MINNEAPOLIS — State capitol Democrats want to slow the tide of corporations buying up homes and converting them to rental property.
According to a report from the Federal Reserve Bank of Minneapolis, investors own 25,000 detached single-family homes in the Twin Cities metro.
That equates to 54% of all home rentals on the market in the region, according to the report. It's a trend legislators want to slow by placing caps on how many rental homes can be purchased by LLCs, or Limited Liability Corporations.
"Individual families are priced out of the buyer market because of all cash bids many of these corporations use to purchase large numbers of properties," Rep. Esther Agbaje, a Minneapolis Democrat, told reporters Wednesday.
Rep. Agbaje asserted the investor-driven rental conversions have dramatically reduced the supply of starter homes for families, especially in the urban cores of Minneapolis and surrounding cities.
"By limiting the amount corporations can purchase for rentals in this market we want more homes available for people," she said.
The legislation would limit corporations to ten single-family rental homes in each city. Those companies that already own more than that would be required to sell them within two years of the law taking effect.
"It’s virtually impossible for new families to compete with the deep pockets of these faceless investors," Sen. Liz Boldon, a Rochester Democrat who is the chief author of the Senate bill, told reporters.
"More concerning, there’s no reason these corporations will stop until they own as much as they can."
Boldon and Agbaje exempted builders who buy homes to flip them or turn them into rentals. That's a change from the previous version of the bill introduced in 2023.
During a hearing in the House Housing Committee Wednesday, Minneapolis realtor Pat Paulson testified against the idea.
"A well-functioning market provides consumers with choices. Many tenant households seek single-family homes for rent," Paulson, the current treasurer of Minnesota Realtors, told legislators.
"Restricting investor ownership of single-family homes will result in less options for tenants, confining many to large apartment buildings."
Paulson said many of those properties would be vacant if they hadn't been purchased by corporate investors. He asserted it would be unconstitutional to require property owners to sell assets.
"Please keep in mind that even in the most extreme sellers' markets, some homes don’t sell," he said.
Supporters of the legislation view the supply of starter homes as a matter of social justice and equity.
"A disproportionate number of these purchases are happening in neighborhoods occupied predominantly by people of color and lower-income households," Boldon said.
AsaleSol Young, who heads the Urban Homeworks nonprofit, pointed out that homeownership is the way most Americans build wealth across generations.
"The most impacted today are those who’ve historically been left out of the opportunity and wealth building through home ownership for generations," Young said.
She also said corporations located out of state don't always maintain their properties.
"If I view your housing as my investment, my priority is not your well-being," she said. "My priority is maximizing the return on my investment."