New York Gov. Kathy Hochul has proposed a series of measures to curb institutional investors' influence in the single-family home market. The governor's plan to impose restrictions on hedge funds and private equity firms, which will be unveiled in her upcoming State of the State address, and it could become a model for other states concerned about housing affordability and availability.
At the heart of Hochul's proposal is a 75-day waiting period that would prevent institutional investors from bidding on properties immediately after they hit the market. This cooling-off period gives individual buyers and families a fair chance to compete for homes. Additionally, the governor's plan would eliminate certain tax benefits, such as interest deductions, for large-scale property purchases by these firms.
"Shadowy private equity giants are buying up the housing supply in communities across New York, leaving everyday homebuyers with fewer and fewer affordable options,” Hochul said.
While the full extent of institutional ownership in New York remains unclear, the issue has gained national attention. A report from the federal Government Accountability Office found that in 2022, the five largest investors in the United States owned 2% of the country's single-family rental homes, primarily concentrated in Sun Belt and Southern states.
Research from Harvard University's Joint Center for Housing Studies has shown a growing trend of rental properties being owned by business entities and medium- to large-scale operators. In 2021, non-individual investors, including landlords operating as limited liability corporations, owned a quarter of single-family rentals.
The plan has already faced opposition from some quarters of the real estate industry. James Whelan, president of the Real Estate Board of New York, cautioned that the proposal could "stifle investment in housing in New York.”
The governor's initiative aligns with a growing national movement to address corporate influence in the housing market. Vice President Kamala Harris has called for federal legislation to eliminate tax benefits for large investors purchasing numerous homes. At the state level, lawmakers in Nevada and Minnesota have proposed measures to cap corporate home purchases and ban the conversion of corporate-owned homes into rentals.
Now, New York is entering the fray, and all eyes will be on the state to see if it can successfully balance the need for housing investment with the dream of homeownership for its residents. The combination of a waiting period, tax benefit elimination, and a focus on restricting purchases and promoting homeownership offers a multifaceted strategy that other states might consider adopting or adapting.