We All Deserve a Home, But Corporations Outbid Some of Our Friends.

Corporate buyers are snapping up residential properties in Massachusetts and pushing out long-time residents, according to a report by the news outlet 25 Investigates. These investment companies form a complex network, making it nearly impossible for individuals and towns to hold them accountable.

Priced Out, Pressed Out: “Investors Are Squeezing Out Everybody”

The investigative reporters interviewed seniors and struggling parents who’ve been priced out of their homes, with rents well above $2K in some complexes.

Alex Pratt, the deputy director of housing and community development for the Boston suburb of Malden, told the news team: “Investors are squeezing out everybody.”

The basic equation is simple. When companies buy up home properties, they hoard supply. That can make pricey housing markets pricier still. And the corporations buy up homes typically seek profits for their shareholders in the 15% range within a five-year time span. They don’t even need to fill the homes to profit from the appreciation of property values.

As for the houses they turn into rentals, profit-making comes down to charging a variety of fees, while keeping maintenance and overhead costs as low as possible. Needless to say, this is not such a profitable concept for the people who end up renting the corporate-owned housing.

We Can’t Afford to Buy, Say Four in 10 Gen Xers

Today, four out of ten renters say they don’t see themselves ever acquiring a deed to a home of their own. The same share of GenXers — 40% — feel permanently sidelined.

Rising home prices and mortgage rates are making their dreams unreachable. Many say they can’t see themselves saving up the money they’d need for a down payment on a home.

The median down payment for U.S. homebuyers has just passed the $55K mark.

This isn’t getting better. The number of people who feel left out is increasing year-over-year. And no wonder. Listing prices have shot up another 7% in the past year. The cost of making monthly payments on mortgages is up more than 10%. Whose monthly earnings are up by that much?

Meanwhile, renters are sending ever larger checks to their landlords. The median U.S. rental home is now listed for about $2,000 a month.

Janet Yellen Can Confirm: For Hopeful Home Buyers, Success Is “Almost Impossible”

The U.S. Treasury Secretary, Janet Yellen, recently testified before Congress about housing affordability. Yellen noted that many people financed or refinanced homes in 2020-2022, when mortgage rates were irresistibly low. Not wanting to give up their rock-bottom rates, many of these same people have had no incentive to sell. They’ve just held onto their deeds. Understandably.

Meanwhile, Yellen said, finding attractive listings and acquiring their own deeds has become “almost impossible for first-time buyers.”

So the Biden administration wants Congress to greenlight a set of tax credits. They’d be designed to:

Give $10,000 to first-time homebuyers.

Give $10,000 tax credits to current deed holders who put their homes on the market.

That’s all well and good, but a focus on ordinary home buyers won’t be enough, when investment firms keep snapping up housing.

Can’t Lawmakers Deal With Large, Corporate Home Buyers?

Congress is now considering the Stop Predatory Investing Act. The bill uses the tax code to rein in the big investors — those with portfolios of 50+ rental homes. These firms would no longer be able to deduct interest or depreciation. The law is necessary, the bill’s sponsors state. “We face a shortage of 3.8 million homes…” They name Atlanta and Cleveland as especially impacted by corporate buyers.

Then there’s the End Hedge Fund Control of American Homes Act. It proposes to bar hedge funds from buying homes, and force them to start selling off the homes they currently own. It would use the tax code as both a carrot and a stick. While corporate buyers insist that they are producing much-needed rental homes for growing families, the End Hedge Fund Control law would push them to actually sell off their properties, creating far more deed holders.

But this bill would only deal with single-unit homes. And it doesn’t provide a method for actually identifying the owners behind the funds. Remember, investors use shell companies. Chris Noble of the Private Equity Stakeholder Project says tracing units to their owners is crucial. The nonprofit is pushing for a nationwide landlord registry.

Rep. Erika Uyterhoeven in Massachusetts made a similar point to the 25 Investigates team, calling the structure of corporate homeownership a “massive maze.” So Uyterhoeven proposed a state law to collect information about LLCs that control the deeds.

As Home Values Surge, State and Local Policies Shift

Recently, a number of state and local laws are pending that would curb home purchases by private firms. Studies show that these companies have become a massive factor in local affordability problems.

Drexel University researchers studied the role played by investor-owners (big and small) in the 2020-2021 real estate value surge. During that time:

Investors snapped up about a fifth of the single-unit houses purchased in Richmond, Virginia.

One in four home buyers in Jacksonville, Florida were corporations.

One in four home buyers in Philadelphia, too, were corporations.

Ordinary home buyers are also being pressed out of North Carolina markets by big business. Lawmakers there have proposed to bar companies from owning more than 100 homes in counties with populations of 150,000+. The bill has real teeth. If it were enacted, companies could be fined $100 per day for every home they hold above the allowable 100 units.

There’s also a proposal in Minnesota to prohibit businesses from turning houses into rental properties. Home renters in the state are fed up. So is Keith Ellison, the Minnesota attorney general. Ellison is suing big corporate players who have profited by skimping on repairs.

Meanwhile, Back in Boston…

25 Investigates found that Massachusetts — together with Hawaii, California, Washington, and the District of Columbia — appears in the “top five” most expensive U.S. real estate markets. Massachusetts is also a draw for investor-buyers. And people have had it.

Annie Gordon has organized renters to resist the companies and the financial pressure they impose on people. She thinks her corporate landlord is trying to push her out because she is using her voice.

But as Gordon told Boston 25 News, “We deserve a home.”

Supporting References

Kerry Kavanaugh and Marina Villeneuve for Boston 25 News (Cox Media Group Television), via Boston25News.com: “We Deserve a Home” – 25 Investigates Finds Renters, Homebuyers Facing Off Against Investors (Feb. 15, 2024; citing figures from Boston’s Metropolitan Area Planning Council.).

Margaret Jackson for Benzinga, via Yahoo Finance: Janet Yellen Says It’s “Almost Impossible” for First-Time Homebuyers to Enter Housing Market (May 2, 2024).

Dana Anderson for Redfin Real Estate News: Nearly 40% of Renters Think They’ll Never Own a Home, Up From 27% Last Year (Apr. 12, 2024; citing figures from Redfin and Qualtrics in 2023 and 2024).

Roshan Abraham for the Backyard newsletter (published in collaboration with Shelterforce) via NextCity.org: Meet the Bill to Ban Hedge Funds From Owning Single-Family Homes (Mar. 28, 2024; citing figures from the Private Equity Stakeholder Project).

And as linked.