The housing crisis in the United States continues to rage on, with rents rising to historic levels across the country, especially for single family rentals (SFR). Unfortunately, not all Americans are impacted equally, with communities of color seeing the most egregious effects of the current housing crisis, according to an article published by Housing Wire.
Housing Wire, July 8, 2022: Wall Street SFR firms accused of stripping equity from neighborhoods
The article highlighted data from a recent House Subcommittee on Oversight and Investigations report that looked at the largest institutional owners of SFR homes.
Unsurprisingly, the data show the five largest SFR companies purchased homes in neighborhoods with significantly larger Black populations than the national average. Specifically, Committee staff found that 40 percent of these acquisitions were in majority Black counties—considerably higher than the overall population. The average population represented across the five companies’ top zip codes was 40.2 percent Black, which is astonishingly more than three times the Black population in the entire United States.
Other large findings the report revealed were that:
- “The companies also tended to purchase homes in areas with lower home prices but higher rents. ‘The average median gross rent in the five companies’ 20 top zip-code tract areas ($1,259) was approximately 13% above the national median ($1,096),’ the House committee’s report states.”
- “The companies also increased fees per lease by 40% over the survey period — from $147.20 in 2018 to $205.29 in 2021.”
The subcommittee report culminated in a live hearing which invited witnesses to testify on the issue of SFR homes and corporate ownership. The hearing was titled “Where Have All the Houses Gone? Private Equity, Single Family Rentals, and America’s Neighborhoods.”
PESP Executive Director was invited to testify and shared statistics on the growing ownership of private equity firms in the SFR housing market.
“Just over a decade ago, no single landlord owned more than 1,000 homes,” said Jim Baker, executive director of the Private Equity Shareholder Project, one of five witnesses who testified before the subcommittee on June 28. “Now the top five [institutional SFR players] … together own or operate almost 300,000.”
PESP has served as a leader in researching the negative effects of private equity company ownership in the housing market. A recent report by PESP, Action Center on Race and the Economy (ACRE) and Center for Popular Democracy described how housing in the U.S. has become increasingly consolidated into the hands of corporations, while rents and home prices have skyrocketed to unprecedented levels.
Sophia Lopez, deputy campaign director of housing at ACRE, also testified at the subcommittee hearing. Housing Wire described her testimony as “blunt in her assessment of the problem, and the solution.”
“Make no mistake about it: These companies engage in equity stripping,” she said, referring to institutional players in the SFR market. “…These companies make the wealth gap worse because they buy homes in communities [including predominantly Latino or Black neighborhoods] … and transfer [that wealth] to shareholders.
“That’s the exact same thing that happened during the foreclosure crisis [that marked the 2008 housing-market collapse]. We need to do everything that we can to make sure that that wealth stays local and continues to support [the local] community.”
As the Housing Wire article title asserts, the housing crisis affects communities of color much more intensely. The article even goes so far as to say that “Single-family rental boom confronts blowback…for enabling white gentrification of minority neighborhoods.”
In his closing testimony, Jim Baker proposed a detailed list of policy actions that can take place to expand transparency of corporate landlord practices and provide relief to the minority communities that are hurting.
“We believe policymakers should take steps to protect tenants and homebuyers from predatory behavior in the housing market,” Baker said, “and limit corporate control over our homes:
“Transparency into corporate landlords and practices:
- The widespread use of shell companies has made it difficult for tenants to know who owns their home. City, state, and national government should require corporate landlords to disclose beneficial ownership through landlord registries.
- Create a corporate landlord consumer complaint database similar to the CFPB consumer complaint database so residents have a forum to get responses to complaints and there is a means to track landlords’ practices.
- Require large corporate landlords to provide regular disclosures of numbers of eviction filings and evictions as well as average rent increases.
“Enact broad tenant protections:
- Enact Just Cause Eviction legislation requiring corporate landlords to have good cause for filing to evict residents.
- Implement and fund Right to Counsel laws, so tenants facing eviction are guaranteed legal representation and a fair chance to stay in their homes.
- Limit annual rent increases by corporate landlords, including mandatory fees, to 3%.
- Eliminate state preemptions that obstruct localities from strengthening renter protections.”