In recent years, the housing market in Minnesota, like much of the United States, has become increasingly challenging for many prospective homeowners. Rising home prices, low inventory, and intense competition have made it difficult for first-time buyers to find affordable housing. One growing concern is the role of corporations and large investors buying up single-family homes, which some argue exacerbates the housing crisis. This raises an important question: Should Minnesota ban corporations from buying homes?
The Current Landscape
In many urban and suburban areas, including Minneapolis and St. Paul, corporate entities have been purchasing single-family homes and turning them into rental properties. This practice, often referred to as “corporate homeownership,” involves large companies or real estate investment trusts (REITs) acquiring multiple properties for investment purposes. These companies rent out homes rather than selling them to individuals or families.
According to some reports, corporate ownership of single-family homes has grown steadily, particularly following the 2008 financial crisis, when many homes were foreclosed and purchased by investors. In the Twin Cities, it’s estimated that around 3-4% of single-family homes are owned by corporate entities. While this may seem like a small percentage, the impact in certain neighborhoods can be significant. As these companies continue to expand their portfolios, concerns have been raised about affordability, community stability, and the role of local versus absentee ownership.
The Argument for a Ban
Many housing advocates and community members believe that banning corporations from purchasing homes could help alleviate some of the pressure on the housing market. Here are some of the key arguments in favor of such a ban:
- Increased Housing Affordability: When corporations purchase single-family homes, they often do so in large numbers, driving up prices and reducing inventory for individual buyers. This makes it harder for local families, particularly first-time homebuyers, to compete. By limiting corporate ownership, more homes could remain available for people looking to buy and live in the homes themselves, potentially slowing the rapid increase in home prices.
- Community Stability: When homes are owned by local residents, they are more likely to be well-maintained and contribute to a stable, long-term community. Corporate landlords, particularly those based out of state or even internationally, may not have the same vested interest in maintaining properties or supporting the local community. Renters in corporate-owned homes may also have less incentive to invest in the neighborhood compared to homeowners. Reducing corporate ownership could help foster stronger communities with more engaged residents.
- Preventing Speculation: Some argue that corporate ownership of homes treats housing as a speculative investment rather than a basic human need. Corporations often view homes as financial assets, aiming to maximize profits through rent increases or by holding properties to sell at higher prices later. Banning or limiting this type of speculation could help refocus the housing market on providing shelter for families rather than serving as a tool for investors to generate wealth.
- Encouraging Local Ownership: A ban on corporate ownership could encourage more local residents to enter the housing market, keeping wealth and investment within the community. This would also reduce the number of absentee landlords, who may not be as responsive to tenant needs or the concerns of the surrounding neighborhood.
The Case Against a Ban
While the idea of banning corporate homeownership has gained support in some circles, others argue that such a move could have unintended consequences. Here are some of the key points raised by opponents of the idea:
- Decreased Rental Options: Not everyone wants or is able to buy a home. For many people, renting is a more viable option, either because they are not yet financially ready to buy or because they prefer the flexibility of renting. By banning corporate ownership of single-family homes, Minnesota could reduce the number of available rental properties, potentially making it harder for renters to find suitable housing. In particular, single-family homes offer a different kind of rental experience than apartments, often attracting families who prefer the space and amenities of a house.
- Market Disruption: Banning corporate ownership of homes could disrupt the real estate market in unpredictable ways. Corporations and investors play a role in the broader housing market, and removing them from the equation could lead to a decrease in housing construction or other economic consequences. For example, if corporate investors are no longer allowed to purchase homes, developers might be less willing to build new homes, leading to even lower inventory and higher prices.
- Potential Legal Challenges: Implementing a ban on corporate ownership of homes could face legal challenges. Corporations, like individuals, have property rights, and restricting their ability to buy real estate could be seen as discriminatory or unconstitutional. Additionally, corporations might find ways around the ban by setting up shell companies or other legal structures to continue purchasing homes.
- Economic Impact: Corporate investment in housing can stimulate local economies by providing jobs in construction, property management, and related industries. Banning corporate ownership could reduce these opportunities and have broader economic repercussions. Additionally, corporate landlords may be better equipped to maintain and manage rental properties than smaller, individual landlords, particularly when it comes to compliance with regulations and maintaining property standards.
Alternatives to a Ban
Instead of an outright ban, some suggest that other policy measures could address the negative impacts of corporate homeownership without completely eliminating it. These alternatives include:
- Taxing Corporate Ownership: One proposal is to heavily tax corporate ownership of single-family homes. By imposing higher property taxes or other fees on corporate owners, Minnesota could disincentivize large-scale acquisitions of homes while generating revenue for affordable housing programs. Some advocates suggest a tiered tax system, where corporations that own more homes are taxed at a higher rate.
- Rent Control: Another option is implementing rent control measures to prevent corporate landlords from excessively raising rents. This would help protect renters from being priced out of their homes and ensure that corporate landlords do not exploit their market power to drive up rents.
- Regulating Short-Term Rentals: In addition to concerns about corporate ownership of single-family homes, there is growing frustration over the rise of short-term rental platforms like Airbnb, which have further reduced the supply of long-term rental housing. Stricter regulations on short-term rentals could help keep more homes available for long-term residents.
- Encouraging Affordable Housing Development: Rather than focusing solely on banning corporate ownership, Minnesota could take more proactive steps to increase the supply of affordable housing. This could include incentivizing developers to build affordable housing units, streamlining the approval process for new housing projects, and providing subsidies or tax credits to make homeownership more accessible to low- and middle-income families.
Conclusion
The debate over whether Minnesota should ban corporations from buying homes is complex, with valid arguments on both sides. On one hand, corporate ownership of homes can drive up prices, reduce inventory, and destabilize communities. On the other hand, banning corporate ownership could reduce rental options, disrupt the market, and face legal challenges.
Rather than pursuing an outright ban, Minnesota might consider a combination of policies that address the root causes of the housing crisis, including taxing corporate owners, implementing rent control, regulating short-term rentals, and incentivizing affordable housing development. These measures could help strike a balance between maintaining a healthy housing market and ensuring that homes are accessible to local families rather than being treated as mere investment opportunities.
Ultimately, the goal should be to create a housing market that serves the needs of Minnesota residents, providing affordable and stable housing options for all. Whether through a ban or other policy solutions, addressing the role of corporate ownership in the housing market is an important step in achieving that goal.
David Gooden | Eden Prairie Realtor