HR4352-119

What This Bill Does

The HOMES Act uses the tax code to pressure large owners of single-family rental portfolios. A disqualified single family property owner is a taxpayer that directly or indirectly owns 50 or more single-family residential rental properties, with related entities aggregated. For those owners, the bill disallows deductions for interest paid or accrued in connection with owned single-family residential rental property and disallows depreciation deductions for such property. Sale-year exceptions apply only when the property is sold to an individual for use as a principal residence or to a qualified nonprofit organization whose principal purpose is creating, developing, or preserving affordable housing. Qualified nonprofits include community development corporations, community housing development organizations, community-based development organizations, land banks, resident-owned cooperatives, community land trusts, and public housing agency subsidiaries. Single-family residential rental property generally means residential rental property with four or fewer dwelling units and related site improvements, but excludes low-income housing tax credit property and property the taxpayer built or acquired before first occupancy. Treasury must issue anti-avoidance regulations, and the bill also blocks capitalization paths for disallowed interest.

Who Benefits and How

Individual homebuyers benefit because large single-family rental owners get a tax incentive to sell homes to people using them as principal residences. Affordable housing nonprofits benefit because sale-year exceptions favor transfers to qualified nonprofit housing organizations. Community land trusts and land banks benefit from explicit recognition as qualified nonprofit purchasers. Renters and neighborhoods affected by concentrated corporate ownership benefit if the tax change reduces large investor ownership of single-family homes.

Who Bears the Burden and How

Large single-family rental owners with at least 50 properties lose interest and depreciation deductions on covered rental homes. Institutional housing investors must track direct and indirect ownership, related-entity aggregation, and sale-year exceptions. The Treasury Department must issue anti-avoidance regulations and administer new interest and depreciation disallowance rules. Tax advisors for rental portfolios must restructure compliance and sale planning around qualified buyers and excluded properties.

Key Provisions

• Disallows interest deductions for disqualified owners of at least 50 single-family residential rental properties.
• Disallows depreciation deductions for those owners on covered single-family rental property.
• Provides sale-year exceptions only for sales to owner-occupants or qualified nonprofit affordable-housing organizations.
• Requires Treasury anti-avoidance regulations and excludes LIHTC property plus newly built or never-occupied acquired property from the covered property definition.