Rent is skyrocketing and home buying is out of reach for millions. One big reason why? Wall Street.
Hedge funds and private equity firms have been buying up hundreds of thousands of homes that would otherwise be purchased by people. Wall Street’s appetite for housing ramped up after the 2008 financial crisis. As you’ll recall, the Street’s excessive greed created a housing bubble that burst. Millions of people lost their homes to foreclosure.
Did the Street learn a lesson? Of course not. It got bailed out. Then it began picking off the scraps of the housing market it had just destroyed, gobbling up foreclosed homes at fire-sale prices — which it then sold or rented for big profits.
Investor purchases hit their peak in 2022, accounting for around 28% of all home sales in America.
Home buyers frequently reported being outbid by cash offers made by investors. So called “iBuyers” used algorithms to instantly buy homes before offers could even be made by actual humans.
If the present trend continues, by 2030, Wall Street investors may control 40% of U.S. single-family rental homes.
Partly as a result, homeownership — a cornerstone of generational wealth and a big part of the American dream — is increasingly out of reach for a large number of Americans, especially young people.
Now, Wall Street’s feasting has slowed recently due to rising home prices — even the wolves of Wall Street are falling victim to sticker shock. But that hasn’t stopped them from specifically targeting more modestly priced homes — buying up a record share of the country’s most affordable homes at the end of 2023.
They’ve also been most active in bigger cities, particularly in the Sun Belt, which has become an increasingly expensive place to live. And they’re pointedly going after neighborhoods that are home to communities of color.
For example, in one diverse neighborhood in Charlotte, North Carolina, Wall Street-backed investors bought half of the homes that sold in 2021 and 2022. On a single block, investors bought every house but one, and turned them into rentals.
Folks, it’s a vicious cycle: First you’re outbid by investors, then you may be stuck renting from them at excessive prices that leave you with even less money to put up for a new home. Rinse. Repeat.
Now I want to be clear: This is just one part of the problem with housing in America. The lack of supply is considered the biggest reason why home prices and rents have soared — and are outpacing recent wage gains. But Wall Street sinking its teeth into whatever is left on the market is making the supply problem even worse.
So what can we do about this? Start by getting Wall Street out of our homes.
Democrats have introduced a bill in both houses of Congress to ban hedge funds and private equity firms from buying or owning single-family homes.
If signed into law, this could increase the supply of homes available to individual buyers — thereby making housing more affordable.
President Biden has also made it a priority to tackle the housing crisis, proposing billions in funding to increase the supply of homes and tax credits to help actual people buy them.
Now I have no delusions that any of this will be easy to get done. But these plans provide a roadmap of where the country could head — under the right leadership.
So many Americans I meet these days are cynical about the country. I understand their cynicism. But cynicism can be a self-fulfilling prophecy if it means giving up the fight.
The captains of American industry and Wall Street would like nothing better than for the rest of us to give up that fight, so they can take it all.
I say we keep fighting.
Read it on Robert Reich’s blog.
COMMENTS