A bill to amend the Internal Revenue Code of 1986 to impose an excise tax on the failure of certain hedge funds owning excess single-family residences to dispose of such residences, and for other purposes.
- Bill Number
- S. 788
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-02-27: Read twice and referred to the Committee on Finance.
- Last Updated
- 2026-02-06T11:56:28Z
AI-Generated Summary
Purpose
The HOPE (Humans over Private Equity) for Homeownership Act aims to discourage large institutional investors, such as hedge funds and similar entities, from owning excessive numbers of single-family homes by imposing financial penalties. This is intended to increase the availability of these homes for individual buyers, promoting homeownership among everyday people rather than investment firms.
Key Provisions
- Excise Tax on New Acquisitions (Section 5000E): Applies to "hedge fund taxpayers" (entities with $50 million or more in assets under management). Imposes a tax on buying single-family residences (homes with 1-4 units) after the law's enactment, equal to the greater of 15% of the purchase price or $10,000. The purchase price is the adjusted basis (essentially the cost) of the home at acquisition.
- Excise Tax on Excess Holdings (Section 5000F): Targets "applicable taxpayers" (partnerships, corporations, or real estate investment trusts—REITs—that manage pooled investor funds and act as fiduciaries). Imposes a $5,000 tax per excess single-family home owned at year-end if holdings exceed "maximum permissible units." These limits phase down over 9 years based on homes owned on the "applicable date" (generally the end of the first full tax year after enactment):
- For hedge fund taxpayers: Starts at 90% of prior holdings in year 1, decreasing by 10% annually to 0% after year 9.
- For other applicable taxpayers: Starts at 50 homes plus 90% of prior holdings in year 1, decreasing the percentage to reach exactly 50 homes after year 9.
- "Excess" homes are those owned before the applicable date. Sales to businesses or individuals who already own another home ("disqualified sales") do not count toward reducing holdings.
- Definitions and Exceptions (Section 5000G):
- Single-family residence: A property with 1-4 dwelling units, excluding foreclosed unoccupied homes (unless bought by hedge funds), owner-occupied homes used as a principal residence by someone with an ownership stake, or certain low-income housing eligible for tax credits.
- Ownership: Triggered by majority interest in the property.
- Aggregation: Related entities (treated as a single employer under existing tax rules) are combined for counting holdings.
- Exclusions: Nonprofits (tax-exempt under section 501(c)(3)) and builders primarily in the business of constructing or rehabbing homes for sale.
- Disallowance of Deductions (Section 3):
- No deduction for mortgage interest on single-family homes if the owner owes the excise tax that year.
- No depreciation deduction (a tax break for wear and tear on rental properties) for such homes if the owner owes the excise tax.
The law applies to tax years starting after enactment.
Significant Changes to Existing Law
- Adds a new Chapter 50B to Subtitle D of the Internal Revenue Code (IRC), introducing excise taxes specifically on excess single-family home ownership by institutional investors—previously, no such targeted taxes existed.
- Amends IRC Section 163 (interest deductions) to block mortgage interest deductions for affected owners, redefining "acquisition indebtedness" (debt used to buy or improve a home) to fit single-family residences.
- Amends IRC Section 167 (depreciation) to deny depreciation for single-family homes owned by those liable for the new excise tax.
These changes expand IRS oversight into real estate holdings of investment entities without altering core tax structures for individuals or small owners.
Potential Impacts
- On Government Agencies: The IRS gains new enforcement responsibilities for tracking ownership, acquisitions, and compliance, potentially increasing administrative costs but also generating revenue from excise taxes and reduced deductions (estimated to affect large portfolios).
- On Citizens: Could make more single-family homes available for purchase by individuals, potentially stabilizing or lowering home prices in markets dominated by investors; however, it might indirectly raise costs if investors pass penalties onto tenants via higher rents.
- On International Relations: Minimal direct impact, though foreign-owned investment funds could face U.S. tax burdens, possibly influencing cross-border real estate investment.
- Broader Market: Encourages divestment by institutions, shifting housing stock toward owner-occupiers and reducing investor-driven price inflation.
Main Stakeholders Affected
- Institutional Investors: Hedge funds, private equity firms, and REITs with large single-family portfolios face the heaviest penalties, requiring sales or restructuring to avoid taxes.
- Individual Homebuyers and Renters: Benefit from increased home supply but may see short-term market disruptions from forced sales.
- Real Estate Developers and Builders: Largely exempt if focused on new construction, but could gain from selling to individuals rather than investors.
- Taxpayers Generally: Indirectly affected through potential revenue gains for public programs or deficit reduction.
Notable Legal, Constitutional, or Political Implications
- Legal: Relies on Congress's broad power to impose excise taxes (under Article I of the Constitution), but definitions like "majority ownership" and aggregation rules may lead to disputes over IRS interpretations or audits. "Disqualified sales" provisions could complicate property transfers, potentially inviting challenges under property rights doctrines.
- Constitutional: No apparent violations, as it targets commercial entities via taxation rather than seizing property; however, it might face equal protection claims if seen as discriminatory against large investors without similar rules for smaller ones.
- Political: Highlights tensions between housing affordability and investment freedoms, appealing to advocates for individual homeownership while drawing opposition from the financial sector; could set precedent for sector-specific taxes on real estate to address social issues like housing shortages.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (6)
Sen. King, Angus S., Jr. [I-ME], Sen. Van Hollen, Chris [D-MD], Sen. Gallego, Ruben [D-AZ], Sen. Sanders, Bernard [I-VT], Sen. Kelly, Mark [D-AZ], Sen. Heinrich, Martin [D-NM]
Recent Actions
- 2025-02-27: Read twice and referred to the Committee on Finance.
- 2025-02-27: Introduced in Senate
Bill Versions
- HOPE (Humans over Private Equity) for Homeownership Act — issued 2025-02-27 — PDF (13 pages)