Bill to limit corporate ownership of SFH for rental

[pannierpacker]

HF 685 is being drafted right now in the MN House with the following description:
"Corporate entities, developers, and contractors prohibited from converting single-family home into rental property unit."
https://www.revisor.mn.gov/bills/bill.p ... n=0&y=2023

It sounds like corporations might still be able to buy and rent though as long as it can be classified as affordable housing.

This could have significant implications for MN housing market.
It would likely prevent things like this from happening (free article preview description should provide enough details):
https://www.bizjournals.com/twincities/ ... polis.html

It would also affect a lot of smaller businesses though. For example, in the Marcy Holmes neighborhood in Minneapolis, 82% of the homes are renter occupied and most of the neighborhood is SFH. Lots of college students prefer SFH over apartments. The law does not seem to apply to duplexes/triplexes but there are still plenty of SFH near the U of MN.

[twincitizen]

I haven't read the full text of the bill, nor do I expect that it would pass both chambers in its current form, but there's certainly a lot of interest out there (especially in the core cities and inner suburbs on the more affordable end of the spectrum) in limiting "corporate ownership" of homes that would otherwise likely be owned by first-time homeowners. The key point in this discussion is what the definition of "corporate ownership" is. It's definitely not someone who owns 2 homes and rents one out. I can't imagine any bill passing that would bar regular people from owning 2 or 3 rental homes. I could see a cap kick in closer to 10 properties. It's fairly common for people to keep their first/starter house as a rental, after getting in to their "move up" house. With my current house locked into 3% interest rate, I would plan on keeping it as a rental if/when I ever decide to move into a bigger/nicer house. That said, I just met a guy who now owns 5 entry-level houses as rentals, and that's probably around where I would start to draw the line / create disincentives to doing that.

[pannierpacker]

I haven't read the full text of the bill, nor do I expect that it would pass both chambers in its current form, but there's certainly a lot of interest out there (especially in the core cities and inner suburbs on the more affordable end of the spectrum) in limiting "corporate ownership" of homes that would otherwise likely be owned by first-time homeowners. The key point in this discussion is what the definition of "corporate ownership" is. It's definitely not someone who owns 2 homes and rents one out. I can't imagine any bill passing that would bar regular people from owning 2 or 3 rental homes. I could see a cap kick in closer to 10 properties. It's fairly common for people to keep their first/starter house as a rental, after getting in to their "move up" house. With my current house locked into 3% interest rate, I would plan on keeping it as a rental if/when I ever decide to move into a bigger/nicer house. That said, I just met a guy who now owns 5 entry-level houses as rentals, and that's probably around where I would start to draw the line / create disincentives to doing that.

Someone in my family currently owns an LLC with 7 properties. I am pretty sure it's just him and a buddy. They have been buying about 2 properties per year for the last few years. They would almost certainly be impacted by this.

Also, the apartment that I rented in Dinkytown was owned by a business that managed dozens of properties (most of which were SFHs and all were in Dinkytown). They were very good to work with and charged a fair rate for their housing. They would almost certainly be impacted by this as well.

[LakeCharles]

Also, the apartment that I rented in Dinkytown was owned by a business that managed dozens of properties (most of which were SFHs and all were in Dinkytown). They were very good to work with and charged a fair rate for their housing. They would almost certainly be impacted by this as well.

This is where I struggle. My worst landlords have all been the people who just owned 1 or 2 properties in addition to their main house. They don't have the time, skills, or necessity to be responsive or helpful, whereas a large company might have a dedicated customer service agent, repairperson, landscaping/shoveling service, etc. They also have a reputation they might care about, a BBB rating, etc. Whereas your aunt who is renting out her old house doesn't really need to care about the reputation of the property.

All that to say, it feels strange to incentivize more of the bad landlords and dis-incentivize the good ones. But maybe I've just had bad experiences.

[BoredAgain]

Also, the apartment that I rented in Dinkytown was owned by a business that managed dozens of properties (most of which were SFHs and all were in Dinkytown). They were very good to work with and charged a fair rate for their housing. They would almost certainly be impacted by this as well.

This is where I struggle. My worst landlords have all been the people who just owned 1 or 2 properties in addition to their main house. They don't have the time, skills, or necessity to be responsive or helpful, whereas a large company might have a dedicated customer service agent, repairperson, landscaping/shoveling service, etc. They also have a reputation they might care about, a BBB rating, etc. Whereas your aunt who is renting out her old house doesn't really need to care about the reputation of the property.

All that to say, it feels strange to incentivize more of the bad landlords and dis-incentivize the good ones. But maybe I've just had bad experiences.

Good landlords are good.
Bad landlords are bad.

The problem is that landlords (of all sizes) are buying up small/affordable homes and are keeping them off the market so that people that want to buy homes in affordable urban areas can't find one. The proposed legislation targets larger corporations because that is a more palatable thing to do than targeting the "small business owners" that are bankrolling properties for their retirement.

[amiller92]

I wouldn't bet on any of these restrictions passing (but what do I know).

[twincitizen]

2024 update on the bill.
MN Reformer: https://minnesotareformer.com/2024/03/0 ... ily-homes/

Finance & Commerce: https://finance-commerce.com/2024/03/bi ... y-rentals/

I tend to agree that *something* should be done to keep more homes available to buyers...I'm just not sure what the answer is. I work in a city department adjacent to rental license applications, and the pace of new applications is pretty jarring. It also seems true that once a SFH becomes a rental, it's unlikely to ever become owner-occupied again. Rental homes just get sold to other owners who keep them as rentals, they don't even get listed on MLS, so they have no chance of re-entering the "normal market". The percentage of rental SFHs in a community only goes one direction - up. While the percentage of SFH being rented in MN is quite low compared to other regions of the country, I don't think it's a bad idea to be studying the issue.

One of the more extreme measures of the bill is that it would force current corporate owners (>10 SFH rentals) to divest their properties to come into compliance. That requirement will almost certainly need to be dropped in order for this to have any hope of passing. I think it's fair to recognize that there is a problem here, a market failure that should be addressed in some way, while simply allowing current owners to be grandfathered into the law. Forcing divesture is simply not going to survive the legal challenges that are sure to come.