A bill being introduced to Congress will prohibit hedge funds and other institutional investors from buying single-family homes.

The bill comes as housing supply continues to dry up in the U.S. with prices climbing 20 percent since 2021. Low housing supply is driving up prices, and hedge funds are partly to blame for that, according to the bill’s sponsors, U.S. Senator Jeff Merkley (D-OR) and Representative Adam Smith (D-WA).

This week, Merkley and Smith introduced the bill, the End Hedge Fund Control of American Homes Act of 2023, which takes aim at hedge funds and private equity firms that have snapped up single-family houses as investment properties.

“The housing in our neighborhoods should be homes for people, not profit centers for Wall Street,” Merkley said in a statement. “Yet, in every corner of the country, giant financial corporations are buying up housing and driving up both rents and home prices. It’s time for Congress to put in place commonsense guardrails that ensure all families have a fair chance to buy or rent a decent home in their community at a price they can afford.”

Hedge funds bought large portfolios of foreclosed homes after the 2008 housing crisis, the bicameral bill’s authors said, and the federal government has only enabled this growth through “bulk sales of federally backed mortgages and foreclosed properties.”

Merkley said this has excluded families and non-profits from buying these homes, something Smith echoed.

“Too many families in the Puget Sound region and across the country are struggling to afford to rent or buy a home,” Smith said in a statement. “This crisis has been exacerbated in recent years by an increasing number of large investors purchasing a significant percentage of single-family homes, squeezing out prospective buyers.”

Newsweek reached out to both Merkley and Smith via email for a comment.

Investors Own Half a Million Homes

Large institutional investors owned about 574,000 single-family homes as of June 2022, the most recent data available from the Urban Institute. The report from the Urban Institute defines institutional investors as entities that own more than 100 single-family homes.

For perspective, there are 15.1 million one-unit rental properties nationwide, the Urban Institute said.

“This would suggest that the total institutional ownership share is 3.8 percent,” the report said. “The vast majority of owners in the [single-family rental] market are small and medium investors who own less than 100 properties. There are 46.6 million total rental properties, so one-unit properties make up 32.4 percent of the total rental stock.”