Washington state's housing crisis is real. High home prices, limited supply, and families squeezed out of homeownership. But the legislature's response in Senate Bill 5496 (E2SSB 5496) is a misguided overreach that tramples on free market principles and deters investment. E2SSB 5496, which prohibits large business entities owning more than 100 single-family homes and all "investment entities" from acquiring additional properties, is a textbook example of government intervention gone wrong. It violates core tenets of economic freedom, property rights, and market efficiency, ultimately harming the very residents it claims to protect.
E2SSB 5496 is anti-free market. Free markets thrive on voluntary exchanges where buyers and sellers determine prices and allocations without arbitrary government caps. By banning certain entities from participating in the housing market, the bill distorts supply and demand dynamics. Institutional investors, often scapegoated for rising prices, actually can play a crucial role in stabilizing markets. They provide liquidity, renovate neglected properties, and increase rental options in high-demand areas like Seattle, where holdings grew 31% in 2024. Capping their involvement isn't preservation, it's exclusionary protectionism that favors some buyers over others, echoing failed rent control policies that reduce overall housing stock.
The anti-investment stance is equally glaring. Investment in real estate drives economic growth, creating jobs in construction, maintenance, and related industries. Yet this bill penalizes success: Entities with large portfolios face outright bans, while "investment entities" like real estate investment trusts (REITs) are barred entirely, regardless of size. This sends a chilling message to capital providers, stay out of Washington. Exemptions for nonprofits or new construction are narrow loopholes that ignore broader realities. Why punish efficient investors who pool resources to build wealth for retirees and pension funds? Such restrictions could scare off billions in potential investment, exacerbating the supply shortage the legislature decries. Median home prices rose 74% from 2018 to 2024 not because of investors, but due to regulatory barriers like permitting delays and zoning restrictions that lawmakers have failed to address meaningfully.
Additionally, the bill erodes property rights by integrating violations into the Consumer Protection Act, imposing up to $100,000 fines per offense and forced sales. This isn't consumer protection; it's state-sanctioned coercion. Sellers and brokers are shielded, but buyers are criminalized based on arbitrary thresholds. Enhanced penalties for "demographic impacts" introduce vague, politicized enforcement, risking discriminatory application and chilling free association.
In a free society, government should facilitate markets, not micromanage them. E2SSB 5496 does the opposite, prioritizing populist rhetoric over sound economics. It won't lower prices, it'll reduce competition, stifle innovation, and limit choices. Policymakers should reject this bill and focus on real solutions: streamlining permits, reducing taxes on builders, and incentivizing private investment. Washington's future depends on embracing free markets, not fearing them.
