[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
WHERE HAVE ALL THE HOUSES GONE?
PRIVATE EQUITY, SINGLE FAMILY
RENTALS, AND AMERICA'S NEIGHBORHOODS
=======================================================================
VIRTUAL HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
JUNE 28, 2022
__________
Printed for the use of the Committee on Financial Services
Serial No. 117-90
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
___________
U.S. GOVERNMENT PUBLISHING OFFICE
48-334 PDF WASHINGTON : 2022
HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri ANN WAGNER, Missouri
ED PERLMUTTER, Colorado ANDY BARR, Kentucky
JIM A. HIMES, Connecticut ROGER WILLIAMS, Texas
BILL FOSTER, Illinois FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio TOM EMMER, Minnesota
JUAN VARGAS, California LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina
CINDY AXNE, Iowa TREY HOLLINGSWORTH, Indiana
SEAN CASTEN, Illinois ANTHONY GONZALEZ, Ohio
AYANNA PRESSLEY, Massachusetts JOHN ROSE, Tennessee
RITCHIE TORRES, New York BRYAN STEIL, Wisconsin
STEPHEN F. LYNCH, Massachusetts LANCE GOODEN, Texas
ALMA ADAMS, North Carolina WILLIAM TIMMONS, South Carolina
RASHIDA TLAIB, Michigan VAN TAYLOR, Texas
MADELEINE DEAN, Pennsylvania PETE SESSIONS, Texas
ALEXANDRIA OCASIO-CORTEZ, New York RALPH NORMAN, South Carolina
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts
Charla Ouertatani, Staff Director
Subcommittee on Oversight and Investigations
AL GREEN, Texas Chairman
EMANUEL CLEAVER, Missouri TOM EMMER, Minnesota, Ranking
ALMA ADAMS, North Carolina Member
RASHIDA TLAIB, Michigan BARRY LOUDERMILK, Georgia
JESUS ``CHUY'' GARCIA, Illinois ALEXANDER X. MOONEY, West Virginia
SYLVIA GARCIA, Texas WILLIAM TIMMONS, South Carolina,
NIKEMA WILLIAMS, Georgia, Vice Vice Ranking Member
Chair RALPH NORMAN, South Carolina
C O N T E N T S
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Page
Hearing held on:
June 28, 2022................................................ 1
Appendix:
June 28, 2022................................................ 33
WITNESSES
Tuesday, June 28, 2022
Baker, Jim, Executive Director, Private Equity Stakeholder
Project........................................................ 5
Bogany, Shad, Agent, Better Homes and Gardens.................... 7
Lopez, Sofia, Deputy Campaign Director for Housing, Action Center
on Race & the Economy (ACRE)................................... 8
Raymond, Elora Lee, Assistant Professor, School of City and
Regional Planning, Georgia Institute of Technology............. 10
Schuetz, Jenny, Senior Fellow, Brookings Institution............. 12
APPENDIX
Prepared statements:
Baker, Jim................................................... 34
Bogany, Shad................................................. 85
Lopez, Sofia................................................. 90
Raymond, Elora Lee........................................... 101
Schuetz, Jenny............................................... 110
Additional Material Submitted for the Record
Adams, Hon. Alma:
``Local Leaders are Worried about Corporate Landlords, but
Find Their `Hands Tied'''.................................. 116
``Wall Street-backed Landlords Now Own More than 11,000
Single-Family Homes in Charlotte''......................... 122
Emmer, Hon. Tom:
Letter from The Amherst Group................................ 130
Timmons, Hon. William:
Written responses to questions submitted to Shad Bogany...... 142
WHERE HAVE ALL THE HOUSES GONE?
PRIVATE EQUITY, SINGLE FAMILY
RENTALS, AND AMERICA'S NEIGHBORHOODS
----------
Tuesday, June 28, 2022
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 12:01 p.m.,
via Cisco WebEx, Hon. Al Green [chairman of the subcommittee]
presiding.
Members present: Representatives Green, Cleaver, Adams,
Tlaib, Garcia of Texas, Williams of Georgia; Emmer, Timmons,
and Norman.
Ex officio present: Representative Waters.
Chairman Green. Thank you very much, Franklin, and
greetings to all. The Subcommittee on Oversight and
Investigations will come to order.
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time. Also, without
objection, members of the full Financial Services Committee who
are not members of this subcommittee are authorized to
participate in today's hearing.
Today's hearing is entitled, ``Where Have All the Houses
Gone? Private Equity, Single Family Rentals, and America's
Neighborhoods.''
I now recognize myself for 3 minutes to give an opening
statement.
Today's hearing will examine troubling issues regarding the
mass predatory purchasing of single-family homes by private
equity firms, including the adverse impact predatory purchasing
has had on first-time homebuyers, the working class, and people
of color.
After an extensive investigation into this practice, we
have found that private equity companies have bought up
hundreds of thousands of single-family homes and placed them on
the rental market, which removes from the housing market homes
that might otherwise have been purchased by individual
homeowners. These corporate buyers have tended to target lower-
priced starter homes requiring limited renovation.
These homes would likely have been bought by first-time
buyers, low- to middle-income homebuyers, or both. These homes
tend to be located in communities with significantly more
families of color than the national average. They also tend to
be located in neighborhoods with more working people and single
mothers than average.
These private equity firms have the advantage of being able
to purchase these homes with cash. Therefore, they easily
outcompete individual buyers who may require loans.
This all has the troubling effect of displacing residents
of color and leading to gentrification of these communities.
Further, private equity firms have demonstrated themselves
to be very poor landlords. Evidence shows that these companies
implement significant increases in rent and fees on these
homes. Evidence also indicates that they evict tenants at a
higher rate and account for a higher percentage of evictions in
areas where this practice is concentrated.
Statistics show that evictions by corporate landlords
proceeded throughout the COVID-19 pandemic. This was despite
Federal, State, and local protections against such evictions,
and these evictions were disproportionately of renters of
color. This is simply shameful.
Corporate landlords are also more difficult to contact.
Therefore, their tenants find themselves unable to amicably
resolve issues involving rent or maintenance.
Our investigation also shows that once these homes have
been purchased by a private entity firm, they tend to be sold
in bulk to other such entities. This can permanently remove
these homes from the market for individual homebuyers.
This predatory purchasing contributes to our nation's
shortage of affordable housing and exacerbates the racial
wealth gap. Because predatory lending contributed to a housing
bubble, we must concern ourselves with predatory purchasing.
I look forward to hearing from our witnesses on this deeply
concerning matter.
I now recognize my friend, the ranking member of the
subcommittee, Mr. Emmer, for 5 minutes for an opening
statement.
Mr. Emmer, you may be on mute.
Mr. Emmer. I am on mute. Now, I am off mute.
Thank you, Mr. Chairman.
Can you hear me now?
Chairman Green. I hear you well, and you sound much better
when you are off mute.
[laughter]
Mr. Emmer. Thank you, sir, and thanks to our witnesses for
appearing before the subcommittee today. I look forward to your
testimony.
Today, Americans are being punched in the face with 8.6
percent inflation. When our constituents go to the grocery
store or the gas pump or when they look for housing, the stark
failure of Congress' spend-your-way-to-prosperity policies
starts to sink in.
While many Americans can't afford a full tank of gas or to
buy meat at the grocery store, our subcommittee is focusing on
institutional homeownership in the home rental market.
In today's hearing, my Democrat colleagues may claim that
private equity firms have strong-armed a majority of the
single-family home rental market. But make no mistake. These
entities capture only 2 percent of the nation's single-family
home rental market. It is clear that today's hearing is nothing
more than the Majority's attempt to use institutional investors
as a scapegoat for the poor housing policy that they are
responsible for, and as an excuse to avoid the real problem at
hand: inflation.
Generally speaking, there are three types of individuals
who choose to rent: those saving for a future down payment on a
home; those wishing to retain the flexibility to move; and
those who cannot own a home for any number of reasons,
including affordability issues.
Single-family rental homes offer Americans an attractive
alternative to other housing options they might consider. As
prices increase across-the-board, especially for housing, and
wages decrease, homeownership is a dream further out of reach
than ever before for many Americans.
Americans are facing the largest cost differential in 20
years to own versus to rent a home. Sixty-seven percent of
renters say they will rent their next home because they cannot
afford to own. The costs of all home construction materials
have increased more than 10 percent, while the average
homeowner sinks $6,300 into home maintenance a year.
Institutional homeowners invest an average of $30,000 in every
home purchased before it is ever even rented, giving tenants
quality shelter.
As we examine the role of institutional investors in the
single-family home rental market, we must not forget that
single-family rental homes fill a gap for a large population of
our country who either prefer or need to rent. It offers
parents an affordable way to give their kids a yard to play in,
access to a good school district, or simply just a safe
community in which to live.
We cannot demonize institutions for facilitating this
supply of quality housing that otherwise would be out of the
realm of possibility for many Americans due to the economic
consequences of inflation. While it may seem like institutional
home rentals are pervasive and problematic because we are
dedicating an entire hearing to this topic, of the 5 million
homes purchased in 2021, 71 percent went to an individual
owner, 28 percent went to an individual investor, and just 1
percent went to an institutional owner.
Let us contrast that with the very pervasive and
problematic economic realities Americans are dealing with
today: 8.6 percent inflation; the energy index rose 34.6
percent; the food index increased 10.1 percent; and shelter
increased 5.5 percent, the highest since 1991.
For far too long, the White House and the Federal Reserve
have maintained that inflation was transitory, when all
Americans know that is nonsense. By the time they acknowledged
that this inflation isn't going anywhere and, in fact, it is
only going to get worse, they had to rush to raise interest
rates, which deeply impacts mortgage rates, making
homeownership even less accessible.
This hearing is misdirected. Our committee must wake up and
focus on solutions to the problems Americans have today,
because no American should have to cut back on essential
expenses like groceries or gas to make ends meet.
I yield back.
Chairman Green. The gentleman yields back.
I now recognize the Chair of the full Financial Services
Committee, my friend, the gentlewoman from California,
Chairwoman Waters.
Chairwoman Waters. Thank you so very much for holding this
most important hearing today, Mr. Green, and while the
Republicans rail about inflation, they don't have any answers,
so they simply try and say that we cause inflation. Everybody
knows that does not make good sense. Nobody wants inflation.
This President is working hard to do everything that he
possibly can to ensure that we tackle some of the problems that
cause inflation.
We know that there is a supply chain problem that has been
going on ever since this pandemic started, and so, thank you
for focusing on housing. Thank you for focusing on the fact
that we have institutional investors who simply go into these
communities and they buy up large numbers of homes, some of
which could be owned by individual homeowners if the financial
institutions gave homeowners the loans that were needed to
purchase them.
And so, thank you for what you are doing today, Mr. Green.
You are on the right track.
And I yield back the balance of my time.
Chairman Green. The gentlelady yields back.
The Chair now recognizes the Vice Chair of the
subcommittee, the gentlewoman from Georgia, my friend, Ms.
Williams, for one minute.
Ms. Williams of Georgia. Thank you, Mr. Chairman.
In today's hearing, we will hear about rising corporate
ownership in the rental housing market, and as in any market
changes, new challenges arise in protecting those most
marginalized.
To illustrate this in the rental housing market, let us
start today by taking an imaginary journey to Forest Cove, a
housing complex in Atlanta that is home to hundreds of people.
Imagine you are walking the grounds. Straight ahead, you see a
building that is burned-out and boarded-up. There is trash
everywhere. You walk inside into one of the units. But be
careful where you step. Part of the floor is collapsing.
Over to the right, you can still tell that bugs and rodents
live there. You wonder how hundreds of problems that you see
right before your very eyes went unsolved for years until they
turned into millions of dollars in damages.
The residents of Forest Cove, under large landlords, were
neglected until things got so bad that residents had to be
moved out of their homes.
Across the country, we must hold large landlords
accountable to the tenants that they serve.
Thank you, Mr. Chairman, and I yield back the balance of my
time.
Chairman Green. The gentlelady yields back.
Members and friends, we will now welcome the testimony of
our distinguished witnesses: Jim Baker, the executive director
at the Private Equity Stakeholder Project; Shad Bogany, a real
estate agent with Better Homes and Gardens Real Estate; Sofia
Lopez, a researcher and deputy campaign director for housing
with the Action Center on Race & the Economy; Dr. Elora Lee
Raymond, an assistant professor at the Georgia Institute of
Technology; and Jenny Schuetz, a senior fellow at the Brookings
Institution.
Witnesses are reminded that their oral testimony will be
limited to 5 minutes. You should be able to see a timer that
will indicate how much time you have left, and when you have
encroached upon more than your 5 minutes, I will probably tap
lightly so that you will know to wrap up your statement. I
would ask that you would be mindful of the timer so that we can
be respectful of both the witnesses' and the committee members'
time.
And without objection, your written statements will be made
a part of the record.
Mr. Baker, you are now recognized for 5 minutes to give an
oral presentation of your testimony.
STATEMENT OF JIM BAKER, EXECUTIVE DIRECTOR, PRIVATE EQUITY
STAKEHOLDER PROJECT
Mr. Baker. Good afternoon, Chairman Green, Ranking Member
Emmer, and members of the subcommittee.
My name is Jim Baker, and I'm with the Private Equity
Stakeholder Project, a nonprofit focused on impacts of private
equity firms and similar Wall Street firms on ordinary people,
including residents of apartments, rental homes, and mobile
homes.
Since the global financial crisis of 2008, private equity
firms have acquired growing portions of U.S. housing, helping
to drive up rents and home prices to unprecedented levels. The
impact has been sharpest in the single-family rental industry
which was created by private equity firms. Rents for rental
homes have grown more than 13 percent over the past year, and
even more sharply in some areas, for example, 39 percent in
Miami, and 19 percent in Phoenix.
Just over a decade ago, no single landlord owned more than
a thousand homes. Now, the top five--Invitation Homes, Pretium
Partners, American Homes 4 Rent, Amherst Holdings, and Cerberus
Capital or FirstKey Homes--together own or operate almost
300,000.
In 2016, Pretium Partners pitched investors that,
``Households that have been unable to obtain mortgages have
become renters, thus driving high occupancy rates and robust
rent growth.''
As these same firms have in recent years aggressively
competed with homebuyers for houses, in some areas this
prediction has increasingly become a self-fulfilling prophecy.
Private equity-backed rental home companies' acquisitions have
accelerated during the pandemic. For example, Pretium Partners-
owned Progress Residential went from 40,000 homes in January
2021 to 80,000 homes in March 2022.
Private equity firms have drawn capital from global
investors. For example, last April, The Wall Street Journal
reported that Singapore's sovereign wealth fund GIC, Canada's
PSP Investment Board, and German insurer Allianz SE were
investing hundreds of millions or billions of dollars in U.S.
single-family homes.
A December 2021 investigation by The Washington Post and
the International Consortium of Investigative Journalists,
drawing on the Pandora Papers leak of offshore financial
records, showed Pretium pouring money into rental homes, part
of an unprecedented flow of global finance into U.S. suburbs
that has left stressed tenants in its wake. The investigation
also pinpointed how Pretium Partners was able to grab the
lion's share of home inventory away from ordinary families by
quickly making all-cash offers.
In the first quarter of 2022, investors made up a record 28
percent of single-family home purchases, up from 19 percent in
2021, and 16 percent, on average, between 2017 and 2019.
According to a recent report by the Harvard Joint Center
for Housing Studies, investors with large portfolios of at
least a hundred properties drove much of that growth.
In April, The Wall Street Journal reported that large
investors had only deployed about one-quarter of the $89
billion in capital they have amassed to acquire rental homes.
Some have projected that the share of rental homes owned by
large investors will hit several million homes, or 40 to 50
percent of market share, by 2030.
We tracked eviction filings during the pandemic across
dozens of counties in Georgia, Florida, Tennessee, Texas,
Arizona, and Nevada. Large single-family rental landlords like
Pretium Partners, Invitation Homes, and Amherst Holdings were
among the most frequent eviction filers we saw out of all
landlords, including when the CDC eviction moratorium was in
effect. For example, Pretium Partners rental home companies
filed to evict more than 3,000 residents, Invitation Homes,
more than 2,100 residents, and Amherst Holdings, more than
1,200 residents.
We also found that Pretium Partners' rental home companies
filed to evict residents in majority Black counties in Georgia
at significantly higher rates than they did residents in
majority White counties in Florida.
Katrina Chisholm, a Pretium Partners tenant from Georgia,
provided testimony to a July 2021 House hearing, saying, ``I
felt expendable and they showed me I was. I was not given any
consideration as a long-term tenant with no evictions on my
record ever. I felt as if I had broken the law somehow while we
were in the middle of the pandemic. There was no concern for my
life or my son's life, as they focused on their profit margin.
I was not profitable so I was booted out with almost no
notice.''
If the COVID-19 pandemic was a test of how landlords would
deal with renters in challenging times, then some of the
largest single-family rental landlords failed that test
miserably.
We believe lawmakers should take steps to protect tenants
and homebuyers from predatory behavior in the housing market
and limit the private equity buy-up of our homes by requiring
corporate landlords to disclose beneficial ownership of homes
and to provide regular disclosures of eviction filings, and
evictions, as well as rent increases, creating a corporate
landlord-consumer complaint database to track landlords'
practices, and provide residents a forum to get responses to
complaints, as well as enacting broad tenant protections such
as just cause eviction legislation, and right to counsel laws
so that tenants facing eviction have legal representation, and
limits on annual rent increases by corporate landlords,
including mandatory fees.
Thank you.
[The prepared statement of Mr. Baker can be found on page
34 of the appendix.]
Chairman Green. Thank you, Mr. Baker.
The Chair now recognizes Mr. Bogany for 5 minutes to give
an oral presentation of your testimony.
STATEMENT OF SHAD BOGANY, AGENT, BETTER HOMES AND GARDENS
Mr. Bogany. Thank you, Chairman Green, for affording me
this opportunity to speak before the Financial Services
Committee on the impact that investors are having on the
affordable housing market.
My name is Shad Bogany. I have over 40 years of experience
helping families purchase their first home. I have been an
advocate for crusading for families through community
involvement.
I have served as chairman of the Texas REALTORS, chairman
of the Houston Association of REALTORS, chairman of the Houston
Urban League Community Development Corporation, and a board
member of the Texas Department of Housing and Community
Affairs.
Currently, I am the president of the Fort Bend Housing
Finance Corporation. My radio show that I started 32 years ago
focuses on educating and encouraging would-be homebuyers on the
availability of financial mortgage products, housing
opportunities, and the benefits of being a first-time
homeowner. My message is, you can be a homeowner. Recently, the
conversation has changed. The discussion there is about
institutional investors buying up houses, competing with first-
time homebuyers for limited housing inventory.
More alarming, the investors are targeting minority
communities since, historically, they are undervalued and
lower-priced, and driving up the prices for residents, making
the Houston dream of homeownership for the population
unachievable.
Homebuyers are having to compete with investors that are
paying cash over the list price, resulting in an increase in
investor purchases. In Houston alone, 40 percent of the buyers
are investors. In Dallas, 52 percent of the investors are
buyers, creating a generation of renters who will miss out on
the benefits of homeownership, the ability to create wealth,
and stabilize communities.
The risks today, should investors liquidate their massive
real estate holdings, would be a decrease in property value,
causing subdivisions to decline, an increase in crime, and a
loss of a tax base for municipalities, and lastly, developing
new ghettos by creating for-rent-only subdivisions.
This trend started when Congress incentivized investors in
the rental market and made homeownership equal to renting by
lowering the tax benefits of homeownership. Homeownership among
Black Americans has been declining in recent years, the lowest
of the ethnic groups. By increasing the percentage of renters
in the Black community, the institutional investors are
creating a modern-day sharecropping colony governed by 21st
Century Jim Crow laws.
In 1968, the Supreme Court established that housing
discrimination is a badge of slavery. It reminds me of my
ancestors' history over 100 years ago. You live on the land,
you have a place to stay, but all of your hard work and money
goes to benefit someone else.
Connecting with our past, and learning from policies that
are suppressive, paves the way for a future free from housing
discrimination. That future is not here yet.
Now, investors are requiring higher credit scores in
rentals than what lenders require for home mortgages.
Minorities typically have more nontraditional credit, which the
FICO score system doesn't consider--the latest Jim Crow.
Recently, in Denton, Texas, a homeowners association passed
bylaws that landlords are banned from renting to families on
housing vouchers, a modern-day redlining. Not only do Black
communities and other minorities miss out on the opportunity to
benefit from the intergenerational wealth that homeownership
offers, they are being pushed out of the rental market, and
driven to less desirable areas with high poverty and crime, or
worse, becoming homeless.
Congress, we need you to act. Let me tell you what you
could do. You could mandate that all foreclosures--Fannie Mae,
Freddie Mac, Ginnie Mae--be stipulated that they offer to
first-time homebuyers before they sell them to investors.
The other thing you could do is you could create tax
incentives for sellers when the property is sold to a first-
time homebuyer. Waive the FHA 90-day flipping rule. This would
allow first-time homebuyers access to more inventory and better
financial terms.
HUD managed the largest rental assistance program, Housing
Choice vouchers. We are now using Housing Choice vouchers not
only for leasing but also for moving buyers into home
purchasing.
I, personally, have had tremendous success in helping
families move to homeownership who are on Section 8 in high-
opportunity neighborhoods. This needs to be expanded on a
national scale.
The bottom line is, we can't tell sellers who they can sell
their property to, but we can encourage them and incentivize
them to sell to first-time homebuyers.
I appreciate this opportunity to shine a light where the
tire meets the road in your districts.
[The prepared statement of Mr. Bogany can be found on page
85 of the appendix.]
Chairman Green. Thank you, Mr. Bogany, for your testimony.
The Chair now recognizes Ms. Lopez for 5 minutes to give an
oral presentation of your testimony.
STATEMENT OF SOFIA LOPEZ, DEPUTY CAMPAIGN DIRECTOR FOR HOUSING,
ACTION CENTER ON RACE & THE ECONOMY (ACRE)
Ms. Lopez. Thank you. Good afternoon, Chairman Green, and
Ranking Member Emmer. Thank you for the opportunity to testify
today on private equity ownership of single-family rentals.
My name is Sofia Lopez. I am the deputy campaign director
for housing at the Action Center on Race & the Economy (ACRE).
We are a national organization working at the intersection of
racial justice and Wall Street accountability.
I had the opportunity to testify last fall in a Senate
Banking Committee hearing on private equity landlords and I
shared stories tenants had told me about conditions in their
homes. I talked about one tenant facing eviction because he was
facing thousands of dollars in fees for charges he didn't
understand and fines for landlord requirements with which he
had already complied.
I talked about a mother of small children who lived with
mold, broken stairs, and whose basement flooded, covering an
electrical outlet. When she called her landlord to shut off her
electricity, she was told to turn it off herself, which would
have required her to wade through electrified water.
More recently, I have heard about tenants in North Carolina
and Las Vegas who faced rent increases of $100 or $200 per
month, and were pressured to sign renewals quickly or face
month-to-month leases with doubled monthly rent.
The National Rental Home Council, the institutional single-
family rental trade group, insists institutional landlords are
professionalizing the single-family rental industry. Yet, this
so-called professionalization often squeezes tenants while
reaping record-breaking profits.
In studying private equity in housing, I am struck by how
consistent tenants' experiences are across geographies and
landlords. Tenants' stories make it crystal clear that profit
maximization has no place in our homes.
Research shows that the institutional single-family
landlord business model follows five core practices. First,
large rent increases. For example, on a 2021 earnings call,
Invitation Homes noted it had raised rents by 30 percent in
Phoenix, 29 percent in Las Vegas, and 20 percent in Atlanta.
Their profits increased 33 percent in 2021 from the year prior.
Second, fees are so central to the private equity landlord
model that one CEO called the failure to capture fee revenue,
``revenue leakage.'' As an example, Tricon Residential, whose
profits tripled between 2020 and 2021, reported taking in $640
per home, per month, in fee and other revenue and anticipates
increasing this figure to between $850 to $950.
Third, inadequate maintenance. In 2021, Minneapolis tenants
living in properties owned by HavenBrook Homes, now managed by
Progress Residential, reported waiting up to a year for
necessary and urgent repairs, including holes in roofs and
ceilings, broken stairways, lead paint, flooding, faulty
electrical systems, broken and inoperable appliances, pest
infestations, and black mold. The following year, the City of
Columbia Heights, a Minneapolis suburb, revoked HavenBrook's
license based on conditions they deemed to, ``put residents'
lives at risk.''
Fourth, eviction filings. Many of these landlords obtain
low-cost debt through rent-backed securities. In 2017,
Invitation Homes' rent-backed securities were underwritten
based on 94 percent paying occupancy. To maintain cash flow to
repay debt, and a favorable rating to get more cheap financing,
landlords must address nonpaying tenants quickly.
Last, convoluted ownership and use of LLCs leaves tenants
unsure who really owns their home and who to appeal to when
problems arise. Despite institutional landlords' insistence
that they make up a mere 2 percent of the nation's single-
family rental market, their portfolios are heavily concentrated
in specific markets across the Sun Belt and the Midwest, where
tenants rights are generally more favorable to the landlord.
Of course, this concentration isn't race-neutral and, as
this committee's survey data show, overlaps with Black
communities in particular. For example, Memphis has a 64
percent Black population and has the lowest rate of Black
homeownership in the 50 largest cities, yet the highest share
of investor ownership of homes.
Research found similar relationships in Los Angeles County,
Fulton County, Georgia, and the City of Atlanta, where a higher
concentration of institutional SFR ownership was correlated
with higher concentrations of Black residents.
Because of these companies' purchasing criteria, tenants
have expressed feeling as if they had few options but to rent
from institutional landlords to live in certain communities
close to jobs, family, and quality schools.
Let us be clear. Private equity and Wall Street-backed
landlords are in every sector of the housing market, and
residents in these sectors often face the same practices that
yield immense profits for investors.
The most straightforward fix for the worst conditions that
private equity tenants face are national tenant protections,
including protection from excessive rent increases and
excessive fines and fees, just-cause protections requiring
landlords to provide a reasonable justification for ending a
tenancy, and a right to counsel and a right to organize to give
tenants a fair chance to defend against evictions and unsafe
living conditions.
We also need a comprehensive landlord registry so we know
who owns what and tenants know exactly who their landlord is.
Lastly, we need massive Federal investment in truly
affordable housing free from the harmful practices of private
equity landlords and dedicated to fulfilling a fundamental
right to housing.
Our housing market is rapidly changing as the largest
landlords, builders, and financiers increasingly partner with
one another. Our communities and neighbors will feel the
consequences until we follow the lead of tenants and housing
justice organizers to create a more just housing system.
Thank you. I look forward to your questions.
[The prepared statement of Ms. Lopez can be found on page
90 of the appendix.]
Chairman Green. Thank you, Ms. Lopez.
Dr. Raymond, you are now recognized for 5 minutes to give
an oral presentation of your testimony.
STATEMENT OF ELORA LEE RAYMOND, ASSISTANT PROFESSOR, SCHOOL OF
CITY AND REGIONAL PLANNING, GEORGIA INSTITUTE OF TECHNOLOGY
Ms. Raymond. Thank you, Chairman Green, Ranking Member
Emmer, and members of the subcommittee for the opportunity to
testify today. My name is Elora Raymond. I am an assistant
professor in the School of City and Regional Planning at
Georgia Tech.
Since 2015, I have researched institutional landlords'
eviction practices, links to gentrification, and growing market
share. In the 15 years since the foreclosure crisis, we have
learned a lot about the impact of institutional investors on
households and neighborhoods.
Far from being good landlords, these firms have
exceptionally high eviction rates, and they profit from
gentrification. More recently, during the pandemic,
institutional investors dominated housing markets in
metropolitan areas across the country and outbid homeowners
trying to buy single-family homes.
The eviction practices of institutional investors are
concerning. In a study in 2015, my co-authors and I found that
institutional investors had an eviction filing rate of 20
percent in Atlanta; that is 2 eviction filings for every 10
homes that they owned.
We confirmed that this exceedingly high eviction rate was
due to the landlord, not to other factors, by using statistical
modeling. Even with controls for tenant and property
characteristics, renting from an institutional investor was the
biggest predictor of an eviction.
Institutional landlords use eviction to boost profits.
Firms leverage the threat of an eviction to enhance rent
collection, rental increases, or to evict tenants in order to
replace them with higher-income households paying higher rents.
But these profits come at a heavy cost. High eviction rates are
devastating for tenants, neighborhoods, and schools.
In addition to displacement through eviction, institutional
investors profit from gentrification. In a study of
institutional investors' multifamily purchases, we found that
neighborhoods in Atlanta with an institutional investor
purchase of rental housing lost 166 more Black residents than
adjacent neighborhoods. These purchases led to long-term
gentrification of Black communities out of Atlanta.
Many researchers have found that institutional investors
crowd out homeownership at the neighborhood level. We see this
in Atlanta, where homeownership has fallen by 6 percent since
the mid-2000s.
My colleague at Georgia Tech, Dr. Brian An, estimates that
we can attribute 1.4 percent of the decline in homeownership
specifically to large institutional investors. Particularly
during the pandemic, institutional investors have outbid
homeowners and mom-and-pop landlords trying to buy single-
family homes.
In a recent study of Tampa, Miami, and Atlanta, my co-
authors and I found that institutional investors bought one in
six of all single-family rentals last summer. In Atlanta alone,
institutional investors bought over half of the single-family
rentals and 17 percent of all single-family homes.
The prices these firms paid rose by 28 percent every
quarter. That is an increase from an average price of $130,000
in 2019, to $275,000 in 2021. By contrast, household purchase
prices rose by just 9 percent every quarter.
Institutional investors' ability to outbid would-be
homebuyers and charge exceedingly high rents is particularly
concerning for racial and ethnic inequality, although this
affects all communities. That is because institutional
investors continue to target moderate-income Black and Hispanic
neighborhoods.
In our study, we looked at the average neighborhood
demographics of a home that an institutional investor
purchased. The average neighborhood was 84 percent non-White
and 62 percent owner-occupied.
These high market shares in urban submarkets are a far more
meaningful measure of market power than national percentages.
Economists and antitrust lawyers don't define markets
nationally. We look at meaningful regional and local market
definitions.
The increased market power of institutional investors to
affect home prices and set rents is a growing concern. Not only
are there grave effects for households being priced out, but it
is problematic if institutional investors have the market power
to set sale prices of homes in neighborhoods where they have
existing assets that they are using as collateral for their
financial instruments.
Because of the use of corporate vehicles like LLCs and
trusts, it is impossible to identify all of the homes that
these firms purchase. Researchers like myself can only provide
conservative estimates.
We need rental property registries to accurately understand
these firms' growing market share. With accurate data and
meaningful market definitions, policymakers should probe for
anti-competitive practices and undue market power in the home
purchase market and the rental market.
Policy measures should examine ways to strengthen tenant
legal protections so that the threat of eviction is not used to
support the aggressive use of fees and increasing rents.
Thank you, Mr. Chairman.
[The prepared statement of Dr. Raymond can be found on page
101 of the appendix.]
Chairman Green. Thank you, Dr. Raymond.
The Chair now recognizes Ms. Schuetz for 5 minutes to give
an oral presentation of your testimony.
STATEMENT OF JENNY SCHUETZ, SENIOR FELLOW, BROOKINGS
INSTITUTION
Ms. Schuetz. Good afternoon, Chairman Green, Ranking Member
Emmer, and members of the subcommittee.
Thank you for the opportunity to testify today on this
important issue of institutional investors and access to
homeownership. It is an honor to be here before you this
afternoon.
My name is Jenny Schuetz, and I am a senior fellow at
Brookings Metro. My comments today will provide some broader
context on housing affordability and availability in the United
States.
The growth of institutional investors is a symptom rather
than the cause of extremely tight housing markets. Rental
housing is an attractive financial option for investors of all
types because of market fundamentals.
Demand for both rental and owner-occupied housing has grown
during the past decade due to job growth and rising incomes.
Since the Great Recession, the U.S. has not built enough
housing, leading to historically low vacancy rates and rapidly
rising costs.
Private equity firms and other institutional investors
benefit from tight housing supply but they did not create the
problem. Local governments across the U.S. have adopted
policies that make it difficult to build more homes where
people want to live. Zoning rules that limit the construction
of small, moderately-priced homes are politically popular with
existing homeowners and local elected officials.
The burden of high housing costs is not shared equally
across all households. Rising housing costs create the greatest
hardship for low- and moderate-income households. The poorest
20 percent of households everywhere in the U.S. spend more than
half of their income on rent, leaving them too little cash to
pay for food and other necessities. Housing cost burdens have
been rising among low- and moderate-income households for
several decades, well before the growth of institutional
investors.
Black and Latino households continue to face higher
barriers to homeownership, reflecting historic and ongoing
disparities in access to credit. Fewer than half of Black and
Latino households own their homes, compared with nearly three-
fourths of White households.
First-time White homebuyers often receive family assistance
with down payments. Black and Latino households have been
systematically shut out of this means of intergenerational
wealth building, which puts them at a greater disadvantage when
competing with institutional investors.
Housing quality and tenant legal protections are important
to renter households' well-being regardless of who owns the
property. Policymakers should be equally concerned about poor
quality housing and fair treatment of tenants regardless of
whether a rental property is owned by a private equity firm, a
mom-and-pop landlord, a public agency, or a nonprofit
organization.
Media reports have raised concerns about housing quality
and customer service in properties owned by private equity
firms. But the existing data make it difficult to determine
whether there are systemic quality differences between private
equity firms and other types of landlords. Better data and more
transparency are essential to inform better policy responses.
Single-family rentals are an important part of the housing
ecosystem. Homeownership is not the preferred choice for all
Americans or at all points in any person's life. Having a
diverse set of tenure choices and structure types in diverse
neighborhoods is important for economic opportunity. Families
may want to live in communities where they can afford monthly
rent but cannot afford to purchase a home.
Congress can improve renters' and homebuyers' well-being
through four channels. First, work with State and local
governments to expand the supply of housing, particularly
moderately-priced rental and for-sale homes. Several existing
proposals along these lines have bipartisan support in Congress
and are included in the Biden Administration's Housing Supply
Action Plan.
Second, relieve financial stress on low- and moderate-
income households. Increased funding for housing vouchers or
renewing the expanded child tax credit are highly effective
tools and also have bipartisan congressional support.
Third, provide more resources to State and local
governments to assist their efforts in ensuring housing quality
and tenant protections.
Fourth, better data collection from Federal agencies could
increase transparency of rental property ownership.
There are no silver bullets to make housing cheaper and
more abundant overnight. Helping renters and homebuyers will
require sustained and coordinated policy efforts from Federal,
State, and local governments.
Thank you again for the opportunity to testify, and I look
forward to your questions.
[The prepared statement of Ms. Schuetz can be found on page
110 of the appendix.]
Chairman Green. Thank you for your testimony.
I will now recognize Members for questions, and Members are
reminded that they will have 5 minutes for questions, and that
at the end of their 5 minutes, there will be a light to
indicate that they are exceeding their time.
Also, we do ask Members to try to ask their questions such
that they may be answered within the time that they have been
allotted.
I am honored now to recognize the Chair of the Full
Committee, my friend, Chairwoman Waters, for 5 minutes.
Chairwoman Waters. Thank you very much, Congressman Green.
I appreciate this hearing.
I would like to direct my question to Ms. Lopez.
Renters who live in single-family rental units owned by
private equity investors pay higher rents compared to other
renters and are more likely to see steeper rent hikes each
year.
Nationwide, rents have increased at the fastest rate in
decades with year over, U.S. single-family rents raising by 14
percent in April 2022, more than double compared to a year
earlier.
Ms. Lopez, in addition to the aggressive rent hikes, the
committee's survey of the 5 largest single-family rental
companies concluded that fees per rental lease increased by
approximately 40 percent from March 2018 to September 2021, and
that the total number of renters who were falling behind on
late fees and rent have doubled in that time.
Have you observed single-family rental companies taking
advantage of renters through increased rent and fees? Can you
explain how the securitization of rental income creates unique
pressures to increase rent and fees each year?
Ms. Lopez. Yes. Thank you so much for the question,
Chairwoman Waters.
I mentioned a couple of examples in my testimony of the
ways in which some of these companies are taking advantage of
tenants who are otherwise shut out of the homeownership market
by increasing rents.
For example, I named Invitation Homes as one company that
has increased rents by 30 percent in the Phoenix market, 29
percent in the Las Vegas market, and 20 percent in the Atlanta
market, and that is just a short overview. American Homes 4
Rent has also done the same thing.
I also mentioned fines and fees as an important source of
revenue for these companies. I gave the example of Tricon
Residential who said that their profits increased by--or that
they were able to bring in $640 per home, per month, in fee
revenue and anticipate growing this number to $850 to $950 per
home, per month.
To think about that in context for myself, I could not
imagine my housing costs increasing by 30 percent from one year
to the next. I could not imagine being made to pay fines and
fees for things like a smart home system or a pet fee or having
utilities registered in my name, which is one of the examples
that I mentioned of stories I had heard from tenants, and
having those fees add up to $850 to $950 per month.
And I think the survey data also shows that tenants are
struggling to keep up with these fees, too. I was struck by
just how many people are behind on rental and fee costs.
Chairwoman Waters. Thank you.
Do you believe that this incredible increase in rent is
going to spur efforts by neighborhoods for rent control?
Ms. Lopez. Do I think that rent control could help cut some
of these incredible rent increases? I think, absolutely, we
have to consider every single tool potentially available to us.
And I agree with Ms. Schuetz that a lot of these dynamics
are true across many different kinds of rental inventory.
But I think just the level of egregious rent increases that
we are seeing in institutional single-family rental properties
means that we absolutely need to find ways to cap both rent
increases and financing increases.
Chairwoman Waters. I want to thank you very much.
And I yield back, Mr. Green. Thank you.
Chairman Green. The gentlelady yields back.
The Chair now recognizes the ranking member of the
subcommittee, the gentleman from Minnesota, my friend, Mr.
Emmer.
Mr. Emmer, you are recognized for 5 minutes.
Mr. Emmer. Thank you, Mr. Chairman.
Again, as I mentioned in my opening statement, inflation is
at 8.6 percent and Americans actually need solutions right now.
Again, we are here to discuss the institutional homeowners'
role in the single-family rental home market, a market where
they make up only 2 percent.
My colleagues across the aisle have insinuated that
institutional investors take opportunities for homeownership
away from Americans everywhere. What they fail to acknowledge
is that not everyone is able to purchase a home at a mortgage
rate of 6 percent for a 30-year fixed loan, and institutional
homeowners actually give Americans quality, affordable rental
housing.
Thanks to the hidden tax we call inflation, which
definitely isn't hidden anymore, many prospective homebuyers
simply cannot afford to pay for a monthly mortgage and the
hidden costs piled on top like maintenance and repairs.
These institutional homeowners remove the additional
barriers and costs that coincide with homeownership. They
provide maintenance services and many even offer their tenants
financial readiness classes.
Here is the reality. Prices are through the roof. Gas is
up. Groceries are up. Housing is up. Inflation is punching
Americans in the face and, actually, Americans are being sucker
punched when you add on climbing mortgage rates that make homes
more expensive.
Yet, here we are. My Democrat colleagues don't seem to
recognize that Congress' careless spending without regard for
real solutions has made it harder for Americans to save up for
a home.
Ms. Schuetz, can you explain how inflation impacts the
everyday lives of renters?
Ms. Schuetz. I can speak more specifically to the role of
housing costs and the way that housing costs play into
inflation. We know, in fact, that the cost of housing has been
rising faster than household incomes for, roughly, the past 10
years.
So, this is not just a short-term problem that we have seen
with the pandemic, although it has certainly gotten worse with
supply chain shortages that have affected the construction of
new housing.
But I think it is important to remember that this is a
long-term problem caused, fundamentally, by the fact that we
are not building enough homes and that the housing supply has
not kept up with demand. Within the last--
Mr. Emmer. Have single-family rental homes addressed the
increase in demand for suburban and community living, at least
during the pandemic?
Ms. Schuetz. We do see an increase in the demand for,
basically, all types of rental homes. In the past several
years, we have particularly seen an increase in the number of
higher-income renters, people who probably would have been
homeowners in other generations when housing prices were
cheaper.
The growth of high-income renters, and also the growth of
older-renter households, are two of the factors that drive the
demand for single-family rentals.
That said, we also see very high demand for multifamily
rentals and for owner occupancy. Basically, there is demand for
more housing across-the-board.
Mr. Emmer. Right.
Listen, over the past few months my Democrat colleagues
continue to find a scapegoat for inflation. They have
determined that institutions buying entry-level housing are
leaving Americans without opportunities to buy.
Yet, according to the National Association of REALTORS, the
United States is behind, like you pointed out, Ms. Schuetz, in
actual available housing. In fact, we are behind, according to
the REALTORS, by 6.8 million housing units.
Is it true that regulatory barriers at a local level are
impeding or are partly to blame for the problem with the
housing supply across the country?
Ms. Schuetz. Absolutely. The fundamental reason we are not
building enough homes, particularly in high-demand locations,
is that our housing production system makes it very difficult.
A combination of rules, zoning rules like bans on
apartments, large minimum lot sizes, and a discretionary
process where existing homeowners get to weigh in on new
developments and, essentially, have said that they don't want
additional housing to be built. This pushes a lot of the demand
into neighborhoods that either are unbuilt--areas on the urban
fringe--or in places where the existing residents are more
friendly or less able to push back against new development.
Mr. Emmer. Thank you.
And I would also add that the idea that rent controls are
somehow going to solve the problem, that is just another local
regulation that, quite frankly, is going to frustrate the
incentive for people to build more housing when we are already
behind.
I want to thank, again, the chairman and all of you for
being here today, and I urge my colleagues across the aisle to
consider the trillions of dollars we have spent over the last 2
years alone and then decide who has stolen the American Dream
of affording a home.
I yield back.
Chairman Green. The gentleman yields back.
The Chair now recognizes the gentleman from Missouri, who
is also the Chair of our Subcommittee on Housing, Community
Development, and Insurance, my friend, Mr. Cleaver. You are now
recognized for 5 minutes.
Mr. Cleaver. Thank you, Mr. Chairman, and before I even get
into my questioning, I really would like to express my
appreciation for your willingness to bring this issue up to the
subcommittee.
I think it is a critically important issue, and I don't
think that it has been discussed enough around the country, or
if it has, it hasn't been listened to enough.
Let me start. Ms. Lopez, thank you for being here today.
Have you ever heard of, ``coup capitalism?'' You probably
haven't, because I made it up. When I talk about coup
capitalism it is a coup d'etat because there is an overthrow of
the homeownership in the urban core and there is a regime
change that comes in.
I have here, Mr. Chairman, an article from the Kansas City
Star, our local newspaper here in Kansas City, and it was a
pretty extensive story that they wrote last December and it
talks about the land grab on the east side of Kansas City and,
frankly, on the west side, the west side because probably then,
historically, maybe over 100 years, it has been an Hispanic
area, and the near east side has been fully African American.
And they go through and they point out all of the issues
that have arisen, and I began to call it coup capitalism
because the people have been overthrown. They are leaving the
west side. It is probably already lost.
Ms. Lopez, one of my questions is, do you think that the
Federal Government--I don't think the municipal government can
do it--should pass some kind of legislation that would require
these vulture capitalists, before they could come in and do
work, there has to be opportunities for local homeownership and
then local participation in the purchasing of houses and land
in historically poor areas?
Ms. Lopez. Thanks so much for the question, Congressman. I
think that is critical, and you are touching on several very
key things.
One, you mentioned policy at the national level. I think we
all know that right now we have a complete patchwork of
policies that protect homeowners, that protect tenants, that
all come down to the luck of the draw of where you happen to
live, where you happen to have been born, what place you call
your community.
I agree that the most broad-reaching thing would be a
Federal policy, and I think you are absolutely right, make no
mistake about it, these companies engage in equity stripping.
As of 2019, for every $1 of wealth belonging to White
Americans, Black Americans had 17 cents, and these companies
make that wealth gap worse because they buy homes in
communities like yours and, instead, transfer it to
shareholders. It is the exact same thing that happened during
the foreclosure crisis.
So, I think you are absolutely right. We need to do
everything we can to make sure that wealth stays locally and
continues to support a community that is experiencing the same
dynamics you describe, dynamics I have seen in every city I
have ever lived in.
Mr. Cleaver. Thank you very much. I might add right here
that institutional purchases of homes in the State of Missouri
is at 16 percent, which means that those areas are pushed out.
We have 500-unit townhouses that, in terms of the way they
look, but it was one of the first co-ops in the country, and it
is about to go under after all these years.
My greatest fear and the fear of the few residents who are
still in that area is that they are going to wake up one day,
and HUD may sell the property after it eventually goes into
default and so forth if we can't find a developer, and then
would wake up one morning and the international bad people's
corporation--I am just getting started.
Okay. Thank you very much, Ms. Lopez.
And thank you, Mr. Chairman.
Chairman Green. The gentleman yields back.
The Chair now recognizes the gentleman from South Carolina,
my friend, Mr. Timmons, for 5 minutes.
Mr. Timmons. Thank you, Mr. Chairman, and thank you to our
witnesses for being here today.
Another day, another new excuse from my friends across the
aisle trying to explain their role in causing record-breaking
inflation.
First, as you recall, it was that inflation was transitory.
Then, it was a high-class problem, according to the President's
chief of staff. Then, it was just used cars and energy. Then,
it was Putin's fault. Next, it was evil corporations price
gouging, and now they are trying out a new boogeyman, Wall
Street and institutional investors.
None of these attempts to explain inflation have worked,
and with the midterms quickly approaching, and the President's
approval ratings in the gutter, my friends are throwing mud at
the wall in the hope that something sticks.
But the American people are too smart for this. It will not
work. They know exactly who is responsible for the 40-year high
levels of inflation we are seeing. The blame primarily lies
with the Biden Administration and congressional Democrats who
poured trillions of dollars of fiscal stimulus on an economy
that was exploding out of the pandemic shutdowns that my
friends on the left have forced upon the country.
There was so much pent-up demand and Americans had record
levels of savings even before the so-called American Rescue
Plan was passed.
On this committee, Republican Members all raised the alarm
on inflation last spring while this body was deliberating on
the American Rescue Plan Act (ARPA), and so did notable
Democrats like Larry Summers.
But they did not listen. They wanted to expand their social
welfare state to unprecedented levels and to increase every
American's dependence on the Federal Government.
Instead, we got record levels of inflation, which, as my
friend, Mr. Steil, said at our markup last week, is punching
Americans in the face. I would say a more apt description would
be a sucker punch, but I guess reasonable minds can differ on
that.
Anyway, today's hearing is supposedly about how private
equity is buying up all of the single-family homes across the
country and preventing families from purchasing homes, and,
instead, forcing up rental costs. This is just the latest
scapegoat for the broad-based inflation that has spread
throughout our entire economy, including in the housing market.
I actually looked up the data on single-family homes in my
State of South Carolina, and the numbers tell a different story
than the one that the Majority is trying to tell. There are
just over 5,100 single-family homes owned by private equity in
South Carolina. There are over 300,000 single-family rental
units in my State and over 2.35 million housing units in South
Carolina. The percentage of housing units owned by
institutional investors in South Carolina is less than one
quarter of 1 percent. Yet, we are supposed to believe that this
is why housing costs are on the rise.
I am not buying it and I don't think the American people
are either. There is no doubt that inflation across-the-board
and, definitely, in the housing market needs serious policy
solutions that will bring down prices for our constituents.
With that in mind, Ms. Lopez, your organization, the
American Center on Race & the Economy, states on its website,
``We envision a U.S. where land and housing are publicly owned
and used for the overall public good.''
I guess my question is, yes or no, do you agree with that
statement?
Ms. Lopez. Yes.
Mr. Timmons. Can I get a show of hands from the rest of the
panel? Does anyone else believe that all private property and
homes should be owned and operated by the government?
[No response.]
Mr. Timmons. I find it pretty outlandish. I guess I have
one more follow-up.
Ms. Lopez, during the pandemic, your organization attempted
to organize a nationwide rent and mortgage strike, including a
pledge that participants would withhold rent payments from
property owners or lenders whether or not they could actually
pay rent, or whether or not they had even lost their jobs.
Ms. Lopez, yes or no, were you involved in organizing this,
``rent strike?''
Ms. Lopez. Yes.
Mr. Timmons. And you think that it is appropriate if
somebody didn't lose their job, that they should stop paying
their rent or their mortgage?
Ms. Lopez. My recollection is our focus was on people who
had lost their jobs and had lost the ability to pay. But I
think, in solidarity with people who had lost their jobs, we
were absolutely open to people who were interested in engaging
also.
Mr. Timmons. Okay. I don't know if the American people
would agree with that sentiment. If you don't lose your job,
you shouldn't stop paying rent.
Mr. Bogany, what would be the impact on your business if
the government took control of all private property and homes?
Mr. Bogany. It would have a huge impact, and I don't think
our membership and REALTORS would be in favor of that at all.
Mr. Timmons. Okay. I appreciate that answer.
Mr. Chairman, thank you for having this hearing.
Witnesses, thank you for being here.
I yield back.
Chairman Green. The gentleman yields back.
The Chair now recognizes my friend, the gentlelady from
North Carolina, Ms. Adams.
Ms. Adams. Thank you, Mr. Chairman, and I want to thank
Chairwoman Waters, and thank you and the ranking member for
hosting the hearing today. As well, thanks for your testimony
and, in particular, Mr. Chairman, I want to thank the staff of
the subcommittee for working to put together--
Chairman Green. Ms. Adams, your voice was elevated for a
moment, and then it went down. Is there something that you can
do to raise the level of your voice?
Ms. Adams. Okay. What about now?
Chairman Green. A little better, but it is not what it was
at one point.
Ms. Adams. Okay. I am at 100 now. Is that better?
Chairman Green. That is better. Thank you.
Ms. Adams. Okay. Thank you.
I did want to thank the subcommittee for putting the
information together for the study.
But I represent Charlotte and Mecklenburg County in North
Carolina, and we say a lot that we have a lot in Charlotte, and
a lot of great opportunities are here, and a lot of great
people. But we have a lot of things that we need to do, and
affordable housing is chief among them.
We have a shortage of more than 30,000 housing units in the
city right now. But according to the research done by the UNC
Charlotte Urban Institute, single-family rental conglomerates
have built portfolios of homes heavily concentrated in the
starter home market.
Now, according to their research, 93.5 percent of the
11,500 homes that these private equity firms have purchased
were under $300,000, and most of those houses have been in what
we call the crescent, where more Black and Brown families call
home.
Mr. Chairman, without objection, I would like to submit
that article for the record.
Chairman Green. Without objection, it is submitted and
received.
Ms. Adams. Thank you.
Ms. Lopez, can you speak to how this trend exacerbates the
affordable housing crisis and hurts people of color and low-
income individuals?
Ms. Lopez. Certainly, Congresswoman. Thank you for the
question.
I am not at all surprised to hear the findings of the study
that you mentioned. They are consistent with what researchers
all across the country have found, that institutional single-
family rental landlords focus on communities where Black and
Brown families live, and because of the market segment where
many of these institutional landlords focus their purchases,
they have billions of dollars at their fingertips and
sophisticated algorithms that tell them exactly what they
should pay for a property.
People of color and low-income folks simply can't compete
to buy those homes. If families want to live in a single-family
home, of course, there is a high likelihood that they have to
rent from one of these institutional landlords, particularly in
Mecklenburg County, where SFR institutional landlords own as
much as one in four single-family rentals.
I have heard from some tenants the feeling that if you are
stuck with one landlord who is raising your rent $100, or $200
every single month and you want to try to find a different
place to live, you turn around and many of the options
available to you are also single-family rental institutional
landlords who have the exact same business practices that are
very clearly documented in their own SEC filings or things that
they say to their investors. It leaves tenants, in many cases,
feeling like they are stuck without options for where else to
go.
Ms. Adams. Okay. Thank you.
Ms. Schuetz, in your testimony you discuss how private
equity is benefiting from a tight housing market and how
private equity concentrations in a local market can lead to
higher local rental costs, and we might disagree that targeting
this subset of landlords could improve renters' well-being but
we agree on the need to increase the housing supply.
Can you discuss how increasing the housing supply, be it
through public housing or more like the funded housing could
immediately blunt the negative impacts to renters that we have
observed?
Ms. Schuetz. Sure. Thank you for the question.
It is important that we increase the supply of housing both
on the market rate side to absorb higher-income households, and
designated low-income housing.
We know that the poorest 20 percent of households just
don't earn enough to pay for market rate housing without a
subsidy. The question is, how can we most effectively help
those households?
Building new housing takes time, even in relatively fast
building markets like Charlotte. One option is to use things
like the affordable housing trust funds to acquire existing
older apartment buildings and put them under long-term
affordability restrictions.
There are two advantages to doing acquisition over new
construction. One is that it brings the housing online much
faster, and the other is that it is generally cheaper.
We have been talking today about the single-family rental
market but we also know that institutional investors are buying
multifamily rental buildings that are older, often doing a
rehab, and then raising the rents on them and, essentially,
moving them up from a class B or class C to a class A apartment
building.
If public entities or nonprofits were to acquire those
apartment buildings and put them under long-term affordability,
that would increase the affordable stock and do it very
quickly.
Ms. Adams. Right. Thank you very much.
Mr. Chairman, I yield back.
Chairman Green. The gentlelady yields back.
The Chair now recognizes the gentleman from South Carolina,
my friend, Mr. Norman.
Mr. Norman. Thank you, Chairman Green.
I, like Mr. Timmons, sat here and listened to some of this
dialogue and it really astounds me that we are blaming
everybody from institutional investors to greedy landlords to--
I guess Putin has something to do--
Ms. Garcia of Texas. Mr. Chairman? I don't see the
Representative on the screen.
Chairman Green. Mr. Norman, you are no longer on the
screen. Can you please turn on your camera?
Mr. Norman. Oh, I'm sorry. How about now?
Chairman Green. Not quite. No, I don't see you just yet.
Mr. Norman. Okay. How about now?
Chairman Green. I still don't see you, sir.
Mr. Norman. Okay. I'm sorry.
[Pause.]
Mr. Norman. Okay. I don't know what--
Chairman Green. Would you mind if we give you an
opportunity to see if you can make an adjustment? I will go to
one additional person and then come back to you.
Mr. Norman. Sure. That would be great. Thank you.
Chairman Green. Well, you know what? Now, I have a picture
of what appears to be something that you might have in your
home.
There you are. You are up now.
Mr. Norman. Okay. Thank you. I'm sorry. We had technical
difficulties.
Chairman Green. Go for it.
Mr. Norman. As I sit here and listen, it astounds me that
everybody is blaming different ones. I haven't heard Putin's
name and I haven't heard Santa Claus yet. But I guess, given
enough time--
Housing is what I made a living doing. Do you all realize
how many trades are affected by one thing and one thing alone:
gas prices? It is over 137 different trades. Now, multiply the
increase in doubling the gas. No wonder people can't afford it.
Ms. Schuetz, you mentioned that there is no silver bullet.
There is one silver bullet that could happen overnight, which
is this Administration opening up the gas from the Keystone
Pipeline from Canada, from Alaska, and not buying it from rogue
countries that do not like us.
That would affect the housing industry more than anything.
As housing goes, so goes the economy, and it astounds me that,
I think Dr. Raymond, did I hear you right that these
institutional investors are using evictions to boost profits?
Did I hear that right?
Ms. Raymond. That is correct.
Mr. Norman. Where did you get that information?
Ms. Raymond. There has been a fair amount of research
looking at how landlords can use the threat of eviction to
pressure tenants to accept even higher rents.
You think about housing as a basic need. It is like water,
air, and food. You can't go without it. If somebody says, hey,
I am going to take your TV away or your luxury good away, you
will say, that is fine, I can live without it.
But if somebody says, I am going to take your house away
unless you pay me $400 more next month--
Mr. Norman. Excuse me. My time. Dr. Raymond, do you realize
what it takes to evict somebody?
Ms. Raymond. In Georgia, it is pretty easy. In Georgia, it
is very easy.
Mr. Norman. No, ma'am. The moratorium of this--
Ms. Raymond. Some States like North Carolina and New York--
Mr. Norman. No, ma'am. I am reclaiming my time. Have you
ever owned property and had to evict anybody? That is the last
thing you want to do.
You have this thing called leases where you sign people up
for 12 months, typically, or 6 months, or different times, and
to evict is a cost to the investor. I have never heard this
before. You are telling me something--of course, now, you are
talking about your work--
Ms. Raymond. Investors don't like vacancies. Actually,
during the pandemic we saw that--
Mr. Norman. Reclaiming my time. Ms. Lopez, did you say that
you are objecting to the different fees--pet fees, smart home
fees? Did I hear you right on that?
Ms. Lopez. I said those--
Mr. Norman. Ms. Lopez?
Ms. Lopez. Yes. Can you hear me?
Mr. Norman. Okay. Yes, ma'am.
Ms. Lopez. I said those fees can be concerning when they
are required of tenants. Absolutely, I would object if they
were required.
Mr. Norman. Okay. Well, you know that up front before you
sign a tenant up. The reason you have pet fees is that
sometimes animals cause problems in an apartment or in a home.
Sometimes, it takes a tremendous amount of money to go back and
remediate the things that come with owning animals. So, you can
either have a pet or not.
Now, Ms. Lopez, I think I understood you to say that rent
controls probably would be a good thing?
Ms. Lopez. In an environment where people are facing 30
percent, even 10 percent, rent increases from one year to the
next, I think we need to find ways to mitigate people facing
the impacts of those dramatic rental cost increases.
Mr. Norman. Okay. Let me just say this, Ms. Lopez. If you
want to stop construction and stop people from investing, you
try rent controls.
Would you be in favor of the government having a tax
control as well? Because we have seen in most cases to buy
property, to develop, to put the infrastructure in, to build
structures, the regulations have gone up, some as high as 35
percent of your total project.
Are you in favor of limiting the government from that, from
raising their regulatory cost?
Ms. Lopez. I am not sure I understand exactly what the
mechanism you are describing is. But I can--
Mr. Norman. If you are in favor of putting rent controls on
those who build apartments and build housing and rent it, would
you be in favor of putting controls on the government from
raising taxes that increase the regulation?
Ms. Lopez. I am still not sure I understand the mechanism
you are describing.
Mr. Norman. Okay. What is good for the goose is not good
for the gander. You are in favor of limiting any investor--put
limits on the--and I think I heard you say that the investors
make rents go up $100 a month. Did I hear you say that?
Ms. Lopez. I have talked to tenants who have struggled to
cover $100 to $200 per month rent increases.
Mr. Norman. Rental increases. Okay. I have never heard
that.
Typically, you have a lease. I have never heard of an
investor that could--you sign a 6-month fixed income. I have
never heard of that. Maybe I am just in the wrong part of the
country.
We are having a severe problem with construction because of
this Administration stopping the decline of gas and oil.
Chairman Green. The gentleman's time has expired.
I will ask you to submit your question in writing.
The Chair now recognizes the gentlewoman from Michigan, my
friend, Ms. Tlaib.
Ms. Tlaib. Thank you so much.
Thank you so much, Ms. Lopez, for pointing that out,
because it is happening in my community and we are one country,
one nation, and I know that when some of our families are
struggling to pay rent and especially increases, we have seen
it over and over again because the threat of evicting people if
they do not comply and changes are done constantly to many of
our families who are renting.
It is the reality. These are not things that--many of the
folks, the housing groups that I work with are representing
them in court with some of these challenges with folks not
following through on their leases or agreements.
The housing increases are second after gas prices. So, you
can't really address inflation without taking on the housing
crisis. And by the way, the housing crisis existed prior to
what we are dealing with right now with inflation.
Dr. Raymond, isn't that true? Isn't it true that the
housing crisis has really impacted the cost of living for
families prior to everything that my--the rhetoric coming out
of many of my colleagues today?
Ms. Raymond. Absolutely. During the Trump Administration,
we had an affordability crisis that extends to this day and is
exacerbated by the pandemic, which is responsible for a lot of
the inflation that we are talking about, although I really
think that what we are talking about here is institutional
investors, not inflation. This is not a hearing about
inflation.
Ms. Tlaib. Yes.
And, Mr. Bogany, I saw you nodding your head. You are an
agent. You see this. This has been a crisis in our country no
matter, really, the Administration, and we haven't been able to
address it because we allow corporations and corporate greed to
come before the needs of our American people.
Mr. Bogany. We have a lack of inventory and that is just
the bottom line. This is straight Economics 101, and what is
happening, the reason these people are renting, is because the
investors are buying the properties and don't give them an
opportunity to buy it.
And nothing comes out of investors buying property. It
doesn't increase the economy. You are enriching the rich, where
if you are selling a piece of property you are going to expand
the economy because everybody now has an opportunity to grow
and get more money.
For every house that is sold, $53,000 to $55,000 on average
goes back into the economy. For every new home that is sold,
$113,000 goes back into the economy. When somebody rents
something or an investor buys a house, no money comes into the
economy.
Ms. Tlaib. Yes. Very few benefit from that. I completely
agree.
We are not trying to stop that. We are just trying to
stop--because what happened is people benefited from the
suffering of our families during this recession--the Great
Recession.
In the aftermath, in my community alone, 100,000 properties
were foreclosed on for just delinquent property taxes because
of the crisis. Many were overtaxed by $600 million.
We are dealing with that crisis, as well as over half of
the inventory in my community right now is valued at less than
$100,000 and my residents are struggling to obtain mortgages,
just are really struggling to get these traditional banks--
because it is not profitable for them, let alone financing the
need to repair our aging single-family housing stock and living
conditions.
I have partnered with Representative Kaptur and, of course,
Chairwoman Waters, to propose the Community Restoration and
Revitalization Fund, which was included in President Biden's
agenda and Build Back Better.
It would have provided Federal funds to land banks,
community land trusts, and non-profit housing partners. I know
these are not the corporate-friendly folks that my colleagues
on the other side of the aisle support.
But these are community-based organizations that help
families redevelop vacant properties into affordable rental
housing, starter homes, and shared equity homes. There is
nothing wrong in being able to invest again into 501(c)(3)s
that are doing the work and providing housing for so many of
our families.
Mr. Baker, would investing in our neighborhoods with
nonprofit community partners be an effective alternative to
allowing this whole private equity scheme to continue to buy up
our housing stock?
Mr. Baker. Thank you, Representative.
What we have seen from the private equity investment in
housing, sort of this is--we have kind of seen the outcome in
terms of sharply rising rents, in terms of dramatic, in some
cases, maintenance issues that lead to life safety issues,
frankly, for residents.
We have seen these firms, really, being the quickest to
evict residents or to file to evict residents during the
pandemic and so, certainly, an alternative that avoids this
incentive to generate high returns or--
Ms. Tlaib. I know. It is all about making money no matter
what, even when it is such an exorbitant, disgusting amount of
profit versus what they could have been. They just don't care
because it is an opening.
I have a number of questions, Mr. Chairman. I will send
those to the witnesses. I cannot thank you enough for having
this very important hearing.
Chairman Green. Thank you very much, and the gentlelady
yields back.
The Chair now recognizes my friend, Ms. Garcia, the
gentlelady from the State of Texas.
Ms. Garcia of Texas. Thank you, Mr. Chairman, and I, too,
want to thank you for putting together such a fine group of
witnesses to discuss this very, very important topic.
And this is not an excuse. This is not make believe. This
is real and it is happening across America, and I know in my
district, which is 77 percent Latino, it is a very critical
topic, this housing shortage, and particularly what is
happening in this arena.
I can tell you that throughout Harris County and Houston--
my district--the housing market and particularly the rental
market has been volatile. Specifically for renters, the cost
burden has gotten worse and does not show any signs of
improving.
The share of renters who are cost-burdened has now become
the majority of both Houston and Harris County as rent has
increased faster than wages, and it appears it is becoming more
and more difficult for Houstonians, particularly Latino and
Black Houstonians, to get out of the rental market and purchase
a home.
And I just want to, first, start with Ms. Lopez and just
tell me, Ms. Lopez, almost every incident and example that you
use I have heard of it.
Unlike my colleague who has never heard of it, I can tell
you I have heard of it, not just as a Member of Congress now
listening to constituents, listening to town hall meetings,
but, more importantly, during my days in the housing landlord/
tenant section with legal services.
And some of this is not new. Some of this was happening
when I was practicing law back then, and that is the sad part
that these things are still happening. It is just that the
dollars and what is at stake is even greater because as urban
areas have gained population, we have not really also gained in
the housing market.
My question to you is, you said in your testimony that what
we needed was true, affordable housing. You used the word,
``true.'' Can you just tell me in a minute or so what you mean
by true, affordable housing?
Ms. Lopez. Sure. I would be happy to. Thank you so much for
the question, Congresswoman.
As someone who also has worked in housing in my local
community--I live in San Antonio, Texas--there are so many
people who live in what is termed affordable housing yet who
tell me that they pay well over 30 percent of their income on
rent. Maybe they pay half of their income on rent. Maybe they
pay more.
I think that there is a national standard of 30 percent. I
think even that, if you are somebody who makes $20,000 a year
like many of the public housing residents that I have spent
time talking to, that is still a massive share of your income
to spend on rent every single month.
So, 30 percent or lower when possible.
Ms. Garcia of Texas. Okay. Thank you.
And, Mr. Bogany, I cannot help but ask you a question as a
fellow Houstonian, given your direct experience here in the
Houston market, a major urban metropolitan area, from your
perspective, how do you see the impact of these home equity
firms and these institutional investors buying homes--how has
that impacted our Houston market, and have you seen a growth in
that?
I know I have heard of investors buying homes specifically
for the purpose of putting them on Airbnb and these networks
particularly around places that are tourist attractions or
destination points like around the Medical Center here in
Houston or around the Tech Center.
Are you seeing that here in Houston?
Mr. Bogany. Yes. I am seeing it all over Houston and you
are right, the Airbnb deal, any time it is anywhere where there
may be a tourist attraction you are seeing it.
The bottom line, to me, is that these homeowners can't buy
these houses because they are being outbid. When you have an
affordable house come up and you have 20 bids on that house--20
consumers trying to buy that house--and the investor comes in
and just writes a check for it and he outbids the other 19
people, it is a huge problem in the Houston area.
And we don't have a lack of people wanting to buy. They
can't buy. They are being forced to rent because they can't buy
these homes because of the past situations in our economy, past
situations with rent.
It is cheaper to own a home in Houston than rent, and that
is the thing, and I think that is across the country, to a
certain extent. It is cheaper to own. But they are not getting
that opportunity.
Ms. Garcia of Texas. Okay. Thank you, Mr. Bogany.
And, Mr. Chairman, I see I only have 7 seconds left. I have
two more questions. I had one for Mr. Baker, and one for Dr.
Raymond, so I will submit those in writing for the record and
hope to hear their responses.
But I really wanted to focus on the eviction rate because I
think that is just horrific that it is--I think Mr. Baker said
that it was more in the non-White neighborhoods where evictions
were higher than other neighborhoods and we really need to
explore that.
Thank you. With that, I yield back.
Chairman Green. The gentlelady yields back.
And the Chair now recognizes my friend from Georgia, the
gentlelady, Ms. Williams.
Ms. Williams of Georgia. Thank you, Mr. Chairman, and I
want to thank all of the witnesses for joining us today,
especially my constituent, Dr. Raymond from Atlanta.
As I mentioned in my opening statement, one of the biggest
problems with the increasing control of large landlords over
single-family and multifamily housing is how difficult it is
for tenants to hold their landlords accountable.
Sometimes, that results in fully deteriorated housing like
Forest Cove here in Atlanta, and as Dr. Raymond highlights, it
can also mean poor regular maintenance, high eviction rates,
high hidden fees, and aggressive rent increases in investor-
owned rentals.
Dr. Raymond, what would be the value of the Federal
Government providing more avenues and resources to help hold
large landlords accountable for predatory behavior toward their
tenants?
Ms. Raymond. I think that it is part of the reason that
these firms are able to expand so massively in cities like
Atlanta and in the Sun Belt is because of the amount of
leverage that they have over tenants to increase rents, to
apply hidden fees.
So, balancing that playing field between landlords and
tenants a little bit so that tenants have a balanced set of
rights and obligations would be really helpful, and I think
also that we need to think about homeownership and how
homeownership is being eroded.
Homeownership is a very important way to build household
wealth. It is a very important way for people to be able to
access their equity to support college funds, and retirement
funds, and we are seeing the homeownership rate in places like
metro Atlanta decline by 6 percent.
And I agree that we need more construction, but I also
don't think of Atlanta as being particularly supply-
constrained. This is not Boston or San Francisco. This is
Atlanta, Georgia. We are pretty relaxed about building new
housing.
I am all for new construction but I also think that we need
to do things to shore up homeownership in our City, which we
are seeing decline because of institutional investors, and I
also think that we need to do something to reduce these
eviction rates because they are just way too high for schools
to operate, for people to live their lives.
Ms. Williams of Georgia. Dr. Raymond, just to go down the
eviction rate a little more, your research has explored how
evictions are more likely to be pursued by institutional
investors and larger corporations who own single-family
rentals.
What effects has this had on the broader housing insecurity
trends in places like Atlanta and, we are seeing it every day
here. The mayor has been very vocal about it, and what effects
are you seeing?
Ms. Raymond. I would say that overall, we have an extremely
high eviction rate in a State like Georgia. I think South
Carolina has among the highest eviction rates in the country
but Georgia is up there as well.
In Fulton County, we see around 20 percent every year in
terms of the eviction filing rate and then around 6 percent of
completed evictions. There is a difference between starting the
eviction process and then actually evicting someone from their
home and that has been pretty consistent over time, and it is
just too high.
When we look at elementary schools like the elementary
school served by Forest Cove, a lot of the school teachers were
saying, we can't teach when a third of our students are
disappearing every couple of months and then another third are
coming in. It is completely disruptive and that impacts the
next generation.
So, it is a great way to squeeze as much rent out of your
tenants as possible. I understand it from a profit-seeking
perspective. Institutional investors are there to make a profit
and it is a great tool for that. But the harm that it is doing
to our communities is unsustainable and we have an
unsustainably high eviction rate in Georgia. It needs to be
lower, much lower.
Ms. Williams of Georgia. Thank you, Dr. Raymond.
In Congress, one of my main focuses is closing the racial
wealth gap, which we know Atlanta leads the nation in,
unfortunately, and that means promoting homeownership.
In your testimony, you mentioned that institutional
investors purchasing single-family homes can crowd out
individual homeownership.
What policy should Congress pursue to help put individual
homeowners on a more equal footing with institutional investors
in purchasing single-family homes, and what impact would
successful policymaking in this area have on closing the racial
wealth gap?
Mr. Bogany. I think if we waive the 90-day flip rule, we
incentivize sellers to sell to first-time homebuyers with tax
benefits, maybe a tax credit of some sort, and I think if we
increase the housing voucher money where people are able to buy
homes with their housing voucher, and some of these landlords
that we have been talking about won't even take housing
vouchers. So, those people are still having a hard time looking
for a house.
I think those are the three things that I would say working
in to try to increase homeownership and increase landlords to
take housing vouchers. They will not take housing vouchers. I
am sharing with you what is happening out here in the field.
Ms. Williams of Georgia. Thank you so much.
And, Mr. Chairman, I am out of time, but I will ask for the
other witnesses to answer that final question in writing for me
so that we can actually get solutions and help the people that
we are in Congress to serve.
Thank you, Mr. Chairman.
Chairman Green. Thank you.
The Chair would ask that the witnesses please submit their
answers in writing.
And the Chair will now recognize any other Members who
desire to be heard before the Chair poses questions. Are there
any other Members available and desiring to be heard with
questions before the Chair poses questions?
[No response.]
Chairman Green. Okay. Hearing none, the Chair now
recognizes himself for 5 minutes for questions.
I remember what it was like during the Great Recession, and
we had testimony before this committee indicating that people
of color, and more specifically African Americans, lost a
generation of wealth--a generation. This is why it was called,
to a certain extent, a predatory lending process that was
taking place. We now have what I call predatory purchasing
taking place.
Mr. Bogany, would you tell us why you would agree that this
is predatory purchasing, the behavior that is being exhibited?
Mr. Bogany. A lot has to do with the purchasing of these
homes. If you look at where all of the negative--the predatory
lending is all in African-American and Brown neighborhoods. It
is nowhere else. It is all there, and what is happening is that
when our people are so far behind based on past issues we have
never really dealt with the housing discrimination issue.
We talk about it, but we haven't really dealt with it. We
have rules on the books right now, Congressman, that are not
being enforced, and we are trying to enforce it.
If you just look at what is happening right now up in
Denton, Texas, with those 81 families who are being evicted
because they own housing vouchers--not that they didn't keep
their yard up, not that they destroyed the neighborhood; it is
because of where their income comes from to do their vouchers.
So, we have to do a better job with making monies available
with mortgage credit certificate programs, down payment
assistance programs.
And we all seem to think that we need affordable housing
for single families. It could be a condo. It could be a
townhouse. There are things that we don't always have to say
everything has to be single family. We have to start trying to
grow income, and currently, in my community, there is no income
being grown.
Chairman Green. Thank you, Mr. Bogany.
The Chair would ask Ms. Lopez to respond to the question.
Is this predatory purchasing, Ms. Lopez, the way these equity
funds are behaving, moving into certain areas, excluding other
areas?
Ms. Lopez. Yes. Thank you for the question, Mr. Chairman.
It is, unquestionably, predatory purchasing. I think, as
Mr. Baker's testimony noted, there are multiple instances where
many of the heads of these companies have said whether in their
initial public offerings or elsewhere that there is an
incredible opportunity from a business standpoint presented by
people being locked out of homeownership.
These companies seized on that opportunity, bought these
homes, and are counting on people not being able to buy homes
but still wanting single-family rentals, often in Black and
Brown communities.
So yes, 100 percent, and you look at the rent increases
that they are charging, the rents that they charge. They are
banking on really high revenues and fee revenue being generated
through both rents and fees because they own these assets.
Chairman Green. Let us talk for a minute about the wealth
gap. It is important that we do all that we can to try to close
it. Ms. Schuetz, is what we are doing or seeing occur with
these predatory purchases going to close the wealth gap?
Ms. Schuetz. Thank you for the question.
We know that homeownership is actually the single biggest
contributor to the racial wealth gap, that Black and Latino
families have been excluded from being homeowners and prior
generations were not able to build up money to pass along to
their kids and grandkids, which makes it that much harder to
get into homeownership now.
But one thing that is important to remember is that you
build wealth and homeownership over time, and so it is not that
you buy a home and suddenly are wealthy. You pay down the
mortgage and develop wealth over time, which means that even if
you got rid of all of the discrimination--
Chairman Green. If I may, let me just ask this question. If
you cannot buy a home because the homes that first-time
homebuyers might acquire are being acquired by large
corporations in concentrated areas, does that help a first-time
homebuyer who might be a person of color?
Ms. Schuetz. The difficulty of getting into into first-time
homeownership is not just a factor of private equity.
As Mr. Bogany pointed out, you have bidding wars where 20
people are bidding on the same house. Even if you took out the
private equity firm that won, you would still have 19
individual homebuyers who don't win that house.
Ultimately, we are not going to be able to get enough
people into homeownership unless there are enough homes for
them to buy.
Chairman Green. The time of the Chair has expired.
I regret to tell you that my time has expired. I assure you
that I would love to hear more from you, but my time has
expired.
And I will now--
Mr. Emmer. Mr. Chairman?
Chairman Green. Yes?
Mr. Emmer. Mr. Chairman, Tom Emmer seeking recognition.
Chairman Green. For what purpose, please?
Mr. Emmer. There are a couple of letters that I would like
to introduce for the record if the Chair will allow, and I also
wanted to point out for the Chair and the rest of the folks on
the hearing, Ralph Norman, our colleague from South Carolina--
Chairman Green. Excuse me, sir. Your time for giving your
statements has lapsed. If you would like to introduce something
into the record, the Chair will entertain this, but not an
additional statement.
Mr. Emmer. I was only welcoming Ralph Norman to the
committee and to your subcommittee, sir.
Chairman Green. Okay. Well, you may consider him welcomed,
and thank you.
Mr. Emmer. Thank you. I would like to mention two letters
that we received in advance of the hearing. The first is from
the National Rental Home Council regarding the question posed
by the title of today's hearing, which is, ``Where Have All the
Houses Gone?'' The letter says the answer is simple. They were
never built in the first place, and it describes the gap
between supply and demand and how it drives up home prices.
Chairman Green. Excuse me. If you desire to enter any
additional--
Mr. Emmer. And the second one is from The Amherst Group.
Chairman Green. Excuse me. The Chair is speaking, sir.
Mr. Emmer. Sorry, Mr. Chairman.
Chairman Green. You may enter your exhibits, without
objection.
Mr. Emmer. Thank you.
Chairman Green. But we will do it without the additional
commentary.
Mr. Emmer. Thank you, sir.
Chairman Green. Okay. The Chair accepts the exhibits
without objection.
And now, the Chair would like to thank our witnesses for
their testimony today.
The Chair notes that some Members may have additional
questions for these witnesses, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
This hearing is now adjourned.
[Whereupon, at 1:37 p.m., the hearing was adjourned.]
A P P E N D I X
June 28, 2022
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