Bad News for the Institutional Investors? Good News for the Home Buyer?

A new bill was recently introduced that could require institutional investors to sell off their single-family home inventories over a 10-year period. Will it pass? Unlikely, but if it does, it could be huge for home buyers as well as small investors.

Institutional investors are companies or corporations that buy up single-family homes for the purpose of renting them out. This business model arose after 2008 when hedge fund managers began buying toxic real estate holdings from struggling banks for pennies on the dollar. They have evolved into gigantic corporations that hold tens of thousands of homes in their portfolios.

Some of these companies include American Homes For Rent, Invitation Homes, and Greystar Partners. To give you a sense of scale, Greystar owns over 700,000 homes in the United States, and they’re just one of hundreds of companies like this. These companies are a huge part of the inventory shortage that the housing market has struggled with for the last decade. When homes come to market in their target areas, they will pay cash and in many cases even pay over listed price in order to secure the home. The average home buyer or small investor simply can’t compete. These companies purchased over 1.3 million homes in 2022-2023.

Should this bill pass, it could open the door to more first-time home buyers actually being able to buy a home without such competition. It could also lessen the home deficit as these inventoried homes begin to come back into the market. Time will tell.