Wall Street and Big Corporations Go Rental and It Means Trouble

ACORN Home Savers Campaign Crew in Atlanta gets organized to hit doors in metro Atlanta suburbs
l to r: Fred Brooks, Karimah Dillard, Marcus Brown, and Lou Sartor

Atlanta   Marcus Brown from North Carolina is new to the Atlanta area, and he has yet to fall in love with it. Marcus was my navigator as we teamed up to hit the doors on rent-to-own contract buyers in metro Atlanta as one of ACORN’s Home Buyers Campaign teams visiting throughout the area. I’ve hit a lot of doors in urban America and around the world. I’ve even hit a good number in rural areas on different campaigns and organizing drives. On union organizing drives I always knew we were in trouble when I drew names in the suburbs of this city or that, but I would never put my name on the top of any master list as a suburban organizer, but that may have to change. Marcus and I were in for a learning experience and some miles to drive it turned out as we plowed through our list. We were a half-hour outside of Atlanta working our way in through one small community after another, and we were in grassy yards, and cookie-cutter, aluminum siding suburbs, and never saw a white family all day. We also saw more “for rent” signs than we saw “for sale” signs, and, frankly, we didn’t see many of either in this red hot real estate market.

But, we started connecting the dots as we looked at the cases in point.

Freddie Mac announces a billion dollar fund to back up efforts to create rental housing last week. The article was scratching its head from sentence to sentence.

 

Even while we were walking up to the doors in Atlanta suburbs, I had an article I had pulled out of the Wall Street Journal in my pocket entitled “Wall Street is the New Suburban Landlord.” In the wake of the housing crisis a lot of Wall Street money and big time realty firms are specializing in renting single family homes in the suburbs. They are betting that in the wake of the Great Recession and housing implosion of 2008, the bloom is off the rose of housing ownership for many families. They estimate that more than 200,000 homes have been bought in a $40 billion spree of bottom fishing from the foreclosure crisis and flipping the homes into rental units. Where the foreclosure epidemic went viral in the South and Southwest, they fed at that trough.

In Atlanta, we were at ground zero it would seem. In a June 2017 estimate of the top markets for the largest single-family-home rental companies, Atlanta led with 24,075 homes on offer, Tampa-St. Pete had over 14,000, Phoenix, over 13,000, Miami almost 11,000, Charlotte right behind at 10, 570, Orlando over 9000, Dallas almost 9000, and Houston over 8000. You get the picture.

This also dovetails with a research report written by Elora Raymond at the Atlanta Federal Reserve Bank that found that the eviction rate in greater Atlanta was over 20% for rental units, and, hear the drumbeat now that will surprise no one, corporate owned rental properties evicted tenants at a significantly higher rate than privately owned landlords. She also noted that eviction rates are increasing significantly in markets all over the country.

Connecting the dots leads to some frightening conclusions where vacancy rates are low in hot markets and affordable housing is a mirage for working and lower income families. The business model depends on quick evictions and the extra cash from late payment fees as tenants try to scrounge to catch up with their landlords, who are now using the courts to pad their payments.

Just the kind of business that Wall Street would love obviously. But, just as we found on the doors, don’t think this is just an urban problem, it’s in the suburbs as well, and as gentrification has increased and rents have soared, many suburban neighborhoods are now populated with our families as well.

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Rising Rents are Squeezing Low-and-Moderate Income Families

New Orleans   The National Low Income Housing Coalition released its 2017 annual report, “Out of Reach,” looking closely at the impact of rising rent throughout the country and how it is pushing lower income and working families into untenable situations because the gap between rent and wages is widening. Millions of families are joining the great poet Langston Hughes by living his haiku: “I wish the rent were heaven sent.”

The gut punch of the report is plain and simple:

The 2017 national Housing Wage is $21.21 per hour for a two-bedroom rental home, or more than 2.9 times higher than the federal minimum wage of $7.25 per hour. The 2017 Housing Wage for a one-bedroom rental home is $17.14, or 2.4 times higher than the federal minimum wage.

State by the state, county by county, the story of this growing crisis is stark. The gap is the largest in a bunch of overwhelmingly “blue” states, which may be one of the reasons Congressional representatives are not running up the aisles and going from desk to desk with a Paul Revere warning call to “Help, the Landlord is Coming!” Those states with the largest gap between wages and what it cost to rent the average two-bedroom house are led by Hawaii, then Maryland, California, New Jersey, Vermont, Connecticut, Massachusetts, Maine, New Hampshire, and then Washington, D.C. I don’t need to tell you that this is aggregate data because you were already scratching your head when you didn’t hear New York, so yes, thanks to lower average rents upstate that offset the New York City metro area, they didn’t make the ten.

Sure enough when you look at the data even states with relatively lower rent still find that urban metropolitan areas like New Orleans, Houston, Miami, Salt Lake City, Dallas, Seattle, San Antonio, Anchorage, Chicago and elsewhere would require a minimum wage worker to labor 80 hours a week to find a one-bedroom place where they could live. And, yes, the Coalition’s point is not that everyone is working 80 hours to do so, but that if they were able to swing a place that is what it would take. The cold, bitter truth on the ground is that they cannot, which leads to overcrowding, homelessness, and embracing rent-to-own predatory contracts or whatever is available until the eviction notice comes.

Even the states where the average wage required to rent a two-bedroom house is relatively low, it’s still astronomical in terms of a family budget. Want a two-bedroom in Arkansas, then you need to make $13.72 per hour, the lowest wage to rent ratio in the country. Neighboring states are a good comparison with Mississippi at $14.84, Louisiana at $16.16, and Texas at 18.38. The lowest wage required after Arkansas is Kentucky at $13.95. The problem is obvious though. Wages are pretty much stuck at $7.25 in those states and too many of the big whoops in these states are fighting to keep wages that way.

As the report makes clear, it’s not for lack of working or lack of looking. Other “key findings” include:

Six of the seven occupations projected to add the greatest number of jobs by 2024 provide a median wage that is not sufficient to afford a modest one-bedroom rental home.

An extremely low income (ELI) household whose income is less than the poverty level or 30% of their area’s median cannot afford the average cost of a modest one-bedroom rental home in any state.

In no state, metropolitan area, or county can a full-time minimum-wage worker afford a two-bedroom rental home. In only 12 counties can a full-time minimum-wage worker afford a modest one-bedroom rental home.

It’s easy to see where this is going: bad to worse to crisis. I’m seems like we’re already there.

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