Pardon in advance to anyone out there who owns more than 50 rental homes, but the IRS may cut off your financial incentives in owning those properties.
That’s mostly wishful thinking. Right now, that threat comes only in the form of a bill called the Stop Predatory Investing Act. It’s co-authored by one of our U.S. senators, Tammy Baldwin, which is how I learned about it.
There is a shortage right now across the country of 3.8 million homes, according to Baldwin’s research. The National Association of Realtors (NAR) frames the housing shortage more specifically. In a June 2023 report, the NAR said the U.S. housing market is missing 320,000 listings valued up to $256,000: the affordable price range for middle-income buyers (households earning up to $75,000).
Middle-income buyers can afford to buy less than a quarter (23%) of listings in the current market, the NAR report said. Five years ago, this income group could afford to buy half of all available homes.
The bill from Baldwin and her colleagues attempts to short-circuit this vicious cycle by amending the Internal Revenue Code to prohibit an investor who acquires 50 or more single-family rental homes from deducting interest or depreciation on those properties. This is intended to demotivate private-equity and other Wall Street–backed outside investors who use technology and all-cash offers to gobble up the affordable starter homes that first-time homebuyers could afford.
The bill also incentivizes big investors to sell single-family rental homes back to homeowners or nonprofits in the community by allowing those investors to deduct the interest and depreciation for the year in which the property is sold.
Some of the data fueling this bill comes from a report from the Joint Center for Housing Studies of Harvard University. The report – “The State of the Nation’s Housing 2022” – notes that the share of purchases made by large investors with large portfolios – a “large” investor is considered one with at least 100 properties – grew from 14% in September 2020 to 26% in September 2021. During the first quarter of 2022, the investor share of homes sold averaged 28%.
Investors have focused primarily on markets in the South and West, according to the report, but in Milwaukee alone, 14% of rental homes are now owned by out-of-state landlords, according to an analysis by Marquette Law School’s Lubar Center for Public Policy Research and Civic Education. That’s up from 4,600 in 2015, and just 1,500 in 2000.
“When Wall Street investors buy up houses in Wisconsin, they drive up rent and lock out hardworking families from affordable housing,” Baldwin said in a statement last month announcing her support of the bill. “By eliminating tax incentives for out-of-state landlords and wealthy investors who are interested only in their bottom line, we can better ensure Wisconsin families are able to buy a home in their neighborhoods and create stronger communities.”
Corporate investors are not dominant in the Door County market, according to longtime local realtors I’ve spoken with. Still, this bill could ward off those types of investors and not compound the affordable-housing problem we do have.
The Sam Watson Benefit Fund
Last week I told you about our reporter Sam Watson, who broke many bones following a serious car crash while driving to work the morning of July 19.
Over the past week, and in partnership with Nicolet Bank, we’ve opened the Sam Watson Benefit Fund. Walk-in donations will be received at any of Nicolet’s branches. Checks can also be mailed to the Sister Bay branch – which is where branch manager Deb Anderson opened the fund. Make the check out to the Sam Watson Benefit Fund, and mail it to P.O. Box 166, Sister Bay, WI 54234.
Sam and her partner, Matthew Smith, who were just starting out on their young careers (Matthew as an employee at Nicolet Bank’s Sister Bay branch), will be able to access the fund’s donations for needed expenses as Sam goes through what she’s been told could be up to 10 months of rehab.
She’s already started that process in Green Bay, where she will remain for the foreseeable future before heading back to Door County. She texted yesterday that she had “successfully stood up several times now! Small but exciting steps.”
For one who broke both her legs and an ankle (and an arm and a collarbone) not even three weeks ago, it was both astonishing and beyond encouraging to hear. She also expressed gratitude that she had landed in a community like ours.
“We really can’t get over how fortunate we are,” she texted.
Door County residents care about their neighbors. I witness this generosity on a regular basis. Even so, not everyone suffers a tragedy like Sam’s, so it’s a unique experience to receive – as she has, and as we have on her behalf – such an outpouring of regards, sympathy, prayers and inquiries about how to help.
Thank you all, from the bottoms of our hearts.
— Debra Fitzgerald