New York Is The Latest State Looking To Prevent Corporate Ownership Of Single Family Homes

Although homeownership is one of America's most reliable routes to financial security, today's homebuyers face a daunting set of obstacles. That's especially true in New York, where prices are high and available inventory levels are low. Many believe the emergence of corporate-owned housing has exacerbated the affordability crisis and Governor Kathy Hochul is one of them. She recently announced a proposal to combat private equity ownership of single-family homes. 

Ownership of large single-family home portfolios by large corporations and private equity funds is a relatively new phenomenon, but it's not without controversy. The practice can enrich real estate investors, but everyday homebuyers complain that it prices them out of the market and limits available inventory. That drives prices upward and incentivizes real estate developers to sell off entire tracts at once instead of individual sellers.

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Some states have proposed bans on corporate or private equity ownership of single-family homes. Governor Hochul's proposal takes a different tack. Instead of banning the practice, she aims to disincentivize corporate ownership by targeting the tax code. It would eliminate state-level tax breaks that normally come with home ownership, such as: 

·      Interest deductions

·      Depreciation write-offs

·      Ancillary expense write-offs such as capital improvements 

These deductions were originally conceived to help individual homeowners offset the cost of purchasing homes and build wealth more quickly. However, the combined savings can yield millions per year in extra investor profit when large corporations or private equity funds claim these write-offs across portfolios that include several hundred or even several thousand houses at once.

Governor Hochul explained her motivation for pushing the legislation by saying, "The cost of living is just too damn high. Shadowy private equity giants are buying up the housing supply in communities across New York, leaving everyday homebuyers with fewer affordable options." Hochul plans to include this proposal with the state's January 21 budget proposal.

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Pending legislative approval, Governor Hochul's proposal will go into effect on April 1. Hochul's proposal is not the only one the New York legislature will consider. Assemblymember Michaelle Solages (D) and Senate Finance Chair Liz Krueger co-sponsored anti-corporate housing legislation. Their bill would eliminate some tax write-offs for corporate ownership while offering a tax break to institutional owners selling 10% of their inventory annually. 

During an interview with Bloomberg News, Solages voiced support for Hochul's proposal and stressed the need for legislative action. Solages said, "We really need to stop these private equities that are amassing these huge amounts of properties and limiting opportunities for New Yorkers to have home ownership." She also told Bloomberg she "looked forward to getting additional details" about Hochul's plan. 

It remains to be seen what effect, if any, this legislation would have on New York's housing market. It's well known that New York State's most expensive housing market is the New York City metropolitan area. Still, a 2022 study by the Urban Institute did not rank New York City in the top 20 nationally for corporate or private equity ownership of single-family residences.

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