HOMES Act

The HOMES Act would impose new tax penalties on large owners of single-family rental homes. Specifically, it would deny both interest deductions (Section 163) and depreciation deductions (Section 167) for “disqualified” single-family property owners—defined as taxpayers who own 50 or more single-family residential rental properties (directly or indirectly). The bill uses aggregation rules so related entities are treated as one taxpayer for purposes of reaching the 50-property threshold. Some properties are excluded from counting toward the threshold (for example, properties constructed by the taxpayer or acquired before any occupancy, and properties that qualify for the low-income 42 housing credit). There are limited exceptions to the denial, notably in the year of sale if the property is sold to an individual for use as a principal residence or to a “qualified nonprofit organization” (with further definitions of what qualifies as such an organization). The measure also prescribes related rules to prevent avoidance, and it applies to indebtedness incurred after enactment (for interest) and to property placed in service after enactment (for depreciation). In short, the bill targets large-scale owners of 50+ single-family rentals by removing the tax benefits of interest deductions and depreciation, with narrow exceptions around specific sales to individuals or nonprofit housing organizations. The intent appears to be to curb the tax advantages enjoyed by big landlords and to redirect certain sales toward affordable housing-focused nonprofits.