HR4352-119

What This Bill Does

The HOMES Act (Houses Over Middle-Class Exploitation Schemes Act) targets large-scale corporate landlords by eliminating valuable tax deductions for investors who own 50 or more single-family rental homes. Specifically, it denies interest and depreciation deductions on these properties, making the business model of accumulating single-family rental homes significantly less profitable.

Who Benefits and How

Individual Homebuyers: By making large-scale single-family rental ownership less tax-advantaged, the bill aims to reduce competition from institutional investors in the housing market, potentially making homeownership more accessible and affordable for individual families.

Affordable Housing Nonprofits: The bill creates an exception allowing large landlords to claim deductions if they sell properties to qualified nonprofit organizations focused on affordable housing, including community land trusts, community development corporations, and public housing agency subsidiaries.

First-Time and Primary Residence Buyers: Large landlords can also claim the deduction if they sell to individuals who will use the property as their primary residence, creating an incentive to convert rental properties back to owner-occupied homes.

Who Bears the Burden and How

Large Institutional Landlords: Investors and corporations owning 50 or more single-family rental properties will lose significant tax benefits, including the ability to deduct mortgage interest and depreciate their properties. This substantially increases their effective tax burden and reduces profit margins.

Private Equity Firms and REITs: Companies that have built portfolios of single-family rental homes will face reduced returns on investment, potentially prompting them to divest from this asset class.

Key Provisions

• 50-Property Threshold: The restrictions apply to any taxpayer (including related entities counted together) who owns 50 or more single-family residential rental properties containing 4 or fewer dwelling units each.

• Denied Deductions: Affected owners cannot deduct mortgage interest (Section 163) or claim depreciation deductions on their single-family rental properties.

• Sale Exception: Deductions remain available in the year a property is sold, but only if sold to a primary residence buyer or a qualified nonprofit organization.

• Anti-Avoidance Rules: The bill includes aggregation rules to prevent owners from splitting properties across related entities to stay below the 50-property threshold.

• Affordable Housing Credits Protected: Properties receiving Low-Income Housing Tax Credits (Section 42) or newly constructed properties are excluded from the restrictions.