Several Democratic senators — led by Amy Klobuchar (D-MN) and Sherrod Brown (D-OH) — this month introduced the Housing Acquisitions Review and Transparency (HART) Act which would require corporations and private equity firms to report plans to purchase large housing inventories.
At present, although anticompetitive transactions increase rents, decrease services, and push homebuyers out of the market, even the largest transactions of residential property need not be reported to the Federal Trade Commission and Justice Department for antitrust review. The bill, S.4620, would modify the pre-merger notification requirements under the Clayton Act to include reporting of certain acquisitions of residential property.
According to Freddie Mac and Redfin, the best level of housing inventory is typically a six-month supply. Viewed as a good balance between supply and demand, this level of inventory promotes stable prices and adequate choices for buyers without causing drastic market swings. Today's inventory of one million units, however, represents only a three-month supply. Price increases during such a tight market exacerbates the affordability problem.
"Predatory Behavior" Cited
Klobuchar says the law would ensure these large commercial transactions "no longer fly under the radar." Brown added that private equity investors — "hid[ing] behind opaque holding companies" — rake in profits while raising rents and neglecting repairs. He says the bill would bring "much-needed transparency" and help check private equity's "predatory behavior."
The National Association of Realtors (NAR) says the volume of existing-home sales in 2023 hit their lowest level since 1995. More than a quarter of realtors named "lack of inventory and housing affordability as the most important factors limiting potential clients from making a purchase." Compared to a year ago, pending home sales declined in all U.S. regions, NAR said in a June blog post, as prices continue to increase month over month.
DOJ Commissions Investigation
In other news related to the industry, the DOJ's investigation of NAR over commissions continues. The group was denied a rehearing of a federal appeals court ruling that allowed the DOJ to reopen its antitrust investigation of the industry group. The U.S. Court of Appeals for the District of Columbia on April 5, 2024, lifted restrictions imposed by a lower court that had prevented the Justice Department from investigating NAR's potentially anticompetitive conduct. On July 12, the court declined review of its opinion.
The case involves the DOJ's authority to investigate NAR's Participation Rule and Clear Cooperation Policy to protect competition for the benefit of homebuyers. The government says an investigation is warranted because real-estate commissions in the United States greatly exceed those in any other developed economy. The DOJ Antitrust Division has filed several amicus briefs and statements of interest supporting competition in the real-estate industry, including: Top Agent v. NAR, No. 21-16494, 9th Cir. and Nosalek v. MLS Property, No. 1:20-cv-12244-PBS, D. Mass.
In March, NAR reached a settlement in a Missouri class action, agreeing to pay $418 million over four years to the home-seller class. NAR agreed to make several changes, including removal of the requirement for buyer agent compensation offers on multiple listing services.
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