Dem lawmakers say keeping hedge funds from buying more single-family homes in the state would help address access and affordability issues in Wisconsin’s housing market.
Sens. Sarah Keyeski of Lodi and Brad Pfaff of Onalaska, along with Reps. Kalan Haywood of Milwaukee and Karen DeSanto of Baraboo, recently sent a co-sponsorship memo to other lawmakers seeking support for legislation making this change.
By barring hedge funds from purchasing more single-family homes in Wisconsin, Keyeski argues the bill represents “one piece of the puzzle” for addressing rising home prices. Because these groups of private investors can pool their money, which “almost gives them unlimited buying power” and allows them to offer more for properties than a typical buyer could.
In an interview yesterday, Keyeski said this “ultimately drives up housing prices and it prices out middle-class individuals that are seeking homeownership” and trying to build their own wealth. And in many cases, these hedge funds use the properties as rentals, making it harder for buyers to find homes, she said.
“That again hurts people, and it hurts communities, because communities, they benefit from stable residency, right? And so if we have these turnovers in rental properties, potentially, it’s just not good for especially our small communities,” she said.
Keyeski said this has been happening in Milwaukee, adding that means the practice could expand to other parts of the state as well. She describes the bill as a proactive effort to halt this trend, in hopes of protecting the middle class in Wisconsin.
Haywood notes the Milwaukee area has seen “a rapid uptick” in the number of out-of-state investors coming in and buying up homes. While he acknowledged other factors such as inflation and higher construction costs are also driving down affordability, he said expecting the average blue-collar worker to compete with corporations that have hundreds of millions of dollars is unfair.
“So you have these folks who are getting more and more interested because Milwaukee is … a city that I think folks have their eyes on,” he said yesterday in a separate interview. “Out-of-state investors have been coming in and buying up huge chunks of property … and holding onto them, they’re either selling them for really high prices or they’re holding onto them in hopes that Milwaukee will blow up someday.”
If the bill becomes law, Haywood is hopeful that more homes would be available for local residents “who support our local schools, our local economy and building up our local communities.”
Under the bill, any ownership interest in a single-family home that’s acquired or owned by a hedge fund would be “forfeited to the state,” according to analysis by the Legislative Reference Bureau. The bill would only limit purchases going forward, and wouldn’t affect properties currently owned by hedge funds.
LRB says the bill would “prohibit” hedge funds from making such purchases, but Keyeski described the approach as a deterrent rather than punitive. She noted the state Attorney General would be in charge of enforcement. When asked what would happen to the home after it’s forfeited to the state, Keyeski said the AG would be responsible for figuring that out.
“If it’s homeownership by the state, my guess is it would be some management of selling that then, and making those profits somehow part of our fiscal benefit,” she said, adding “outside of that, we don’t have it exactly figured out, the mechanism of that.”
The bill’s language defines a hedge fund as a corporation, LLC, partnership, association, trust or other organization that manages funds pooled from investors with a fiduciary role, has at least $500 million in net assets under management, and isn’t classified as a 501(c)(3).
The memo notes a similar bill was introduced by a Republican lawmaker in Virginia – identified by Keyeski as Sen. Glen Sturtevant. While she noted that bill hasn’t gotten much traction, she’s hopeful that GOP support elsewhere would be a good selling point in Wisconsin. Authors have gotten 25 Democratic co-sponsors but no Republicans have signed on yet, though Keyeski noted the co-sponsorship memo is Wednesday at 4 p.m.
“I would love to be hopeful that they see this is a bipartisan issue,” she said. “This is happening across the nation … it’s a complicated and growing issue that we’re trying to be proactive about and address as fast as we can.”
Haywood, the Assembly’s assistant minority leader, argued housing is “one of the least divisive issues” in the state.
“No matter where you go in the state, you are hearing an outcry from residents asking us to do something about the housing crisis we’re currently in,” he said. “I think this is definitely an idea that we can get our Republican colleagues on board with.”
See the memo.
