Senate Democrats are rolling out a proposal to curtail tax breaks to deter major real estate investors from buying up homes in the market, as President Donald Trump seeks congressional support for his own policy.
A group of 18 Democrats, led by Massachusetts Sen. Elizabeth Warren and Oregon Sen. Jeff Merkley, said the soon-to-be-introduced bill is aimed at cutting tax breaks to large corporate landlords.
“This bill will take on predatory landlords while making investments to increase housing supply and boost homeownership for Americans,” said Warren, who is the ranking member on the Senate Banking, Housing, and Urban Affairs Committee.
The bill includes Minnesota Sen. Amy Klobuchar, New Jersey Sen. Cory Booker, and Connecticut Sen. Richard Blumenthal as co-sponsors. It also includes independent Vermont Sen. Bernie Sanders.
The bill comes as congressional Democrats have laid out plans to tackle affordability, starting with housing. Trump signed an executive order last month that curtails mortgages to large investors. It is one of several ideas he’s unveiled to tamp down costs in the housing market. But the Department of the Treasury has yet to unveil further guidance on the new rules.
The two parties found some common ground in signing the Housing for the 21st Century Act in the House. That bill has yet to be reconciled with a Senate version. But Trump’s investor ban was not a part of the bill.
Cutting tax breaks
The Democrats’ new bill would forbid some tax breaks and deductions on residential properties “in which an institutional investment entity (directly or indirectly) holds a majority interest.” That includes deductions for depreciation and mortgage interest payments.
The bill targets private equity, hedge funds, and private real estate investment trusts. It generally defines these larger entities as those that own 50 or more single-family units. Tax breaks wouldn’t be discouraged for smaller firms because they tend to keep rents more affordable.
And those entities would be precluded from federally backed mortgages or buying foreclosed homes sold by Fannie Mae, Freddie Mac, or the U.S. Department of Housing and Urban Development.
There are some exceptions, including for home sales to nonprofit organizations devoted to affordable housing. And some businesses, like housing developers and companies that rehabilitate homes, would keep tax benefits.
The bill would bolster antitrust protections as well, closing a loophole that companies have used to escape reporting requirements for some property acquisitions. It would also clarify rules around housing market concentration so antitrust enforcers can intervene.
Merkley said in a statement he would work with “anyone, on either side of the aisle, who is serious about driving down home prices and rents.”
“Hedge funds are driving up home prices and rents across America as they gobble up single-family homes,” Merkley said. “They are a significant factor in killing the dream of homeownership and must be stopped.”
