Democratic lawmakers are studying whether the American dream of a suburban home and a white fence is being taken over by large institutional investors, costing workers a chance to own a property.
The Financial Services Subcommittee of the House of Supervisors and Research held a virtual panel on Tuesday, entitled “Where have all the houses gone? Private Equity, Single Family Rentals, and America’s Neighborhoods,” to investigate the impacts of companies involved in what Representative Al Green, chairman of the subcommittee, called a “mass predatory purchase.”
Shad Bogany, a real estate agent and advocate who testified before the committee, also said institutional investors are “creating a generation of tenants who will lose the benefits of home ownership, the ability to create wealth and stabilize communities.” .
“Congress, we need you to act,” Bogany said.
Corporate ownership of single-family rental housing, which accounts for about a third of the country’s rental housing stock, has increased significantly since the 2008 financial crisis, when companies came in to buy foreclosed properties, according to a memorandum from committee. And the third quarter of 2021 marked the fastest annual increase in corporate ownership in 16 years, according to the memorandum. In addition, as the housing market warmed and prices rose, investors had the advantage of being able to buy homes with cash, outperforming early buyers with lower incomes.
““After extensive research on this practice, we have discovered that private equity firms have purchased hundreds of thousands of single-family homes and placed them on the rental market.””
In the Atlanta metropolitan area, 42.8% of homes for sale went to institutional investors in the third quarter of 2021, while investors bought 38.8% of homes in the Phoenix-Glendale area -Scottsdale during the same period, said the committee’s memorandum.
“After extensive research on this practice, we have found that privately held companies have purchased hundreds of thousands of single-family homes and placed them on the rental market,” said Green, a Democratic congressman from Georgia. during the hearing Tuesday.
“This removes from the housing market homes that would otherwise have been bought by individual homeowners,” he added. “These corporate buyers have tended to target low-cost start-up homes that require limited renovation; these houses would probably have been bought by first-time buyers, low- and middle-income home buyers, or both. “
Homes, Green said, are often found in communities with above-average populations of people of color. For example, the average population of the top 20 zip codes of five major investors is about 40 percent black, although blacks make up only 13.4 percent of the total U.S. population, according to the survey. Invitation Homes, INVH,
American Homes 4 Rent AMH,
FirstKey Homes, Progress Residential and Amherst Residential, as well as an analysis of government data, according to the committee’s memorandum.
“The average population of the top 20 zip codes of five major investors is about 40% black, although blacks make up only 13.4% of the total U.S. population.”
Republicans, however, said during the hearing that the Biden administration was to blame for rising prices and accused Democrats of making a scapegoat on Wall Street while trying to distract people from the worst inflation in decades.
“Today, Americans are hit in the face with 8.6% inflation,” said Rep. Tom Emmer, a Minnesota Republican congressman. “When our voters go to the grocery store, to the gas station, or when they look for housing, the serious failure of Congress’ policy of ‘spending your way to prosperity’ begins to sink.”
Institutional investors still account for a relatively small share of the single-family home rental market, Emmer said. And Jenny Schuetz, a senior member of the Brookings Institution who testified Tuesday, also noted that investors are a symptom, rather than the cause, of housing accessibility problems. After all, investors are being driven to rented family homes due to existing demand and limited supply, while burdens on the cost of housing among low-income people have been rising for decades.
“Private equity firms and other institutional investors benefit from a reduced supply of housing, but they did not create the problem. Local governments in the United States have adopted policies that make it difficult to build more homes where people want to live.” , said Schuetz. “Zoning rules that limit the construction of small, moderately priced homes are politically popular among existing homeowners and local elected officials.”
““Zoning rules that limit the construction of small, moderately priced homes are politically popular among current homeowners and local elected officials.””
When asked for comment, Invitation Homes, American Homes 4 Rent and FirstKey Homes spokespersons referred MarketWatch to a statement from National Rental Home Council executive director David Howard. On behalf of the single-family home rental industry trade association, Howard noted that prices for all types of homes were rising due to demand and scarce supply of units, and said that “single-family rental housing providers are not influencing the premises and dynamics of the domestic housing market, as the data have clearly shown.”
“As they constantly show multitude of data, the answer to the question posed in this week’s hearing title, ‘Where have all the houses gone?’ is that they were never built, “Howard said in the statement. “In simple terms, housing supply in the United States has not kept pace with demand.”
The National Rental Home Council and large companies have worked with the committee, even to provide data, and continue to welcome “the opportunity to work with bipartisan policymakers on meaningful solutions to the housing supply challenges they promote. the dignity of rent and preserve the choice of housing. ”Howard said.
Regardless of how the real estate market reached its troubled state, experts and advocates largely agreed that tenants were facing higher prices. Rents are rising nationwide and prices have risen faster for single-family properties compared to apartments. Rents for single-family homes increased 14% in March 2022, marking the 12th consecutive month of record growth. according to a recent report from the Harvard Joint Center for Housing Studies, with the largest annual increases in Miami at 39%.
The impacts of these rent increases could be long-lasting, Bogany said, noting that tenants in black communities could be driven to cheaper areas with more poverty and crime, or even become homeless. , rather than having the opportunity to generate intergenerational wealth through home ownership. Corporate landlords also require higher credit scores from tenants, which can negatively affect people of color, Bogany said.
“By increasing the percentage of tenants in the black community, institutional investors are creating a modern parking lot colony governed by 21st century Jim Crow laws,” Bogany said.
“It reminds me of the story of my ancestors more than 100 years ago: you live on earth, you have a place to stay, but all your work and your money will go to benefit someone else,” Bogany added.
Speakers proposed multiple solutions to the problem: a landlord registry to provide transparency on rental property ownership in America, a database of consumer complaints to track landlord actions, tenant protections against eviction , investments in affordable housing and more.