large number of single-family homes so profitable by taking away tax breaks these investors don’t need.
“In too many communities in Ohio, big investors funded by Wall Street are buying up homes that could have gone to first-time homebuyers. So many families who have worked for years saving to buy a house end up getting out-bid over and over by outside investors, and they can’t afford to compete,” Brown said in the release.
On Monday, Brown visited Cincinnati to call for passage of the Stop Predatory Investing Act and tour a home once owned by a large out-of-state investment company before it was bought by the Port of Greater Cincinnati Development Authority to rehabilitate as part of its CARE Homes initiative. He was joined by Cincinnati Mayor Aftab Pureval, Vice Mayor Jan-Michele Kearney, the Port’s William Fisher and Robie Suggs, president and CEO of Warsaw Federal Savings and Loan.
“Cincinnati is no stranger to the unacceptable pattern of behavior by some institutional investors – who buy single-family homes throughout our city to raise rents and neglect properties. That is why we are so incredibly grateful to have a leader like Senator Sherrod Brown, who is once again standing on the side of working families,” Pureval said.
A report from theWashington Post this year found, in Cincinnati, 15% of homes were purchased by investors, which is more than those purchased in a typical metro area. In 2015, investors bought just 7% of the housing stock. That same year, a single company bought 29 homes on a single street, according to Brown.
“Large out-of-state corporate investors that buy up our moderately priced homes decrease the inventory needed for our local families to acquire affordable homes. They prevent our families from building generational wealth through homeownership,” she said.
Suggs of Warsaw Federal Savings and Loan says Hamilton County in particular attracts investors due to lower prices and decent rents compared to the rest of the country.
“Investors are looking to build their portfolios in some of the most disinvested neighborhoods, leaving many renters susceptible to displacement. These investors are predators, more interested in increasing profits and not providing affordable housing, and because there isn’t a deterrent, they are happy to continue this behavior,” she said.
While the Stop Predatory Investing Act would end deducting interest or depreciation on large investors’ properties, if those investors sold one of their properties to a homebuyer or qualified nonprofit, they can deduct the interest and depreciation for the year the property sold. The bill also incentivizes affordable rental housing and construction of new houses by allowing owners to continue taking deductions on properties financed with Low-Income Housing Tax Credits (LIHTC) that are still in their affordability period, as well as on build-for-rent, single-family houses, according to a summary of the bill. Those renting single-family homes now would also be protected as the bill would still allow deductions on homes purchased before its enactment.
You can read the legislative text of the Stop Predatory Investing Act here.
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