The Single Family Residence Now an Instrument of Inequality

Landlords grow rich in their sleep without working, risking or economizing. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title.

-John Stuart Mill (1806–1873)

This is the esond in the seris on the housing crisi. The first is here: The Rise of the Corporate Landlord.

Low Maintenance for High Profitability

Investigative reporters have repeated horrific stories of how hedge-funds’ goals maximize returns for their wealthy members at the expense of their tenants. Here are just a few:

* After reviewing media reports of tenant complaints about the new corporate landlords of single-family houses, Elena Botella of Slate Magazine concluded the goal of the hedge fund landlords was to “Squeeze our tenants for every penny, avoid making repairs, let black mold and raw sewage accumulate, and count on the fact that moving is a huge, expensive hassle.”

* Michelle Conlin of Reuters Investigates summarized her findings in a headline: Spiders, sewage and a flurry of fees — the other side of renting a house from Wall Street

* In her article in The Hill, Wall Street Landlords Aren’t Looking Out For Main Street Tenants, Eileen Appelbaum, Co-Director of the Center for Economic and Policy Research in Washington, DC, found, “Wall Street landlords extract the highest rents with the least investment, allow building conditions to deteriorate, then dump the property on the market or abandon it.”

Extracting Wealth from the Middle Class

Elena Botella of Slate magazine points out that these mega investors aren’t buying all of the homes, they are buying the most important ones for the middle class:

“ But investorsaredepleting the inventory of the precise houses that might otherwise be obtainable for younger, working and middle-class households, in the cities where those workers can easily find good-paying jobs…”

Botella recites data that disclosed Invitation Homes bought 90 percent of the homes for sale in some ZIP codes in Atlanta in the early 2010s.

Investors research future locations where there is expected job growth according to Botella. They control the market and wait for jobseekers to arrive who find there are only rental houses close to their place of work:

“While normal people buy houses when they actually need to move somewhere, (savvy) investors buy houses several years before a bunch of people need to move to an area. Whether they’re tracking where major employers are building new offices or looking at public school enrollment data, being ahead of the market gives big firms a big leg up.”

A New Use for Redlining

A study by the Georgia Institute of Technology reported under the heading , Investors Force Black Families Out of Home Ownership, New Research Shows,revealed:

“ Data from800 neighborhoods in the Atlanta metropolitan area between 2007 and 2016revealed that major investors bought homes in majority-minority neighborhoods far from downtowns and in lower-income areas. These homes were often undervalued because of their minority populations, but they remained desirable and offered good market value”.

● The report quotes Professor Brian An’s data thta showed Investors acquired up to 76% of for-sale, single-family homes in some neighborhoods.

A Drug Lords’ Dream

As economist Joseph Stiglitz points out in his forward to the EU Tax Observatory’s Global Tax Evasion: Report 2024, t he researchers found some, but unsatisfactory, progress in some areas targeting tax evasion by using bank accounts in secrecy jurisdictions. However, real estate is completely outside any regulations and so has become the new tax refuge.

“But the report also points out that other international efforts are falling short of their initial ambition. Real estate continues to provide ample opportunities for the rich to avoid and evade taxes”.

In her investigative article for the New York Times, A $60 Billion Housing Grab by Wall Street, Francesca Mari confirmed the foreign interest in US real estate:

“REITs were funded with money from all over the world. An investment company in Qatar, the Korea Exchange Bank on behalf of the country’s national pension, shell companies in California, the Cayman Islands and the British Virgin Islands — all contributed to Colony American Homes”.

There’s no way of knowing if these investors include drug lords and other criminals including wealthy tax evaders. Mari quotes Christopher Thornberg, a founding partner of the research firm Beacon Economics,

“There’s no way of looking at the ownership of properties and understanding who owns them ultimately,”

However, more concerning is that university and government worker pension plans are providing capital for these REITs that are making it impossible for workers to afford homes. Mari again quotes Thornberg,

“Columbia University and G.I. Partners (on behalf of the California Public Employees Retirement System) invested $25 million and $250 million in the REIT Waypoint.”

The Solution

There are several causes of the exorbitant house prices that demand several solutions. This section concentrated on collective ownership such as corporations, REITS, partnerships, trusts including any group ownership form; and foreign billionaires. The strategy here is to concentrate on two factors that should outrage most voters. For a more comprehensive set of solutions, see the report by Popular Democracy and The Institute for Policy Studies: Housing Crisis Super-Charged by Billionaire Investors Disrupting Housing Market

Members of the wealth defence league argue that corporations only own 3% of single-family residences so restrictions on them won’t affect property prices. Therefore, leave them alone. Daniel Herriges writing in Strong Towns summarizes his opinion in the title of his article: Going After Corporate Homebuyers is Good Politics but Ineffective Policy.

The position is partially correct, but the rational conclusion is the opposite. If the corporate landlords own only a small proportion of national housing, the data means that prohibitions must extend to all forms of investors, large and small. Thus, legislation that mentions only corporations or hedge funds, or such, will be completely ineffective as Herriges alleges.

House ownership should be limited primarily to those who live in the unit. A simple restriction would be effective:

• No Investor can own more than three single-family residences.
• No foreign resident can own a single family residence.

Acknowledgement: Photo by Pixabay

Originally published at https://jandweir.substack.com.