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Is Homelessness Our “Malnutrition & Starvation” Applied to Housing?
As America’s housing & homelessness problems reach crisis levels - the housing equivalent of malnutrition & starvation - Sen. Merkley has submitted legislation to stop the corporate feeding frenzy…
This week’s brutal winter storm’s impact on homeless people across the nation — it will certainly kill many —reminds us how essential safe housing is for us human beings.
There are commodities and there are necessities. Sometimes, they’re the same. Food, for example, is both a commodity and a necessity.
Imagine, then, if a group of giant companies were to buy up a third of America’s food and then begin steeply raising its price. It would produce the same situation I’ve seen both war and drought create when I did international relief work in multiple third-world countries: hunger, malnutrition, and — among the poorest and least able to work — starvation.
Housing is only slightly less a necessity than food (it varies with climate) but the scenario I just described with that food metaphor is very much what is happening in America today. Homelessness, it turns out, is our “malnutrition and starvation” applied to housing.
So, how did the situation get so dire just in the past decade?
About a third of all American houses bought in the past few years were bought for cash; while some of this is wealthy people, most cash purchasers today are giant investment corporations.
These large-scale cash home purchases drive up the price of houses, which in turn drives up rental costs. Homlessness begins to pop when community rent exceeds 22 percent of community income, and explodes above 32 percent.
For every 5 percent increase in house prices, there’s a roughly 4 percent increase in homelessness in the same communities.
And we’re seeing it play out right in front of us in cities across America because a handful of Wall Street billionaires want to make a killing.
There’s a backstory here.
This was not an issue when I was six years old and my dad bought his house in 1957. He got a VA loan and picked up the brand-new 3-bedroom, 1-bath tract house where my three brothers and I grew up in suburban south Lansing, Michigan.
It cost him $13,000, which was about twice what he made every year working a union job in a tool-and-die shop. When my dad bought his home in the 1950s the median price of a single-family house was around 2.2 times the median American family income.
As the Zillow study notes:
“Across the country, the rent burden already exceeds the 32 percent [of median income] threshold in 100 of the 386 markets included in this analysis….”
As noted, wherever housing prices become more than three times annual income, homelessness stalks like the grim reaper.
And what’s driving much of this today? Corporate speculation in real estate as a commodity, ignoring its status as a necessity.
As noted in a Wall Street Journal article titled “Meet Your New Landlord: Wall Street,” in just one suburb (Spring Hill) of Nashville:
“In all of Spring Hill, four firms … own nearly 700 houses … [which] amounts to about 5% of all the houses in town.”
This is the tiniest tip of the iceberg.
“On the first Tuesday of each month,” notes the Journal article about a similar phenomenon in Atlanta, investors “toted duffels stuffed with millions of dollars in cashier’s checks made out in various denominations so they wouldn’t have to interrupt their buying spree with trips to the bank…”
The same thing is happening in cities and suburbs all across America; the investment goliaths use fine-tuned computer algorithms to sniff out houses they can turn into rental properties, making over-market and unbeatable cash bids often within minutes of a house hitting the market.
After stripping neighborhoods of homes families can buy, they then raise rents as fast and far as the market will bear.
“The average rent for 148 single-family homes in Spring Hill owned by the big four [Wall Street investor] landlords was about $1,773 a month…”
Ryan Dezember, in his 2020 book Underwater: How Our American Dream of Homeownership Became a Nightmare, describes the story of a family trying to buy a home in Phoenix. Every time they entered a bid, they were outbid instantly, the price rising over and over, until finally the family’s father threw in the towel.
“Jacobs was bewildered,” writes Dezember. “Who was this aggressive bidder?”
Turns out it was Blackstone Group, now the world’s largest real estate investor. At the time they were buying $150 million worth of American houses every week, trying to spend over $10 billion. And that’s just one corporate investor.
In 2018, corporations bought 1 out of every 10 homes sold in America, according to Dezember, noting that:
“Between 2006 and 2016, when the homeownership rate fell to its lowest level in fifty years, the number of renters grew by about a quarter.”
Today, more than one-in-three homes in many of America’s cities are bought by giant corporations. As Oregon Democratic Senator Jeff Merkley notes:
“Data from 2021 show the fastest year-over-year increase in hedge fund home purchases in 16 years. For example, in 2021, large hedge fund investors bought 42.8 percent of homes for sale in the Atlanta metro area and 38.8 percent of homes in the Phoenix area.”
This trend of giant corporations locking up local real estate really took off a decade ago, when Morgan Stanley published a 2011 report titled “The Rentership Society,” arguing that snapping up houses and renting them back to people who otherwise would have wanted to buy them could be the newest and hottest investment opportunity for Wall Street’s billionaires and their funds.
Turns out, Morgan Stanley was right. Warren Buffett, KKR, and The Carlyle Group have all jumped into residential real estate, along with hundreds of smaller investment groups, and the National Home Rental Council has emerged as the industry’s premiere lobbying group, working to block rent control legislation and other efforts to control the industry.
As John Husing, the owner of Economics and Politics Inc., told The Tennessean newspaper:
“What you have are neighborhoods that are essentially unregulated apartment houses. It could be disastrous for the city.”
As America’s twin housing and homelessness problems have now reached crisis levels — the housing equivalent of malnutrition and starvation — Senator Jeff Merkley has submitted legislation to stop the corporate feeding frenzy.
The End Hedge Fund Control of American Homes Act bans hedge funds and private equity leeches from owning housing at scale. Merkley noted:
“In order to meet Americans’ housing needs and root out systemic inequities in the housing market, the End Hedge Fund Control of American Homes Act bans hedge funds and private equity investors from owning large numbers of homes by establishing a $20,000 federal tax penalty for each single family home owned by a single company and its affiliates over 100 homes.
“The bill allows companies with large portfolios to sell homes over several years to come into compliance so there’s an orderly exit, and includes incentives to make sure buyers of divested homes are ordinary people who will live in the home. The tax penalties collected will be used to provide down payment assistance to homebuyers.”
It’s not often legislation so precisely identifies a problem of crisis proportions and offers such common-sense remedies. There’s a petition in support of this bill at Daily Kos worth taking a moment to sign.
Call your representative and your two senators and ask them to co-sponsor Merkley’s legislation in the Senate or co-sponsor companion legislation in the House. The Congressional switchboard, which will connect you to any member of Congress, is 202-224-3121.