Those Neglected Issues

It isn’t simply that our attention is consumed by the daily obscenities of the Trump administration–the increasingly overt and unapologetic racism, the economic damage, the assaults on the rule of law. Reeling from the daily headlines and trying to stem the progress of MAGA’s anti-Americanism takes up most of our policy bandwidth, meaning that we neglect the large number of important issues that we ought to be addressing.

One of those issues is America’s housing crisis.

I have previously posted about various elements of that housing crisis--including out-of-state buyers of homes (My own city, Indianapolis, is now first in the nation for out-of-state ownership of rental property, but such ownership is a real problem in most cities.) More recently, I’ve posted about the escalating rate of evictions, also acute locally, and about the laudable effort by the genuinely religious folks in GIMA-The Greater Indianapolis Multifaith Alliance– to provide permanent housing and supportive services for individuals experiencing chronic homelessness through the Streets to Homes initiative.

Local efforts are important, but housing problems are national. A recent article in The Atlantic took an in-depth look at the extent to which private equity has changed the housing market.The article begins with a recitation of the problem: the country is short by approximately 4 million housing units, and the shortage is most severe in areas like starter homes, moderately priced apartments in low-rises, and family-friendly dwellings.  Among the increasing numbers of Americans who are renting, half of them are spending more than a third of their income on shelter, and in numerous markets, wages are insufficient to cover the rent of a two-bedroom apartment.

It isn’t just private equity, of course. Multiple factors contribute to the housing crisis, including but not limited to restrictive zoning codes, excessively bureaucratic permitting processes, and the escalating costs of labor and building materials. But the problem has been significantly aggravated by the aggressive entry of private equity into the housing market. As the article reports, “Institutional investors have bought up hundreds of thousands of American homes since the start of the coronavirus pandemic, outbidding families and pushing up rents.”

And it matters.

The Lincoln Institute of Land Policy and the Center for Geospatial Solutions published a report showing that corporations now own a remarkable one in 11 residential real-estate parcels in the 500 urban counties with data robust enough to analyze. In some communities, they control more than 20 percent of properties….These investors are pouring the most money into “buy low, rent high” neighborhoods: communities, many of them in the South and the Rust Belt, where large shares of families can’t afford a mortgage.

These private equity firms are buying up huge numbers of starter homes in low-income, minority neighborhoods, intensifying America’s racial wealth and homeownership gaps. The article notes that, in Cleveland, corporations own 17.5 percent of residential real-estate parcels, primarily in low-income areas. In the city’s predominantly Black neighborhoods, just one in five homebuyers in 2021 took out a mortgage, and in 2022, owner-occupants made just 13 percent of purchases. In a nearby majority-white neighborhood, owner-occupants bought more than 80 percent of homes that same year. In affluent White neighborhoods,  out-of-state corporations owned less than 1 percent of residential parcels.

Private equity isn’t to blame for high housing costs in desirable cities and neighborhoods, but it is distorting markets in low income communities, and pushing thousands of Black and Latino families off the property ladder. And to add insult to injury, renters of these investment properties often find that corporate owners are more prone to skimping on maintenance and upkeep and quicker to evict their tenants than local, individual owners.

Policymakers have advanced a variety of proposals to address the problem. Washington State is debating a proposal to cap the number of units that a corporation can own, but that approach would simply invite investors to set up multiple entities to purchase properties. Other policymakers suggest classifying firms that own more than 10 properties in a given jurisdiction as commercial owners, subjecting them to higher property-tax rates and higher taxes on their capital gains, but there are obvious “work-arounds” to that approach as well.

The most straightforward remedy would be a dramatic expansion of the country’s housing stock–especially the supply of affordable housing. During the presidential campaign, Kamala Harris released a detailed plan to improve housing affordability and increase housing supply, but voters chose to ignore boring proposals aimed at ameliorating real problems, instead choosing to install a bloviating ignoramus who gave them permission to publicly express their bigotries.

I wonder if We the People have learned our lesson…