Tag Archives: Home Ownership

Housing Shortages and Rental Squeezes

housing crisis, home owner, gentrification, rent increase

March 4, 2021

New Orleans      One story after another in the mainstream media is now focusing on the shortage of homes for sale in city after city.   The curious American dream of homeownership is another endangered species it seems, while at the same time the corporate and private equity grip on rental properties as cash cows with manageable risk is accelerating. Families may not be able to buy affordable houses, but the big whoops is sweeping them up still in huge tranches.

The reasons or rationales for the shortage of homes for sale are numerous. Some point to the delays still lingering from the 2007-2008 housing bubble collapse. The pandemic is a popular culprit. Older home owners, normally a source of homes for sale as they transition to smaller properties or other forms of care are hanging on in fear of nursing home morbidity and resistance to strangers, including real estate agents, tramping through their houses. Others are staying put because they are unsure whether more remote work is here to stay, or this is all temporary, but either way they are standing pat. The moratorium on foreclosures and increased forbearance also may mean that houses even with nonperforming loans are also not coming on the market.

Less often cited, but invariably a huge factor, is the capture of more than five million homes by bottom feeders and private equity after the Great Recession and, after a splash of paint and minor repairs, repurposed as rentals. These companies have made billions, spun off their creations, and now are even consolidating. This area of investment is now seen as so lucrative that recent reports saw a merger of sorts between Roofstock, a rental agency, and a giant commercial real estate company to take the phenomenon internationally.

Needless to say, the shortage of affordable homes, available to low-and-moderate, working class families is even more intense. Companies with various intentions are trying to see if they can reverse the trend and flip rentals into home ownership, even though some of these schemes are flatly predatory.

This is a situation that is way too close to home. We see prices hitting ridiculous levels in our own neighborhood in New Orleans, already under intense gentrification pressure. Simple shotgun doubles are going for $5 – 600,000, the same houses that fifteen years ago before Katrina would have raised eyebrows with even a $150,000 price tag. In Little Rock, friends put their house up for sale and had a half-dozen offers within hours, including one for more than they had asked. A year ago, the contract to buy had failed, but now, there’s a line.

Meanwhile, rents are going up along with home prices and for all of the discussion of eviction moratoria and foreclosure delays, no one seems to have a clue on where people are going to go. There also seems to be no plan on the national level to see these circumstances as linked, nor is there any loud drumbeat to create more affordable homes and apartments for families who are increasingly desperate to find them. Talk is cheap, but these programs will be costly. Nonetheless, now is the time to move forward, while interest rates are low and before big whoops drain the housing market dry.


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.