HOMES Act Targets Landlords with 50+ Properties, Stripping Key Tax Breaks on Rental Homes

The Houses Over Middle-Class Exploitation Schemes Act, or the HOMES Act, is a direct hit on large-scale single-family rental property owners. In plain terms, this bill eliminates two massive tax advantages—the ability to deduct interest paid on loans and the ability to claim depreciation—for any entity that owns 50 or more single-family rental homes.

Who Gets Hit: The 50-Property Rule

This bill defines a "disqualified single family property owner" as anyone or any entity that owns 50 or more single-family residential rental properties. Crucially, the bill includes anti-avoidance rules: you can’t just split up your 51 houses among three different LLCs to duck the limit. If those companies are related under existing tax law, they’ll be counted as one owner, keeping the focus squarely on institutional investors and large property management groups. For these larger owners, any debt taken out or property placed in service after the bill becomes law will lose those two major tax shields.

The End of Interest and Depreciation Deductions

For the affected owners, the changes are brutal. First, under Section 2, they can no longer deduct the interest they pay on mortgages or loans used to finance these rental properties. Second, under Section 3, they lose the ability to claim depreciation write-offs on these homes. These two deductions are fundamental to the financial model of real estate investment, allowing investors to offset rental income. Losing them means that the taxable income for these large landlords skyrockets, significantly increasing their operating costs overnight.

Think about what this means for the bottom line. When a large investment firm buys a $400,000 house to rent out, they rely on deducting the mortgage interest and taking depreciation (a non-cash expense) to make the numbers work. If those deductions vanish, their cash flow takes a massive hit. The big question is: will they eat the cost, or will they pass it on to renters through higher monthly payments?

The Escape Hatch: Selling to Homeowners or Nonprofits

There is one major exception to these new restrictions, and it’s clearly designed to push properties back into the hands of owner-occupants. The ban on claiming interest and depreciation is lifted only in the tax year the property is sold—but only if that sale is made to two specific types of buyers: an individual who will use the property as their main home, or a qualified nonprofit organization focused on affordable housing.

This creates a strong incentive for large landlords to sell off their inventory, especially if they are already struggling with the increased tax burden. For an individual family looking to buy their first home, this could mean more inventory coming onto the market, potentially easing competition from institutional buyers. For affordable housing groups like community land trusts, this opens a door to acquire properties at a time when large investors might be desperate to offload them to gain a final tax break.

What’s the Real-World Impact?

This bill is a powerful regulatory tool aimed at disrupting the business model of large-scale, institutional landlords who have been criticized for driving up single-family home prices. If you’re a tenant in a home owned by one of these massive companies, you might see rent increases as they try to cover their newfound tax liabilities. If you’re a prospective homeowner, you might eventually see more houses available for sale, though the immediate effect could be market turbulence as these large entities adjust their strategies. The HOMES Act doesn't directly cap rents or lower housing costs, but it makes it significantly less profitable for the biggest players to hold onto single-family homes purely as tax-advantaged assets.