Minnesota lawmakers target private equity in homes

By DAN NETTER

BridgeTower Media Newswires

State lawmakers have advanced legislation that would take aim at some of the largest investor-owners of single-family housing.

Heard by the Senate Committee on Judiciary and Public Safety, the legislation would prohibit private equity companies from owning more than 99 single-family homes. The committee approved the bill on a voice vote and referred it to the Senate Committee on Finance.

According to its lead author, Sen. Liz Boldon, DFL-Rochester, the bill takes aim at the largest entities that own investment properties while still carving out space for smaller “mom-and-pop” landlords or entities that own up to 100 properties.

The bill defines the single-family properties as being properties with one to four dwelling units. It also allows exceptions for some owners, such as companies that are flipping properties (increasing value by 20% or more) or companies that are making the property safe and code compliant.

The bill also defines private equity firms as investors who mostly “engage in the raising or returning of capital and who invest, develop or dispose of specified assets,” including publicly or non-publicly traded entities or real estate trusts. It exempts units of government, land trusts, nonprofits and housing developers.

“I don’t necessarily think this is going to have a dramatic impact in lessening rental opportunities; I think that still will happen through the natural course,” Boldon said. “What I do think it will limit, which is a good thing, is some of the predatory behaviors or just some of the neglectful behaviors that we see from private equity companies.”

The bill’s referral to the Finance Committee comes just over a week after the Federal Reserve Bank of Minneapolis held an event related to investor homeownership in the Twin Cities metro.

According to the Investor Ownership of Twin Cities Residential Properties Dashboard, an interface that is ran by the Minneapolis Fed, there are about 42,000 single-family homes owned by investors in the Twin Cities metro. The dashboard has a different definition of single-family homes than the Senate bill, however, as it does not include duplexes, triplexes or fourplexes.

The 42,000 homes owned by investors represents 4.7% of homes, less than one home for every 20 homes in the market in 2024. The dashboard also shows that there are only two entities with more than 1,000 single family investment properties, while the remaining three of the top five investors in the metro have fewer than 300 properties.

According to data presented by Ben Horowitz, senior policy analyst for the Minneapolis Fed, about 16% of single-family investors own 50 or more properties. Out of that 16% of investors, a significant share — over 70% — originate out of Minnesota.

Horowitz also said very large investors (50 or more properties) have continued to purchase in both urban and suburban areas, but since 2012, very large investors were more likely to purchase homes in suburban areas.