Lansing — The Michigan House voted overwhelmingly Thursday to bar large institutional investors from buying up single-family homes on the premise that those companies are contributing or could contribute to the state’s current housing crunch.
The legislation — which passed through the lower chamber 102-3 within two weeks of its introduction — largely prohibits the purchasing of homes by corporations, investment funds, limited liability companies, joint ventures, or other for-profit entities if they already own more than 100 single-family homes and have a net value of $375 million.
State Rep. Karl Bohnak, a Deerton Republican who represents the Marquette area and sponsored the bill, said the legislation will help to protect the path to homeownership for individuals.
“There are so many people, young and old, who are struggling to find homes right now,” Bohnak said in a statement. “… My plan alone will not fix this crisis, but by ensuring giant corporations aren’t monopolizing a huge chunk of our housing inventory, we can protect the single-family homes we already have.”
A similar bill has been introduced in the Michigan Senate.
In January, President Donald Trump signed an executive order to restrict large institutional investors from buying “single-family homes that could otherwise be purchased by families.” Among other things, Trump’s order directs his administration to review acquisitions by large investors for “anti-competitive practices” in the single-family home rental market.
Earlier this week, the U.S. Senate passed a bipartisan housing affordability bill that included restrictions on the number of homes Wall Street investment firms could control. The single-family home cap in that legislation was 350 per firm.
In a hearing last week on the Michigan House bill, Bohnak acknowledged that the issue of institutional investors buying up single-family homes is less prevalent than in other states. He estimated that between 75,000 and 100,000 homes in the state are currently owned by large institutional investors.
Still, he said, Michigan should get out ahead of the issue.
“The intent is to reduce competition from large corporate entities that often have the financial resources to outbid individuals and families looking to purchase a home,” Bohnak said.
Michigan Realtors, which voiced opposition to the state legislation in committee last week, said the issue is not particularly pressing in Michigan.
Shawon Cecil, public policy field director for the Michigan Realtors, said there was a brief hike nationally in large institutional investors buying up homes after the COVID-19 pandemic. But those numbers have since receded, he said.
“Where we see most of the strain is in states where there is a larger strain on the market, such as New York, Dallas, Atlanta, and also around the Sunbelt: Oklahoma, Arkansas, Texas,” Cecil told lawmakers last week.
“In Michigan, we haven’t seen much of a trend of this being a major issue,” he said.
The House-passed bill would generally ban institutions engaged in investing, owning, renting, or managing single-family homes from buying up single-family homes if they already control more than 100 single-family homes in Michigan and have a net value of $375 million or more.
The law provides some exceptions to the prohibition, including homes purchased under a build-to-rent program or a renovate-to-rent program, that make improvements of not less than 15% of the purchase price. Even those homes bought under the exception, however, must be sold or otherwise disposed of within seven years of the purchase, according to the legislation.
“That’s the guardrail,” Bohnak said.
Violations of the law could result in a $25,000 fine for each home purchased in violation of the law under a civil action brought by the county prosecutor or attorney general.
It is unclear which agency, if any, would provide oversight to ensure the law is being followed and that companies aren’t owning homes under multiple LLCs above the 100-home limit. Bohnak was unable to answer when asked about oversight in a House committee last week.
State Rep. Parker Fairbairn, R-Harbor Springs, questioned whether the fine might be too small for a corporation buying homes at $250,000 a pop.
“It might not disincentivize them from buying it,” Fairbairn said. “It just might be a tax if you will.”
eleblanc@detroitnews.com
This article originally appeared on The Detroit News: Michigan House OKs bill limiting large investor purchases of homes
Reporting by Beth LeBlanc, The Detroit News / The Detroit News
USA TODAY Network via Reuters Connect
By Beth LeBlanc, The Detroit News | USA TODAY Network
