Kathy Hochul Aims to Limit Investors in NY’s Housing Market

New York Gov. Kathy Hochul is moving to inhibit institutional investors from playing in the housing market sandbox, but the impact of any action may be limited.

On Thursday, Hochul proposed several measures to curtail hedge funds and private equity firms from snapping up swaths of homes, the New York Times reported. Hochul is expected to include the proposals in next week’s State of the State address.

Her first proposal is to stop institutional investors from bidding on a home within its first 75 days on the market. This would give individual homebuyers more time to navigate the market without added pressure from a faceless company.

Hochul is also proposing an elimination of select tax benefits that come with an investor’s home purchase. That includes interest deductions.

“The cost of living is just too damn high — especially when it comes to the sky-high rents and mortgages New Yorkers pay every month,” Hochul said in a statement, a callback to Jimmy McMillan’s infamous gubernatorial platform, “The rent is too damn high.”

But the proposals won’t necessarily improve affordability for individual residents, despite the pervasive narrative that institutions crowd out other buyers by paying above market rate, driving up prices. The data doesn’t appear to bear out the conclusion, with lack of inventory seemingly a bigger issue.

As of 2022, five of the largest investors in the country owned 2 percent of the nation’s single-family rental homes, according to a report from the federal Government Accountability Office, but private equity ownership still represents a small percentage nationwide. Collectively, 32 investors account for about a 3 percent share of homeownership, according to the GAO report, though it varies by region.

In New York, it’s not clear how much home ownership is in the hands of institutional investors. Still, this is the latest swing at a perceived boogeyman of the housing market.

Several states are weighing legislation regarding institutional investors — entities that often turn around and rent out the homes they buy to those who can’t yet afford home ownership — and their tax benefits received mention from Vice President Kamala Harris on the presidential campaign trail.

At the national level, Sen. Jeff Merkley and Rep. Adam Smith — both Democrats — introduced legislation that would kick hedge funds out of the single-family housing market over 10 years.

In New York, the next step is for Hochul to dive into specifics and negotiate with the Legislature on her proposals.

— Holden Walter-Warner