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…
Excellent and timely letter, Sheila.
The take over of America by greedy, wealthy and self centered politicians and corporations is the core problem facing every aspect of America society.
We know it, how do we change it? Vote Democratic!
Well, if you spend any time on X, you’d conclude that Americans are still in love with Trump or at least promote that love for a fee. Usually, it’s hand in hand with the love of Israel. This is not a coincidence.
Our billionaires shouldn’t be allowed to get tax breaks when we have so much homelessness. Congress needs to set up triggers that open or close the doors for bailouts and any other tax-lowering schemes to the wealthy until fundamental issues like homelessness have been rectified. However, all our representatives are cowards, so that’s a problem.
If I remember correctly, BlackRock is linked to institutional buyers of single-family homes and apartments. They pool all those homes and sell to investors as mutual funds. The reason they may be targeting minority communities is gentrification. I haven’t looked into housing that much.
I know our Republican mayor is building low-income apartments and high-dollar single-family residential homes. Meanwhile, we just lost another major employer, so I have no idea who would want to live in our community when there are no jobs.
And, it’s going to get worse as Trump’s Big Shitty Bill kicks in on January 1st and those 1 trillion dollars of healthcare cuts kick in, mainly in Medicaid and Medicare. IU Health is laying off its entire addiction recovery program.
And thanks to Mike Johnson, there will be no subsidies for ACA-insured. But, like Trump, he’s on social media, blaming the Democrats. In fact, all the Republicans are blaming Biden and the Democrats for all the problems they created.
p.s. BlackRock’s CEO, Larry Fink, met with Zelenskyy to see if he could cut a deal for peace with the Russians. Something tells me Larry wants to invest in Ukraine before it becomes Russian territory.
A big problem in both the USA and Canada is software that landlord’s use to set their rental prices as high as they can. One of the biggest culprits is RealPage’s YieldStar software. (See https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent) The software allows landlords to collude in setting their rents. So, they can maximise prices and make them rise as quickly as possible.
Canada had been investigating the company (among others) but concluded in November that its use wasn’t widespread enough to substantially harm competition.
Yet. It’s just a matter of time, though.
EVERYTHING Republicans (and private equity firms) touch dies. These insane, greedy, stupid and racist idiots are killing our country one quarterly report at a time.
This is what believing the trickle-down lie, the deregulation of banks lies and the blind stupidity of voting against ones own best interest for racist and non-economic reasons gets us. Marx was right, and Republicans are racing to that end game for our nation and society. Somebody I know wrote a book titled: “Racing to the Brink: The End Game for Race and Capitalism”.
“Bloviating ignoramus”…nice ring to that!
One other problem is that Indiana is one of only 6 states that has no renter protection laws to prevent landlords from evicting tenants if they complain of problems like mold, rodent infestations, etc. And, two of those states allow local municipalities to implement their own rules to protect tenants.
“gen·tri·fi·ca·tion
/ˌjentrəfəˈkāSHən/
noun
1.
the process whereby the character of a poor urban area is changed by wealthier people moving in, improving housing, and attracting new businesses, typically displacing current inhabitants in the process:
“an area undergoing rapid gentrification”
This is another problem which increases out of state ownership of properties which forces residents and businesses off of their properties with no aid for the low-income owners or the renters, who are often elderly, disabled, too often minorities, and too often resulting in adding to our homeless numbers. Blocs of homes in low income areas are purchased by out of state developers who never bother to develop properties into livable conditions and infrastructure is ignored due to declining conditions of the properties. Unless the ridiculous Republican upheld process; when a person buys a property at a tax sale, they are only paying off the tax lien for one year before actually owning the property. So the City no longer owns it, the lien owner doesn’t own it meaning no one is responsible for the declining condition or who moves in as squatters. Often drug dealing goes on in the property and how often do we see these vacant residences going up in flames on the morning news?
“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.” UNENFORCED zoning codes is a major problem allowing entire residential areas to decline; owners raise rents to cover maintenance or repairs or renters move out leaving another empty property to decline.
The Goldsmith decision increasing the Canal Walk downtown presented a major problem due to residents and businesses of 50 years of ownership did not want to leave; Goldsmith did not want transparency of their legal rights to be make public. In my position in Department of Metropolitan Development (and I was never told what my position was with the conglomeration of work assigned to me) brought residents and attorneys to the front desk asking for JoAnn Green who was known to provide their legally requested information (called the Sunshine Law). One clever attorney applied in the court system to have me assigned the job as his secretary to work for him to prevent the takeover of one business. My panicked trip to City Legal quickly ended that problem. The Geist area report to me (as Lawrence Township Zoning Ordinance secretary to the Manager) when a resident from Turkey announced he was building 4-5 $40,000 homes for his workers to live in, workers being family from Turkey he would be transporting to the U.S. I repeatedly reported and reminded my Manager of the frequent calls demanding action. Residents began calling in a panic when the Turk had poured the footings for the homes; my repeated reports to my Manager and his Supervisor, neither of which knew anything about Zoning Ordinances had ignored for weeks. Getting no response from either that morning, I made the decision to give every resident who called the home phone number of their City County Councilor. Within an hour she was seen running down the hall in the City County Building into DMD demanding immediate stop action and got it. It was a frightening time for me to follow the Rule of Law in the Goldsmith administration; their constant stress to drive me out took them 2 years, 3 months and 11 days to destroy my health, per my three doctor’s diagnoses. I would do it again.
“Those Neglected Issues”
Thanks for writing about the institutional buyers of housing. Private equity whose decisions are made far distant from local markets, impact property values -raise them when they buy, increasing property valuations for
taxation and, lower house prices with wholesale selloffs.
Media, for example, Face the Nation’s Margaret Brennan, interview prominent economists like Alan Goolsbee to discuss housing prices and neither identifies the affect of private equities’ portfolio of houses on the market. There is no reason to be surprised. Goolsbee signed a public letter along with 3 other professors (identified their college employers to establish credibility) that criticized Bernie Sanders’ prescription for an economy for the 90%.