Tag Archives: Home Ownership

Wall Street is Crippling the Single-Family Housing Market

New Orleans        The financial meltdown in the real estate market of 2007, marked by foreclosures triggered by speculation and broker scams and wiping out the citizen wealth of millions of families, continues to carry a legacy of community and family disasters.  Once again Wall Street and the unregulated, robber baron private equity industry is the face of more disaster in communities.  As part of the ACORN Home Savers Campaign, we joined experts from the Federal Reserve Bank and elsewhere last fall in Memphis at the Hooks Institute to present the evidence of their attempt to corner huge segments of the housing market in Memphis, leading to high eviction rates and disastrous and predatory market concentration.  All of which made reading “The Great Wall Street Housing Grab” by Francisco Mori, a very painful, déjà vu experience.

The backstory is well-known.  Private equity companies, led by Blackstone, took advantage of the glut of foreclosed properties among single-family homes in working class and moderate communities and suburbs to buy properties in bulk at fire sale prices.  Using subsidiaries, like Invitation Homes, which has made them billions as they sold out their interests, they consolidated market share making the homes into rentals units, attaching predatory fees and practices with low maintenance, and bleeding the neighborhoods.

Peter Kuhns, a former ACORN California organizer is quoted early in the report talking about the impact on the greater Los Angeles area where he has long worked, most recently as regional director for the Alliance of Californians for Community Empowerment (ACCE), the California ACORN successor.

“Neighborhoods that were formerly ownership neighborhoods that were one of the few ways that working-class families and communities of color could build wealth and gain stability are being slowly, or not so slowly, turned into renter communities, and not renter communities owned by mom-and-pop landlords but by some of the biggest private-equity funds in the world.”

The stories in the article were horrific about the exploitation of tenants, including in some cases the former owners of the same homes who had been swept up in foreclosure during the crisis. Their efforts to bribe and induce activists to coverup their bad behavior was shocking.

More concerning is the predatory way they have concentrated in various markets and among minority areas.  Our colleague, Elora Raymond, at the Atlanta Federal Reserve found that “a third of all Colony American tenants in Georgia’s Fulton County received an eviction notice in 2015.  One of the strongest predictors was the concentration of African-Americans in their neighborhood.”  A Los Angeles research effort found that neighborhoods where 15% of the homes “are owned by large single-family-rental companies have an average black population of 30 percent.”  It’s not hard to follow this trail!

Another researcher from Cornell found that “Institutional investors own 11.3 percent of single-family rental homes in Charlotte, 9.6 percent in Tampa and 8.4 percent in Atlanta.”  Add Memphis to that list, and perhaps a city near you.  A California study found that “if single-family rental ownership in a neighborhood went up by 10 percent, property values went down by 4 to 7 percent.”

Meanwhile the private equity folks are securitizing these properties in large tranches.  What could go wrong?  Where have we seen this movie before?

We need to block the tracks and stop this train before it runs over our neighborhoods and cities.

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The Good and Bad of Declining Home Ownership

New Orleans       Home ownership rates are declining globally for the first time in one-hundred years, while tenancy is rising.  I have mixed feelings about these trends.

On the one hand, I hope that greater numbers of tenants equals more power in the bargains with landlords, and look to Germany and the rent freezes in Berlin with particular interest.  The optimist says that more tenants means that there will be accelerated construction of decent and affordable units providing better units.  Sadly, I see no sign of that in either Canada, the United States, Ireland, or the United Kingdom.  Construction seems geared to higher income tenancy and condominium purchases, not something that benefits low-and-moderate income tenants and their families caught in the cost squeeze of higher rents.  The Economist touted co-living spaces as an alternative for such families, even as they celebrate the decline in homeownership, but too much of co-living sounds like the familiar marketing strategy for singles-only apartment complexes, except that co-living lacks the swimming pool and your own kitchen.  The price might be right, but I’m not feeling the love.  In the small sample of our 30s-aged organizing staff in England, two have moved to buy a home when they thought they had the chance, and their relationships were stable.

On the other hand, as I worry about the decades long emphasis that ACORN made for families to achieve ownership and the rightness of our emphasis from cooperative spaces in New York City to single-family homes in Phoenix and Houston, I worry that I don’t see any other asset class that allows long-term, multi-generational security and citizen wealth that could serve as a replacement for ownership strategies.  Rent-controlled apartments in New York City offer some of that, but that’s the exception not the rule.  I joked last year with a talented former organizer who bolted our staff in Philadelphia decades earlier when a rent-controlled unit came available in the building where he was raised in NYC, but I understood fully.

Depressingly, I recently finished reading Saving America’s Cities, the story of urban renewal chief Ed Logue in New Haven, Boston, and the Bronx in the heyday of government and foundation financing for housing and development projects for low-and-moderate income communities.  In that brief window of the 60s and 70s before Republican block grants and CDBG funds, housing was built, but at a price.  The author Lisbeth Cohen notes that HUD insisted that buildings be segregated by income.  Logue and his team, despite their personal progressivism, populated their projects at 70% white to 30% minority, worshiping on the alter of stability for these rental developments.  Redlining was curtailed in homebuying but slips into publicly supported housing developments.

You have to have a horse to beat a horse, and as much as we push and demand for more and better rental units, we have to have something that provides potential security for families to compete against the goal, and increasingly the dream, of home ownership.  As the news again heralds more Trump efforts to reduce what’s left of the safety-net, it seems we are forcing people to believe in a broken-down nag, when we need a thoroughbred to win the race.

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