[Senate Hearing 117-667]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-667


      HOW PRIVATE EQUITY LANDLORDS ARE CHANGING THE HOUSING MARKET

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                                   ON

  EXAMINING HOW THE PRIVATE EQUITY BUSINESS MODEL HAS BEEN PREYING ON 
                    PEOPLE SINCE THE HOUSING CRISIS
                               __________

                            OCTOBER 21, 2021
                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                
                                
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                
                                

                Available at: https: //www.govinfo.gov /
                
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
52-203 PDF                 WASHINGTON : 2023                  
                


            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                     SHERROD BROWN, Ohio, Chairman

JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
JON TESTER, Montana                  MIKE CRAPO, Idaho
MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia                  JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                     STEVE DAINES, Montana

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                Megan Cheney, Professional Staff Member

                 Dan Sullivan, Republican Chief Counsel

                  Jonathan McKernan, Republican Detail

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                       THURSDAY, OCTOBER 21, 2021

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    28

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     3
        Prepared statement.......................................    29

                               WITNESSES

Sofia Lopez, Deputy Campaign Director on Housing, Action Center 
  on Race and the Economy........................................     6
    Prepared statement...........................................    31
    Responses to written questions of:
        Senator Toomey...........................................    78
        Senator Reed.............................................    78
Holly Hook, Manufactured Home Resident and MHAction Leader in 
  Swartz Creek, MI...............................................     7
    Prepared statement...........................................    41
Norbert Michel, Vice President and Director, Center for Monetary 
  & Financial Alternatives, Cato Institute.......................     9
    Prepared statement...........................................    42
Michael Hendrix, Senior Fellow and Director for State and Local 
  Policy, Manhattan Institute....................................    10
    Prepared statement...........................................    57
Desiree Fields, Assistant Professor of Geography and Global 
  Metropolitan Studies, University of California, Berkeley.......    12
    Prepared statement...........................................    59
    Responses to written questions of:
        Senator Toomey...........................................    81
        Senator Sinema...........................................    83

              Additional Material Supplied for the Record

Statement submitted by ROC USA...................................    86
Statement submitted by Hometown America..........................    89
Statement submitted by The Manufactured Housing Institute........    93
Statement submitted by Inqulinxs Unidxs for Justicia (United 
  Renters for Justice)...........................................   100
Letter submitted by Pretium......................................   105
Schu-Mark Graphic................................................   107
``Protecting Companies and Communities From Private Equity 
  Abuse''--PESP..................................................   108
``How Private Equity Landlords are Changing the Housing 
  Market''--PESP.................................................   135

                                 (iii)

 
      HOW PRIVATE EQUITY LANDLORDS ARE CHANGING THE HOUSING MARKET

                              ----------                              


                       THURSDAY, OCTOBER 21, 2021

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10 a.m., via Webex and in room 538, 
Dirksen Senate Office Building, Hon. Sherrod Brown, Chairman of 
the Committee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. The Senate Committee on Banking, Housing, 
and Urban Affairs will come to order. Today's hearing is in a 
hybrid format. Our witnesses are testifying in person, one of 
them in person--thank you for joining us in person, sitting by 
yourself--and the other four virtually. Members have the option 
to appear either in person or virtually.
    For those joining remotely, a few reminders. Once you start 
speaking there will be a slight delay. To minimize background 
noise, please click your Mute button until it is your turn to 
speak. You should also have one box on your screen labeled 
``Clock''. For those of you joining virtually you will hear a 
bell ring when you have 30 seconds remaining and then again 
when your time has expired. If there is a technology issue we 
will move on and try to come back.
    Our speaking order will be as usual, by seniority, 
Republican, Democrat, Republican, Democrat.
    One thing seems to be pretty much certain in this economy: 
no matter what happens to most Americans--a financial crisis, a 
global pandemic--Wall Street finds a way to profit off of 
everybody else's pain.
    We remember 2008. That was my second year in the Senate. 
Sitting on this Committee we saw what happened in our country. 
Nine million workers lost jobs. Workers' savings were wiped 
out. Ten million families lost their homes and everything that 
went with them--months and years of mortgage payments, their 
neighborhood school, the family pet, the stability of knowing 
where you live, where your kids would go to school, maybe even 
where you would attend church for the next 20 or 30 years. All 
that changes when someone is evicted or loses a home.
    As families watched their dreams crumble, Wall Street--no 
surprise--found new opportunities to profit from the 
devastation it created. As families--disproportionately 
families of color, who had been targeted with predatory loans--
lost their homes, private equity firms with access to cheap 
cash were waiting to scoop them up.
    Following the financial crisis of '08, private equity funds 
bought families' homes in cash, often at foreclosure auctions. 
They bought the loans of the hardest-hit borrowers in bulk from 
FHA and the GSEs. Professional investors were not shy about 
what made it possible, and profitable, for them to buy up tens 
of thousands of homes.
    They told investors, and these are all quotes, ``Recent 
turbulence in U.S. housing and mortgage markets,'' created a 
``unique opportunity.'' The availability of large quantities of 
single-family homes at ``distressed prices,'' and ``strong 
demand from tenants'' meant the opportunity for ``attractive 
yields.''
    ``Unique opportunity'' for ``attractive yields.'' What 
could possibly go wrong for Wall Street?
    Think about that. In plain English, that meant take 
advantage of the foreclosure crisis, of course, the crisis that 
turned homeowners' lives upside down and gutted their hard-
earned savings, to give Wall Street billionaires the chance to 
buy up homes for less than they are worth and rent them out at 
a steep profit. And this is personal to me in the sense that 
the ZIP code that Connie and I live in, in Cleveland, 44105, 
that ZIP code had more foreclosures in 2007 than any ZIP code 
in the United States.
    Let us also be clear. There would be, quote, ``strong 
demand from tenants'' because Wall Street preyed on people and 
cost them their homes. They would have to rent at those higher 
prices, locking in tenants, with no other options, for years 
into the future.
    The largest investors in the world went on a buying spree, 
and they shopped strategically. Neighborhoods with good 
schools, in Atlanta, Phoenix, Tampa, and Charlotte, became the 
centers of investment. By 2020, just seven cities contained 
more than half of the homes owned by institutional investors. 
Nobody ever accused them of being stupid.
    And as some private equity funds were buying single-family 
homes, another group of funds started targeting--and this is 
maybe even worse, maybe not, but we will see--started targeting 
manufacturing housing communities. The nearly 38,000 
manufactured housing communities around the country have 
traditionally been owned by small, local companies. The 
families who live there own their homes, but rent the lot where 
their home is placed. Many of the families who live in 
manufactured housing communities are low-income or on fixed 
incomes. Their median income is $35,000 a year. That does not 
leave room for a rent increase or a broken-down car, let alone 
being able to afford to pick up and relocate the home they own 
to a cheaper lot.
    So when big investors began buying up these communities 
after the crisis, many of them raised rents, they added new 
fees, they changed their policies of the previous owner, all 
without fixing up the communities the way they promised 
residents they would.
    Residents like Ms. Hook, who is joining us remotely today, 
and like manufactured homeowners I met in Iowa a couple of 
years ago, are left with an impossible choice: abandon the home 
they own with nowhere to go, with literally nowhere else to 
take their home, or pay rent, or try to pay rent they cannot 
afford.
    That private equity business model has been preying on 
people since the housing crisis. No one should be surprised 
that in the turmoil of a public health and economic crisis, 
Wall Street runs a similar playbook.
    Today, there are few affordable options in many places. 
When private equity comes in and buys up homes in their town, 
renters are often left with no choice other than to accept the 
rising rents. And remember what, in the book Evicted, Matthew 
Desmond says, ``The rent eats first.'' You have to pay your 
rent before you can do almost anything else.
    One of the largest single-family rental firms reported 
``record-breaking results'' at the end of 2020. A resource for 
manufactured home community investors reported that properties 
just became more valuable.
    It is a variation on the same theme, no matter the 
industry. They buy up companies like Toys `R Us and Sears, lay 
off workers to show a profit on their balance sheet, then close 
the business. They buy up local newspapers, fire journalists, 
and any oversight or coverage of their corporate greed tends to 
disappear. They buy up nursing homes, they raise the prices, 
and they neglect residents.
    It is all the same. Private equity profits depend on 
squeezing every last nickel from workers and renters, without 
any kind of real investment in their employers or their 
communities.
    It is a symptom of one of the biggest problems in our 
economy. The Wall Street system is not set up to prize long-
term investment. Private equity is all about the quick buck; 
everyone else be damned.
    Today, we will look at how these firms have changed the 
housing market. We will hear from witnesses about how this 
hurts pretty much everyone except the big investors--renters 
pay higher rents or are forced out, families hoping to someday 
own their own home are priced out. We will begin to hear what 
we need to do to make sure that every family, whether in 
Columbus or Atlanta or Charlotte, has a safe, affordable place 
to call home.
    Ranking Member Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman, and welcome to our 
witnesses.
    I must say I am a bit puzzled by today's hearing topic. It 
seems intended to demonize people who use their own money to 
buy, and even build, as little as 1 percent of the single-
family houses in America.
    At least one of today's witnesses represents a group that 
rejects the concept of private property altogether, stating on 
their website as they do, and I quote, ``we envision a United 
States where land and housing are publicly owned,'' end quote. 
Let me just say for the State ownership of homes. In fact, it 
is a big part of the American dream.
    Now there is nothing wrong with people renting homes 
instead of, or before, becoming homeowners, and there is 
nothing wrong with investors putting their own money to work to 
meet the needs of renters.
    Now if Democrats are concerned about investors crowding out 
homebuyers then I hope they would agree that taxpayers 
certainly should not subsidize loans to investors. 
Unfortunately, the Biden administration has a different view. 
The Administration lifted existing restrictions on the ability 
of Fannie and Freddie to buy loans from single-family 
investors.
    That is a taxpayer giveaway. That is why I am introducing 
legislation to prohibit the GSEs from acquiring investor 
property mortgages, and I hope my colleagues will cosponsor it.
    Today what I think we need to focus on is the $3.5 trillion 
elephant-in-the-room, the Democrats' reckless tax-and-spend 
spree, which includes $300-plus billion for housing.
    Billions of this aid is not targeted. Some of these 
programs have weak means testing and loopholes. Forget work 
requirements, even for able-bodied adults with no dependents. 
They, and many people of above-average income, will do quite 
well under some of these programs.
    Let us consider a few of the bill's misguided housing 
provisions. Start with the $9 billion in downpayment assistance 
for ``first time'' and ``first generation'' homebuyers. Well, 
this is rife with problems. First of all, you can qualify even 
if you or your parents previously owned a home. So much for 
``first time'' and ``first generation.''
    Second, you do not have be low income. A member of Congress 
could qualify for a taxpayer-funded downpayment in Washington, 
DC, under this program.
    Third, there is an invitation to mortgage fraud. A 
homebuyer only has to attest to being a first-generation 
homebuyer. There is no other diligence is required. And in 
fact, lenders are explicitly exempt from liability even if they 
knowingly accept a false attestation.
    But worst of all, this program is a thinly disguised 
attempt to give assistance to homebuyers based more on the 
color of their skin than their financial need, something that 
is very likely unconstitutional.
    Democrat Chairwoman Maxine Waters has said the objective of 
this program is to ``help address the racial wealth and home 
ownership gaps.'' The director of the liberal National Fair 
Housing Alliance has said, ``you cannot address issues of 
racial inequity if you do not address housing inequity. It is 
an impossibility. They're so inextricably linked.'' And thus, 
the bill text directs the HUD Secretary to allocate funds in 
part based on, quote, ``racial disparities in home ownership 
rates,'' end quote.
    Now increasing wealth and home ownership rates among 
minorities is a fine goal, but designing race-based policies 
and benefits is not.
    The Democrats reckless tax-and-spend bill also has $80 
billion for renovating public housing. Now this is a bit odd 
because the Biden administration requested only $40 billion. So 
why does this bill have $80 billion?
    Well, it just so happens that the New York City Housing 
Authority wanted $40 billion all for itself. But our Democrat 
colleagues knew they could not very well pass a bill that sent 
100 percent of that money to New York City. It might be a bit 
of a problem for the 48 Democratic senators who do not 
represent New York.
    So instead, Majority Leader Schumer publicly promised to, 
quote, ``double down'' on the Administration's proposal and, 
quote, ``use all of my power as majority leader . . . to secure 
a funding package that can restore and transform [the NYC 
Housing Authority],'' end quote.
    And lo and behold, we now have $80 billion, not to be 
distributed using the existing formula, mind you, but rather by 
executive fiat. It certainly looks a lot like Senator Schumer 
is securing a $40 billion earmark, or should we call it the 
``Schumark.'' So it looks like half of all the bill's public 
housing dollars will go to a housing authority plagued by 
scandals, bribery, and chronic mismanagement.
    It is also distressing to see Democrats pouring billions 
into outdated public housing projects that concentrate poverty 
and crime and trap families in generational cycles of 
dependency and despair. Twenty years ago, both parties 
recognized the flaws in Government-controlled housing. That is 
why Congress capped the number of public housing units with the 
Faircloth amendment. Now, Democrats' reconciliation bill would 
waive this sensible law so new public housing units can go up. 
This is a remarkable return to Government-owned housing, and 
one that we will once again regret.
    So we need to try something different than Big Government 
socialism to help make housing affordable. We need to leverage 
the power of free enterprise, including private equity, to 
promote housing for all Americans. To that end, in March I 
proposed principles to guide housing finance reform 
discussions. Since then, the Administration has shown no 
interest in reform, and even missed a September 30th deadline 
to report on its reform plan.
    In light of the issues that I have raised today, I hope 
this Committee will hold hearings soon on long overdue topics 
like housing finance reform, and mark up any reconciliation 
legislation so we have an opportunity to debate and offer 
amendments on housing policy.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey.
    I will introduce today's witnesses. Sofia Lopez is the 
Deputy Campaign Director for Housing at the Action Center on 
Race and the Economy. She conducts research in support of 
housing and racial justice campaigns across the country.
    Ms. Holly Hook is an independent author and resident of 
Swartz Creek Estates in Swartz Creek, Michigan. She became 
involved with MHAction in 2019, after the private equity firm 
Havenpark Capital purchased her community.
    Mr. Norbert Michel, who is joining us in person, is the 
Vice President and Director of the Center for Monetary & 
Financial Alternatives at the Cato Institute; Michael Hendrix 
is a Senior Fellow and Director for State and Local Policy at 
the Manhattan Institute; and Dr. Desiree Fields is an Assistant 
Professor of Geography and Global Metropolitan Studies at the 
University of California, Berkeley. Her research and writing is 
focused on housing financialization.
    Ms. Lopez, if you would proceed.

STATEMENT OF SOFIA LOPEZ, DEPUTY CAMPAIGN DIRECTOR ON HOUSING, 
             ACTION CENTER ON RACE AND THE ECONOMY

    Ms. Lopez. Chairman and Ranking Member of the Committee, I 
really appreciate the invitation to speak with you today about 
how private equity landlords are changing the housing market. 
My name is Sofia Lopez. I am the Deputy Campaign Director on 
Housing at the Action Center on Race and the Economy. We are a 
national organization working at the intersection of racial 
justice and Wall Street accountability.
    A common claim by the largest single-family landlords is 
that their institutional capital is professionalizing the 
single-family rental industry, but there are many stories from 
tenants who are hurt by the so-called professionalization. For 
example, Dean, a leader at Inquilinxs Unidxs por Justicia, or 
Renters United for Justice in Minneapolis, Minnesota. He moved 
into a HavenBrook home unit and started to see fees pile up: A 
$10 ``property administration fee,'' a payment portal that 
would crash and trigger 8 percent late fees, and $25 service 
fees based on a requirement that Dean had already complied 
with.
    HavenBrook alleges that Dean owes thousands of dollars in 
fees, and despite the threat of eviction he is fighting back 
because he knows that these fees are wrong.
    This is an example of the private equity business model in 
housing, which enables record-breaking profits, even during a 
pandemic. And it depends on exploiting tenants. This model 
includes rent increases, and one particularly egregious 
example, an Invitation Homes tenant in California faced a 
nearly $800-per-month rent increase, to over $3,000 per month 
in rent. This year, single-family rents rose to 13.9 percent 
from last year, beating even multifamily rental increases.
    Second, fines and fees. In 2016, fees and tactics like 
withholding rent, tenants' security deposits generated $26 
million in revenue for Colony Capital, and one CEO described 
the failure to capture fee revenue as, quote, ``revenue 
leakage.''
    Third, inadequate maintenance. In Minneapolis, HavenBrook 
tenants have reported waiting up to a year for essential 
repairs, including holes in roofs and ceilings, broken 
stairways, flooding, faulty electrical systems, broken 
appliances, pest infestation, black mold, and more. Tenants are 
left to either fix these problems themselves or live in unsafe 
conditions.
    Fourth, aggressive pursuit of evictions. Even during a 
pandemic, Pretium Partners, the second-largest single-family 
rental landlord, which includes HavenBrook Homes, Progress 
Residential, and Front Yard Residential, led the pack, having 
filed 2,000 evictions since mid-March of 2020.
    And fifth, opaque and confusing ownership structures. 
Publicly available landlord names are often a string of 
consonants, numbers. And in addition to that, confusing 
financial relationships with holding companies and the use of 
multiple tenant-facing brands make even asking questions an 
enormous challenge for tenants.
    Despite the industry's claims that they only make up 2 
percent of the Nation's single-family rental market, 
institutional investor ownership is most heavily concentrated 
in a handful of markets and neighborhoods. In fact, Memphis, 
which is 64 percent Black, has the lowest Black home ownership 
rate of the 50 largest cities and the highest share of investor 
ownership. A recent Core Logic report explains, quote, 
``Investors are likely more attracted to locations where tenant 
rights are far more favorable to landlords,'' end quote.
    These landlords are focused on specific home price range, 
square footage, and critical quality of school districts. 
Because of the market segment focus, the fact that they have 
billions of dollars in cash to spend, and are willing to buy 
properties sight unseen, first-time and lower-income 
prospective home buyers are simply not able to compete.
    And often new units never even make it to market through 
arrangements like build-to-rent. For example, the largest 
single-family rental landlord, Invitation Homes, and the third-
largest homebuilding, Pulte Group, recently announced a 
partnership to build more build-to-rent communities. It is not 
a stretch to imagine that in some communities if you want to 
live in a particular part of town, in a high-performing school 
district, you would have to rent from one of these landlords.
    The clearest fix for private equity's abuses would be 
establishing comprehensive, nationwide tenant protections from 
exorbitant rent increases, prohibition on excessive fines and 
fees, just cause eviction protections, and a tenant rights to 
counsel, to give tenants a fair shot in defending themselves. 
This would benefit tenants across all housing types. For 
example, a set of multifamily developments in New York are 
currently facing mass evictions by private equity landlords, 
Greenpoint Partners and Carlyle Group, in an effort to boost 
their profits by increasing rent on existing tenants.
    In addition, there are many avenues to regulate private 
equity in housing by examining their financing, partnerships 
and mergers, concentration of ownership in particular 
communities, and shedding much-needed light on where and how 
they operate. At a minimum, the expansion of private equity 
into our homes is a moment to create a more transparent housing 
market, where landlords cannot hide behind LLCs and tenants 
know who the owners of their homes are.
    Our housing market is rapidly consolidating, and as the 
largest landlords, builders, and financiers increasingly 
partner with one another, our communities and neighbors will 
continue to feel the consequences unless we follow the lead of 
tenants and housing justice organizers in creating a more just 
housing system.
    Thank you.
    Chairman Brown. Thank you, Ms. Lopez.
    Ms. Hook, you are recognized for 5 minutes.

    STATEMENT OF HOLLY HOOK, MANUFACTURED HOME RESIDENT AND 
              MHACTION LEADER IN SWARTZ CREEK, MI

    Ms. Hook. OK. Thank you, Chairman Brown and Members of the 
Committee. My name is Holly Hook and I am a resident of Swartz 
Creek Estates in Swartz Creek, Michigan. I am a member of 
MHAction, who are made up of mobile home residents who organize 
our neighbors and fight to save our communities.
    Everyone has the right to a safe, affordable home and 
community. We need the Federal Government to work with us to 
ensure everyone this basic right. Right now, predatory 
investors threaten this human right for millions of families.
    I bought my manufactured home because I needed an 
affordable place. In our communities, seniors and families 
often own their homes but rent land from a common landlord. 
This creates lower housing costs. We loved our community. Like 
so many others, it was friendly, well-maintained, and walkable.
    In 7 years, I paid off my house and had reasonable lot rent 
that covered land, sewer, and garbage. My neighbors were mostly 
low-income seniors who retired to our community.
    Nobody knew that our community was for sale until a notice 
appeared on our doors in July 2018, saying Havenpark Capital, a 
private equity firm, had bought us, and our lot rent had gone 
up 22 percent, effective in 1 month. I needed answers, but 
Havenpark only offered an investor site. At the top was a 
statement, quote, ``creating stable, long-term income.''
    It costs thousands to move our homes. We had two options. 
We could pay the giant increases or we could just walk away and 
lose our homes. Havenpark admits this on their investor website 
by stating, quote, ``It is difficult for tenants to move their 
homes. As a result, operating cash-flow is among the highest of 
any real estate class.''
    The rent hikes and fees kept going. Havenpark unbundled 
administrative fees, school taxes, sewer charges, and trash 
fees from our rent. Monthly payments rose 40 percent by June of 
2019, and as of this year they have gone up over 50 percent. My 
old lot rent was $310 per month, for just the lot. Now I am 
paying over $200 more.
    Our sense of security and independence is gone. Worst hit 
is the elderly and the disabled, who live on fixed incomes. 
Havenpark now takes most of their income. Some fear losing 
their homes. Many moved out, including my 80-year-old neighbor, 
who is now in a small senior apartment, and we know of 
residents forced to use food pantries due to the increases.
    Havenpark kept raising rents and fees during COVID and sent 
letters threatening those who could not pay in full. They 
refused partial payments, though the CDC moratorium allowed 
them.
    In another Havenpark community across town, a lady named 
Mary worked five jobs to keep up with the increases until she 
got COVID last spring. Havenpark tried evicting her while she 
waited for a relief payment. Havenpark only backed off when a 
reporter asked questions about her case.
    And let us be clear. These big increases do not come back 
to us. Havenpark has cut back on maintenance. A nearby 
community they own lost their water in a storm, and they would 
not fix the generator in a timely manner. State officials had 
to get involved after residents went without water for several 
days.
    Our communities are not alone and Havenpark is not the only 
actor doing such things. Roughly 2 million people live in 
communities owned by the 50 largest community owners. Many 
operate like Havenpark, devastating seniors and families. And 
now some of the biggest private equity companies in the world 
are buying up mobile home parks.
    Outrageously, this trend is fueled by those who say they 
support affordable housing. We were astonished to learn that 
Havenpark Capital got their financing through a subsidiary of 
Enterprise Community Partners, the national affordable housing 
nonprofit, and Fannie Mae. Both Fannie Mae and Enterprise claim 
they advance affordable housing, but when they finance 
predatory investors like Havenpark, they destroy it.
    We have called on Fannie Mae and Freddie Mac and their 
regulator, the FHFA, to add safeguards against rent and fee 
gouging, unfair evictions, and unsafe conditions in their 
manufactured home community financing. We need financing to 
support us, the residents, not passive investors. We want 
financing products allowing nonprofits, public entities, and 
resident-owned cooperatives to buy our communities and keep 
them affordable and healthy.
    Thank you for your time.
    Chairman Brown. Thank you very much, Ms. Hook.
    Mr. Michel, welcome, and thank you for joining us in 
person.

   STATEMENT OF NORBERT MICHEL, VICE PRESIDENT AND DIRECTOR, 
  CENTER FOR MONETARY & FINANCIAL ALTERNATIVES, CATO INSTITUTE

    Mr. Michel. Good morning. Chairman Brown, Ranking Member 
Toomey, and Members of the Committee, thank you for the 
opportunity to testify at today's hearing. I am happy to be 
here in person. My name is Norbert Michel. I am Vice President 
and Director for the Center for Monetary and Financial 
Alternatives at the Cato Institute. The views that I express in 
this testimony, however, are my own, and they should not be 
construed as representing any official position of the Cato 
Institute.
    In my testimony today I will argue that private equity 
firms, or other large investors, driven by a profit motive are 
not responsible for price inflation in U.S. housing markets. 
Instead, failed Federal policies that boost demand are the main 
culprit, and I will expand on this argument with three main 
points.
    First, the evidence does show that institutional investors 
have played, and still play, a very small role in the single-
family housing market. Their share of purchases has varied over 
the last decade or so, but they tend to account for somewhere 
between one-tenth of a percent and 1.5 percent of home 
purchases. As of 2019, institutional operators owned, at most, 
2 percent of the roughly 15 million detached, single-family 
rental homes in the United States, and less than half-a-percent 
of the total number of single-family homes.
    While their share is much smaller than that of individual 
investors, we should not fixate on that share or the share of 
other investors. We should, instead, embrace private investors 
in housing markets and not fall victim to the notion that 
investing in itself is a harmful, zero-sum game, a principle 
that applies even to housing markets.
    Second, the share of institutional, corporate, and 
individual investors combined is extremely small compared to 
the level of involvement of the Federal Government. Combined, 
Fannie, Freddie, and the FHA, just those three, have been 
behind more than half of outstanding mortgage debt for decades, 
even before the 2008 financial crisis, and in some years 
responsible for a share of close to 70 percent. From 2009 to 
2020, Fannie and Freddie's annual share of the total mortgage-
backed securities market average 70 percent. Including Ginnie 
Mae securities, the Federal share of the mortgage-backed 
securities market averaged 92 percent per year over this 
period.
    Virtually all Federal housing policies, even those outside 
of the GSEs and FHA, are geared toward increasing demand, and 
because housing markets are almost always supply constrained, 
these policies will consistently put upward pressure on prices 
and rents. Such policies include providing housing allowances 
to military and other Government employees.
    I have personally been involved in my own, not entirely 
tragic story, of having to bid against an embassy employee for 
a rental home. That individual had a housing allowance that was 
tied to inflation, and he submitted a long-term lease 
application that offered to pay an escalating rent each year. 
And I know from speaking to other real estate agents that I am 
not alone in coming into this situation. The economic 
principles are exactly the same for other types of assistance 
and subsidies that pay for housing. They place upward pressure 
on prices.
    My third and final point is that the Biden administration's 
housing policies, as well as many that are being considered in 
the budget reconciliation process, only double down on these 
types of failed Federal policies from the past. They too will 
artificially boost demand even more than we are used to in the 
housing markets, thus promising to make price inflation worse 
and waste more taxpayer money. These policies move the U.S. 
housing market further in the wrong direction, which means 
toward less affordability.
    The following list provides just a few examples: $10 
billion for First-Generation Downpayment Assistance Fund; $80 
billion to create new public housing projects; $72 billion for 
the HOME Investment Partnerships Program; $10 billion for a new 
housing investment fund; $75 billion for Section 8 rental 
housing vouchers, more than triple the current level of 
funding. And the partial list of items in my written testimony 
includes $4.5 billion just for the HUD Secretary to, quote, 
``implement and oversee the programs,'' many of which already 
exist. That figure alone represents an 8 percent increase for 
HUD's fiscal year 2022 budget.
    The main problem with all of these policies is that they 
boost demand while doing nothing to address supply constraints, 
and more tragically, while doing nothing to address the 
underlying economic and social issues that make it difficult 
for people to earn income and build wealth. We should expect 
nothing from these policies but the same poor results that they 
have produced in the past.
    Thank you for your consideration, and I am happy to answer 
any questions you might have.
    Chairman Brown. Thank you, Mr. Michel.
    Mr. Hendrix is recognized remotely. Mr. Hendrix.

 STATEMENT OF MICHAEL HENDRIX, SENIOR FELLOW AND DIRECTOR FOR 
          STATE AND LOCAL POLICY, MANHATTAN INSTITUTE

    Mr. Hendrix. Chairman Brown, Ranking Member Toomey, and 
Members of the Committee, thank you for inviting me to 
participate in today's hearing. My name is Michael Hendrix, and 
I serve as a Senior Fellow and Director of State and Local 
Policy at the Manhattan Institute.
    I have to say I agree with Ranking Member Toomey that 
today's hearing topic seems misguided. Large investment firms, 
including those in private equity, buy just 1 to 2 percent of 
homes sold nationally, and they own less than one-tenth-of-1-
percent of the housing market in America. Big finance is still 
a tiny player in housing.
    But housing is a hot market today, and investors both large 
and small are seeing opportunities to invest, so I am open to 
discussing how these private dollars can go to expanding access 
and affordability for Americans looking for a place to call 
home. Yet many in Congress are embracing this Administration's 
plans to regulate and legislate their way to a bigger 
Government role in housing.
    For instance, the reconciliation bill being considered now 
doubles down on failed public housing and throws more subsidy 
money at a limited supply of homes, a recipe for prices to keep 
rising.
    These are not answers to America's housing crisis. Housing 
demand is far outpacing housing supply. But the roots of this 
crisis lie not in financial speculation but in Government 
regulation.
    Localities have made it practically illegal to build enough 
homes to meet demand, leading to inflated prices. Yet this 
hearing suggests a skepticism for private sector investment in 
more housing and more housing supply, and if not the private 
sector then that leaves us with the public sector, specifically 
public housing. That would be a mistake.
    Rather than helping the private sector solve the 
Government's crisis, Congress plans to bail out failed public 
housing system. This money has few limits on how it is spent. 
Senate Majority Leader Chuck Schumer has promised to hand over 
the bulk of these dollars to the scandal-plagued New York City 
Housing Authority, or NYCHA. Back in April, Senator Schumer 
called on President Joe Biden to double his planned spending of 
$40 billion on public housing. He wanted all of the original 
money just to pay NYCHA's repair bill, and he got it, an 
increase to $80 billion in spending on public housing and 
enormous influence on securing half of it for a NYCHA bailout.
    Here is the reality: NYCHA is what we get when we get more 
public housing, and that should scare every American, 
especially for the survivors of public housing. NYCHA is the 
Nation's oldest and largest public housing system, housing more 
people than the city of Atlanta, and long held up as a model of 
what Government can achieve when it takes charge of housing.
    And in 2018, NYCHA's own tenants sued the Housing Authority 
for its squalid living conditions. Then the Federal Government 
sued too, finding that the housing agency had worked harder to 
cover-up its, quote, ``dangerous problems'' than to actually 
fix them. It turns out that the Nation's largest and greatest 
public housing system poisoned over a thousand children with 
lead exposure, then lied and covered it up.
    Sometimes more money means more problems. Despite record 
levels of funding, quote, ``New York public housing isn't 
getting better,'' admitted the New York Times.
    A public housing slush fund only harms accountability and 
leaves structural problems in place. Spending $40 billion to 
repair NYCHA amounts to roughly $250,000 for every family 
living in public housing in New York City. Do we really believe 
we will not get more of the same?
    Bailing out scandal-plagued public housing authorities like 
NYCHA is not the answer. Neither is condemning private sector 
solutions to America's housing crisis. It is time we did better 
for Americans in need of affordable housing. We can and we must 
do better.
    Thank you.
    Chairman Brown. Thank you very much, Mr. Hendrix.
    Dr. Fields, you are recognized for 5 minutes, remote.

 STATEMENT OF DESIREE FIELDS, ASSISTANT PROFESSOR OF GEOGRAPHY 
  AND GLOBAL METROPOLITAN STUDIES, UNIVERSITY OF CALIFORNIA, 
                            BERKELEY

    Ms. Fields. Thank you, Chair Brown, Ranking Member Toomey, 
and Members of the Committee, for the opportunity to testify 
today. My name is Desiree Fields and I am Assistant Professor 
of Geography and Global Metropolitan Studies at the University 
of California, Berkeley.
    My research considers the intersection of financial 
processes, housing, and digital technologies. A particular 
focus of my scholarship is the role of institutional investors 
as landlords. I examined how single-family rental homes have 
become the site of new financial asset classes, the 
organizational forms and growth strategies common to 
institutional landlords, and the critical role of technological 
advances in the institutionalization of single-family rental, 
or SFR.
    Single-family homes have always been a meaningful share of 
the U.S. rental housing sector, but before the 2008 financial 
crisis the market was highly fragmented and largely opaque to 
institutional investors. This also changed in the wake of 2008. 
Large pockets of discounted but newer homes were available in 
suburban Sunbelt markets. Mortgage credit was also constrained, 
and rental demand was rising. Together with new information 
technologies, these market conditions allowed investors to 
aggregate ownership of single-family homes, efficiently 
coordinate management, and develop structured finance 
opportunities in SFR.
    Today, what began as an opportunistic trade has evolved 
into a full-blown industry. Individually and through their 
lobby group, the National Rental Home Council, SFR operators 
position themselves as strengthening communities and creating 
solutions to America's housing crisis. While compelling, this 
messaging does not fully capture how private equity landlords 
are changing America's housing market nor how the new round of 
investor-led growth since the start of the COVID-19 pandemic 
may deepen these changes.
    The ways private equity landlords are changing the housing 
market is linked to the geography of corporate SFR. The 
industry's messaging, as we have heard today, is that they 
comprise just 2 percent of the SFR market. But institutional 
landlords do not acquire properties uniformly across the 
country. To achieve efficiencies of scale, they have focused on 
suburban Sunbelt markets hit hard by the 2008 crisis, 
concentrating especially on Florida, Georgia, Texas, North 
Carolina, and Arizona.
    Furthermore, they do not search uniformly across all 
single-family homes in their target markets. Investors use a 
specific set of neighborhood and built environment criteria, 
and they limit their acquisitions to properties they can 
purchase near or below median prices. This segmented geography 
sheds light on how corporate landlords have been able to 
increase rent so dramatically during the pandemic.
    Amid the generally heightened demand for space and 
amenities seen during the pandemic, a flood of capital into SFR 
is enabling institutional investors to outcompete would-be 
homebuyers in their target markets, channeling them back to 
renting and generating spillover demand for SFR homes. Thus, 
while SFR operators claim to provide quality, affordable 
housing, they have, in fact, pushed outsized rent increases on 
tenants, especially during the pandemic. Rent increases by the 
largest operators have ranged as high as 15 percent on new 
leases in some markets. Corporate landlords are also creating 
new fees and ancillary services on top of rent as a way of 
driving up revenues.
    In addition to the implications of institutional SFR for 
housing costs and home ownership opportunities, we should 
consider their wider consequences. Corporate landlords advance 
a rhetoric of reinvesting in distressed communities and 
strengthening neighbors. This rhetoric is contradicted by their 
behavior, which indicates they put investment priorities ahead 
of community stability.
    Large SFR owners are more likely to file for eviction than 
mom-and-pop landlord, and they are more likely to use 
aggressive, serial eviction filings as a rent collection 
strategy. They also employ specialists who petition for 
property tax reductions, seeking out cost savings by minimizing 
contributions to the local tax base.
    Finally, institutional operators use their financial clout 
in the political area, to organize against efforts to expand 
tenant protections and to support politicians who are friendly 
to their interests. These examples show how the SFR industry 
wields power that has implications for the public beyond the 
tenants who actually live in their properties.
    In closing, I would like to emphasize that institutional 
investors backed by private equity have already changed the 
housing market. Their behavior has potentially far-reaching 
social and economic consequences, but so far they have 
effectively shielded themselves from meaningful public scrutiny 
and responsibility.
    As I hope my testimony makes clear, institutional landlords 
enjoy outsized power and influence in our housing market, and 
it is vital to intervene with research-informed policies that 
support tenants, homebuyers, and communities.
    Thank you again, and I look forward to your questions.
    Chairman Brown. Thank you, Dr. Fields.
    We have heard testimony today about private equity firms 
buying up manufactured housing communities and homes across the 
country, and how residents, because of that, suffer.
    I will start with you, Ms. Hook. When Havenpark and other 
private equity firms buy a community and raise the rents, what 
sacrifices have you and other residents had to make to keep 
your homes?
    Ms. Hook. Yeah, it is quite bad. In my community alone, a 
lot of senior citizens on fixed income, they get $800 a month. 
I know one woman who has to go to a food bank on occasion now. 
There is another community north of me where people have had to 
band together and start utilizing food banks because of the 
rent increases. And I know of the other community, right across 
town, this poor woman was working five jobs trying to keep up 
with these rent increases, and I know a few seniors, just in my 
community alone, where they have had to go back to work and 
come out of retirement. You know, they have hip problems, back 
issues, they cannot stand for very long, and they have to go 
back to working in a grocery store in order to keep up with 
these rent increases. I have also heard of where senior 
citizens and people with health issues have had to choose 
between paying these heightened rent fees or paying for 
medications that they need.
    Chairman Brown. Thank you, Ms. Hook.
    Ms. Lopez, what are some of the most problematic elements 
of the private equity single-family rental business model?
    Ms. Lopez. Thank you for the question. As I enumerated, I 
think that rent increases are a particularly damaging impact. I 
want to begin, I guess, by focusing on the people who actually 
live in these homes today who have reported these immense rent 
increases. I was reading that Invitation Homes actually just 
this year announced that they would be increasing rent by 8 
percent for tenants who are planning to renew, and 11 percent 
for tenants who are coming in to new, vacant properties. So 
that is a fairly dramatic issue.
    I would add, on top of that, fines and fees, as I mentioned 
in my testimony. This is the primary revenue-generating 
strategy for these companies, and it is really across the board 
and has been pretty well documented.
    Inadequate maintenance, for sure. I submitted, in my 
written testimony, a story of one tenant who said that there 
was flooding in her home, in the basement, covering an outlet. 
So standing water covering an outlet that had been improperly 
installed by her landlord, Havenbrook Homes. And as the water 
rose over it she was told that in order to turn off the 
electricity to defuse an otherwise hazardous situation she 
would have to do it herself. And this just fits with the 
pattern of what I have heard from tenants again and again, this 
attitude that tenants need to fix these kinds of things because 
no one is going to come fix it for them.
    And then I would also touch on these aggressive eviction 
practices, which Dr. Fields also mentioned. In the interest of 
making sure that these private equity-backed companies are able 
to meet the obligations of the kinds of financing that they 
take on, evictions are paramount, and these companies have to 
be aggressive in pursuing them. Otherwise, they risk the tool 
that allows them to procure and acquire more of these homes in 
the future.
    Chairman Brown. Thank you, Ms. Lopez.
    Dr. Fields, we hear that these big investors only own, the 
estimate 1 or 2 percent of single-family rental homes 
nationwide. We know in some regions the percentages are much 
higher. Where are these investors buying homes, and why are 
they choosing these communities?
    Ms. Fields. Sure. So the geography of the corporate single-
family rental market largely tracks with the markets where the 
housing bubble before 2008 was the largest and where price 
declines were the steepest afterwards. So some of the top areas 
for the major single-family rental operators include Atlanta, 
Phoenix, Tampa, South Florida, generally, and then the Dallas-
Fort Worth region.
    And investors are, you know, they are using acquisition 
engines or acquisition algorithms in order to zero in on the 
properties that meet their investment criteria. They are 
typically looking for three-bedroom, two-bathroom, single-
family homes, priced at the midrange of the local market, and 
Invitation Homes, for example, is looking for homes that 
average about 1,800 square feet with three bedrooms and two 
bathrooms in attractive neighborhoods, in infill locations that 
have proximity to major employment centers, desirable schools, 
and transportation corridors.
    In other words, I would suggest that the operators are 
competing directly with would-be homebuyers----
    Chairman Brown. Dr. Fields, thank you, and I am sorry to 
interrupt but I have just a few seconds.
    Ms. Lopez, Dr. Fields mentioned algorithms and technology. 
What are your thoughts about that, how investors use technology 
to buy and manage homes around the country? Ms. Lopez.
    Ms. Lopez. I appreciate that question. You know, what I 
find fascinating is that some of the same private equity 
companies who invest in actually acquiring the homes also 
invest in the technological advances that allow them--and 
platforms, very specifically, that allow them to purchase more 
of these homes. So I would say that there is an interesting 
interplay between this field of iBuyers that exists--so Zillow 
is an example, Redfin is an example, Opendoor and Offerpad--and 
actually there has been an increasing interplay between some of 
these iBuyers selling directly to institutional owners, and for 
me I see all opportunity for the acquisition of homes to 
rapidly accelerate because of those technological advances, 
because of the investments in the technology themselves, and 
also the needs of companies on both sides. It is a partnership 
that is geared toward consolidating the market even further.
    Chairman Brown. Thank you. Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman. Public housing is 
a veiled model of delivering assistance. Let's face it. It is 
costly. It traps families, often in multigenerational cycles of 
poverty.
    A generation ago, by the way, there was a very broad, 
bipartisan consensus to move away from public housing. In 1998, 
Congress voted, with overwhelming bipartisan support, to cap 
the net number of public housing units. Senator Durbin even 
referred to public housing as, quote, ``vertical slums.''
    So that cap is still in place today. Such is the durability 
of this consensus. But our Democratic colleagues now want to 
eliminate that cap, and as I mentioned in my opening remarks, 
and I think Mr. Hendrix did as well, Senator Schumer, in 
particular, appears to have effectively added $40 billion for 
this ``Schumark'' to public housing in order to bail out the 
New York City Housing Authority.
    So my question for Mr. Hendrix is, is there really a 
justification for the New York Housing Authority getting half 
of all of this money? For instance, does New York City provide 
half of all the public housing in America? Is the New York City 
Housing Authority one of the best-run public housing 
authorities in America that deserves the additional resources? 
Could you elaborate on that a little bit?
    Mr. Hendrix. Thank you for the question. There is, in my 
opinion, no justification for awarding failure. NYCHA has 
failed as public housing and has failed to keep its residents 
safe. New York's progressive public advocate has named NYCHA 
the city's worst landlord for 3 years straight. The only 
justification for spending $80 billion in public housing, that 
New York wanted $40 billion, Senator Schumer promised to double 
support for public housing, even though NYCHA's share of public 
housing nationwide is only 20 percent. So half of all public 
housing funding, potentially even more, going for 20 percent of 
housing. And they will take more if they can get it.
    No doubt, NYCHA has problems. It is falling apart. But a 
no-strings-attached slush fund I believe is not the answer. How 
can Congress trust NYCHA to safely house families when the 
families cannot even trust the agency? We should be embracing 
private sector solutions to America's housing crisis, not 
doubling down on NYCHA.
    Senator Toomey. Thank you. Mr. Michel, one of the concerns 
I have is the lack of means testing, or at least the lack of 
sufficient means testing and an almost complete lack of work 
requirements in many of the housing provisions in the Democrat 
tax-and-spend bills. One of my concerns is the effect this is 
going to have on the incentives to work.
    What are your thoughts on the effect that these programs 
will have on the incentive to work and the ability of people to 
build a middle-class, and if you could do that briefly, because 
I do have one more question.
    Mr. Michel. All right. It will continue to destroy it, as 
that has been going on for decades now, well over 50 years. It 
becomes part of an open-ended assistance system that literally 
destroys the incentive to become a productive member of 
society. It creates and perpetuates a subculture, if you will.
    Senator Toomey. And if you undermine and eliminate the 
incentive to work you really undermine the ability to work your 
way into the middle class, it seems to me.
    Mr. Michel. Yes. When I say that, that is what I mean, 
eliminate the incentive to build a career and build wealth.
    Senator Toomey. Exactly. So this both for Mr. Michel and 
Mr. Hendrix. There is no question housing prices have been 
going up. They have been going up, actually, very dramatically, 
across the board. If you ask me, the monetary policy that we 
have been pursuing, that has driven up the price of virtually 
every asset class I can think of, from commodities to energy, 
equities, crypto assets, real estate, that is a big part of 
this.
    Let me ask you both briefly, and I apologize, I know there 
is not much time. What could we be doing that would be a 
constructive way--let us assume we got our monetary policy 
right sometime in the reasonably near future--what could we be 
doing to increase the availability of affordable housing?
    Mr. Michel. Well, we have to stop increasing demand. You 
have supply constrained markets in housing all the time, and 
all Federal policy is geared toward doing is making it easy to 
get a loan and increasing demand. There is no way that that 
policy ends in anything on than higher prices. And the way that 
we do that is primarily through Fannie and Freddie. So we have 
got to shrink their footprint. There is no way around that.
    Senator Toomey. Mr. Hendrix, did you have anything you 
wanted to add?
    Mr. Hendrix. I could not agree more with my fellow witness. 
We have more money chasing after an ever-vanishing supply of 
homes. We need to get the supply of homes increased. We need 
more private sector investment. Investment in public housing is 
not the answer. Having more Government money chasing after an 
ever-smaller supply of homes is also not the answer.
    Senator Toomey. Thanks very much, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey. Senator Tester 
is recognized from his office, remote.
    Senator Tester. Yeah. I have got a question for Ms. Hook 
before Yeah. I have got a question for Ms. Hook. Before I start 
any questions, I just want to say that housing across this 
country has increased because of demand, and if anybody on this 
call has a way that we could increase supply so that houses 
become more affordable and what role the Government could play, 
I would love to hear it. Because quite honestly, unless you are 
making a lot of money right now you cannot afford a house in 
this country.
    And so we have got a huge problem out there. We have got 
businesses who cannot startup. We have got businesses that 
cannot expand because there is no workforce housing. There is 
no housing for people who make regular wages. And if we do not 
wake up to what we are going to do--and I do not believe 
Government should be building houses, but I will tell you this, 
freaking Fannie Mae and Freddie Mac and doing away with the 30-
year mortgage would be insane. I just want to get that off of 
my chest.
    All right. Ms. Hook, I want to thank you for being here 
today. I want to thank you for your story. I have, 
unfortunately, heard similar stories from folks in Montana 
facing challenges, I believe from the same private equity firm 
that has impacted your community in Michigan.
    So could you expand, from your testimony, on what 
transition to ownership was like for you and your neighbors? 
When this happened, what did it do? How much did your rent go 
up? And did any of the benefits of your rental agreement change 
for the better?
    Ms. Hook. Thank you very much for your question, Senator 
Tester. What happened when we changed ownership is we residents 
had zero say in who our park was sold to. We just received 
notices taped to our doors saying, ``Hey, We are Havenpark. We 
are happy to acquire your community, and we are going to 
increase your rent.'' At the time it was about a 22 percent 
increase, which was about $70. My original base rent was $300, 
just for the dirt that my home sits on, and immediately it 
jumped up to $370, which for me at the time, I am a writer. I 
do not make a ton of money, and that was actually a pretty big 
increase for me at the time, and for the seniors in my 
community on Social Security and fixed income it was even worse 
because a lot of them, they cannot go back to work and raise 
their income, like I can work harder and make more money.
    Senator Tester. So are you familiar with resident-owned 
communities?
    Ms. Hook. I am somewhat familiar with resident-owned 
communities. I know my friend in Montana, who lives in Great 
Falls, was pursuing that option. You may have heard of her. We 
know that there are not very many resident-owned communities 
right now. I know ROC USA specializes in resident-owned. What 
we would like to see out of Fannie and Freddie is more funding 
for resident-owned community options so that residents can 
purchase their own communities and run their own communities 
and ensure that all investments and rent actually goes back 
into the community and making conditions better for all 
residents.
    But unfortunately, these private investors come in and they 
pay such a high dollar for our communities that we can never 
afford to buy them back, so it effectively closes the market to 
us and pretty much they own the entire local market because 
they tend to buy groups of communities.
    Senator Tester. Yeah, and I do not care what percentage it 
is, if you live in one of those communities and your rent is 
jacked up and you have no way to increase the amount of money 
that you are making, other than working two or three or four or 
five jobs, as you pointed out in your testimony, the street 
becomes the option. And for a country that has the rich history 
that we have had, and a vibrant middle class that we have, to 
put folks in that middle class out on the street is something 
we should be very, very concerned about.
    And make no mistake about it. I have lived a very good 
life. I have been able to pay my bills without having to work 
three or four jobs. I have worked two most of my life, but not 
three or four. But if you are put in a situation where your 
fixed costs are going up, especially if you are on a fixed 
income, you do not have a lot of options. There are not a lot 
of options out there.
    I want to talk to Dr. Fields for a second. Dr. Fields, the 
private equity firm that has bought some of the manufactured 
home places has also bought multifamily housing, in Great 
Falls, in particular, and maybe in other communities within our 
State that I am just not aware of. They bought apartment 
buildings, and it is similar problems that have arisen with the 
rents. The rents have been jacked to the point where people are 
having to make decisions that, quite honestly, are not 
reasonable.
    And, in fact, HUD-VASH vouchers, in some cases, are no 
longer effective, for a number of reasons. So what more do we 
need to do? I am talking about the U.S. Senate, Congress, the 
agencies out there, to make sure that those HUD-VASH vouchers 
are not taken advantage of in these private equity transitions.
    Ms. Fields. Sure. Thanks for the question. Yeah, certainly 
I think the kinds of rent increases that you are describing are 
common whether we are talking about single-family rental homes, 
apartment buildings, manufactured housing, and that is because 
investors are really trying to deliver returns to their 
investors and to pay back the debts they have taken out to 
finance their portfolio acquisitions.
    In terms of what the Senate can do in order to ensure that 
HUD vouchers, you know, can actually cover the cost of housing 
in communities controlled by these types of investors, you 
know, I do think it is important that we do think about housing 
as a public good, even if we do not have the Government 
involved in, you know, building new housing and owning new 
housing. You know, the fact is that these investors are 
providing a good that everyone needs in order to survive, and, 
you know, if they are able to take out huge credit facilities 
and deliver returns to investors and pay themselves, there is 
no reason that they would not be able to keep rents at a 
moderate level that would ensure that people could actually use 
their HUD housing vouchers.
    Senator Tester [presiding]. All right. Thanks, Dr. Fields. 
I will pass it off to my friend, Senator Tillis.
    Senator Tillis. Thank you, Senator Tester, and thank you 
all for being here. I know this hearing is supposed to be about 
structural issues and housing, but, Mr. Hendrix, I want to go 
back and touch on NYCHA. We have our friends on the other side 
of the aisle on what I believe is a spending spree to 
redistribute a mass amount of taxpayer dollars, $80 billion to 
public housing.
    Half of this total, though, $40 billion, has been earmarked 
by Senator Schumer to go directly to New York. In fact, he 
publicly said he will use ``all of my power as majority leader 
to secure a funding package that can restore and transform 
NYCHA,'' half of $80 billion. It would seem that Senator 
Schumer believes that the American taxpayer simply exists to 
funnel money to New York, and we know its long history of sex 
scandals, bribery, general incompetence.
    So Mr. Hendrix, how does $40 billion compare to NYCHA's 
usual budget?
    [No response.]
    Senator Tillis. Mr. Hendrix.
    [No response.]
    Senator Tillis. Mr. Michel? We will try to see if the 
Committee staff have coms problems.
    Mr. Michel. Sorry. I do not know their annual budget. 
Sorry.
    Senator Tillis. Well, I think that the Democrats' $80 
billion funding total was equivalent to $85,000 for every 
family in public housing. We will see if we can get Mr. Hendrix 
back online, because I would like to cover some of this.
    But while we are waiting I wanted to talk about the 
landscape. You know, again, we are here talking about, under 
the pretense of examining structural deficiencies and problems 
in national housing market, yet the target of the hearing, in 
part, has been on private equity businesses and really private 
housing enterprises writ large. But they are only an 
exceedingly low portion of the Nation's housing stock. Eighty-
five percent of single-family residence homes are owned by 
individuals and small proprietors. Twenty-two percent are in 
the rural markets. Institutional ownership of single-family 
housing rentals accounts for 0.19 percent of the U.S. housing 
market.
    So if we are trying to find a way to provide better 
housing, more affordable housing, one of the things that I 
think that our Committee should focus on, and I saw this when I 
was Speaker of the House in North Carolina, are the obstacles 
to building affordable housing--regulatory overreach, waters of 
the U.S. That is one of my favorites, because it brought a 
bipartisan opposition to my State of North Carolina, at the 
city, and the county, and the State level, because it was 
artificially inflating the cost of housing, hurting the people 
that this Committee, I think, wants to focus on the most. The 
barriers, we are creating the barriers. We are, I think, 
creating an artificial crisis with the amount of institutional 
investment that is moving into the real estate market. I do not 
know what it is, but I do not think it is a disturbing number 
now.
    Mr. Michel, do you have anything to say about that?
    Mr. Michel. Yes. So I am from New Orleans, and I am 
familiar with some regulatory issues.
    Senator Tillis. I lived in Westwego.
    Mr. Michel. Oh, OK. So you know, the entire metropolitan 
area is essentially wetlands, so that is a problem, and that is 
still going on. It is a supply problem. It is not a demand 
problem. And what we have done with Federal policy is----
    Senator Tillis. We are at about a 60 percent low for new 
housing starts. Is that right?
    Mr. Michel. Somewhere between 50 and 60, I believe that is 
correct, yes. And at the same time, we are continuing to 
increase demand. That can only end one way, and that makes 
housing less affordable. And the houses themselves are less 
affordable, which also does impact rents. So it is a two-
pronged problem on that side of the market.
    Senator Tillis. I just recall--and then I will turn to 
Senator Warren--but back shortly after I became Speaker I met 
with a town who wanted me to provide--we spent 45 minutes of an 
hour-long meeting talking about affordable housing. It was a 
great discussion, things that we could do at the State and 
local level, workforce housing, a number of things that we 
need. Rural areas, urban areas, they are all in need. In the 
last 15 minutes, they pitched me on the idea of giving them 
local authority to require that every new single-family home be 
mandated to have fire suppression systems, sprinkler systems, 
which, for a $100,000 house would probably increase that house 
by about 10 or 15 percent.
    But that is the sort of mentality that we have to get past 
if we really want to get to a point to where we are producing 
affordable housing and we are reducing the regulatory barriers 
that are the real cause, or, I think, a substantial cause for 
why we continue to have the challenges that we do.
    Senator Tillis [presiding]. On behalf of the Chair I turn 
to Senator Warren.
    Senator Warren. I appreciate that, but I think we are not 
connected with our folks online. Is that right? We are 
connected? We are not connected?
    So we are just going to adjourn temporarily? Recess. That 
is right. We are not adjourning. Recess. Thank you. I am glad 
one us is a lifer in this. OK. Thank you.
    Chairman Brown [presiding]. Senator Warren.
    Senator Warren. Thank you very much, Mr. Chairman. This is 
an important hearing for us to have. Yesterday, in my Economic 
Policy Subcommittee, witnesses discussed the damage the private 
equity industry has done to communities across this country. It 
is good that we are continuing this discussion today, 
specifically in the context of housing.
    Manufactured or quote/unquote ``mobile homes'' are a 
critical avenue to affordable housing for millions of 
Americans. A few decades ago, these communities were generally 
owned by mom-and-pop businesses. But the private equity 
industry saw an opportunity. Residents of manufactured home 
communities often own their own homes but not the land 
underneath, and since most of these homes are not actually 
mobile, Wall Street vultures realized that families were 
effectively stuck in place, sitting ducks.
    One of these vultures is a private equity-backed company 
called Hometown America. In 2006, Hometown purchased a 
manufactured housing community called Oakhill, that is home to 
175 resident families in Attleboro, Massachusetts. Now, Ms. 
Lopez, from what you have seen, when private equity or other 
Wall Street firms purchase a manufactured home community does 
the quality of life for residents of that community generally 
improve?
    Ms. Lopez. Thank you so much for the question, Senator. No. 
I mean, what is typical from my experience when private equity 
purchases housing, whether it is mobile home parks, single-
family rentals, multifamily properties, they typically follow 
the same playbook--rent increases, the tenants are hit with 
impossible new fees and fines, and maintenance almost always 
deteriorates. And in this case, because tenants have bought 
their own trailers, as mentioned, it really expensive, if not 
impossible, to relocate, and absolutely, that is a quality that 
they are banking on.
    Senator Warren. Yeah. So when companies like Hometown buy 
up these communities they have responsibilities, legal 
responsibilities, as landlords, like responsibility to maintain 
the property. And this is particularly important for the 
residents at Oakhill because the home sites in this area are 
subject to flooding.
    So, Ms. Lopez, from your experience observing how corporate 
landlords behave, do you think that Hometown was proactive in 
making the repairs to make sure that residents have quality 
living conditions?
    Ms. Lopez. I do not know the specifics of the situation, 
but based on all of the patterns that I have seen I think it 
would be highly unlikely.
    Senator Warren. Well, you guess right on this one. Hometown 
implemented a policy that specifically put the burden of these 
repairs on the residents, and yet, at the same time, Hometown 
increased the rents so that they could further pad their own 
profits. Now remember, as you say, most of these homes are not 
on wheels, so the residents have to choose between either 
paying the higher rent or, in some cases, just abandoning their 
housing.
    Nobody should be surprised that the private equity industry 
is forcing residents to make this choice, and doing it just so 
that they can pad their own profits. Private equity firms get 
rich by loading companies and real estate they buy with debt, 
then stripping out all the assets, extracting whatever value 
they can, and charging exorbitant fees. That is the business 
model. And for communities like Oakhill this means increasing 
the rents, refusing to make home repairs, and squeezing every 
penny out of the residents that they possibly can.
    Ms. Lopez, what does Congress need to do to ensure that 
residents at Oakhill and other manufactured home communities 
across this country are not being gouged by private equity 
firms?
    Ms. Lopez. I appreciate this question. To me, the most 
effective way to stop private equity abuses, as I mentioned in 
my testimony, would be a comprehensive set of tenant 
protections that would safeguard against things like exorbitant 
rent increases, excessive fines and fees, providing just cause 
eviction protections, and also a tenant's right to counsel, to 
protect against the worst parts of what you are describing.
    On the other side, there are many ways to begin to regulate 
private equity. I think the Stop Wall Street Looting Act is an 
excellent piece of legislation that starts to take away the 
ability to take on excessive risks in ways that harm tenants 
and workers.
    But I also think that taking a look at the financing that 
these companies engage in, the mergers and acquisitions that 
they engage in, and the ways in which they geographically 
target are all ways that we could begin to develop legislation 
that takes on exactly the role of private equity in housing.
    Senator Warren. Thank you. That is a very comprehensive 
answer, and I think you are right, there are a lot of ways that 
we can approach this. I very much appreciate your mentioning my 
Stop Wall Street Looting Act, because it would fundamentally 
reform the private equity industry and end its most predatory 
practices. That would leave the residents in Oakhill and other 
manufactured home communities safer from Wall Street's 
clutches. So I am going to keep working on that one, and I am 
looking forward to getting some help on it.
    Thank you very much, Mr. Chairman.
    Chairman Brown. Thank you, Senator Warren. Senator Smith 
from Minnesota is recognized from her office.
    Senator Smith. Thank you very much, Chair Brown. Thank you 
for holding today's hearing. This is an important issue and 
something that is directly affecting the lives of my 
constituents in Minnesota. As large institutional landlords 
have increasingly been buying up swaths of previously 
affordable single-family homes in Minnesota, there are a number 
of concerns that I have heard from my constituents about this. 
And Ms. Lopez has cited some specific stories from Minnesota 
renters in her opening statement, but I would just like to just 
share a couple of other examples of what I have heard from my 
office in Minnesota.
    Shanika Henderson, for example, says, ``Starting at the 
beginning of the pandemic, Havenbrook stopped responding to 
repair requests in my home. The basement leaks during the 
winter and has ruined many of the items in my home. In my home 
there are issues with the porch falling in, electrical issues, 
broken steps, broken windows, screens that are broken. I have 
been reporting many of these issues since October of 2020,'' 
she says, ``and had to do many of the fixes myself.''
    And then one more from Jimmy Harris, who described heat not 
working, and ``a large hole of dirt, around three feet tall in 
the basement, where a rat has come through, leaving an 
infestation.'' And these are just some of the concerns that I 
have heard.
    Mr. Chair, I ask that the full statement from Renters 
United for Justice be entered into the record, as well as a 
Minneapolis Star-Tribune story describing the situation more 
fully.
    Chairman Brown. Without objection, so ordered.
    Senator Smith. Thank you very much.
    With these concerns in mind I have a question, something 
that I discussed with Julia Gordon, who is the Federal Housing 
Commissioner nominee, a few months ago. So many of the 
properties that we are talking about today were required by 
institutional landlords through bulk sales by Federal agencies 
after the 2008 financial crisis. So that got the properties off 
the books of the Federal Government, but it concentrated them 
in the hands of large institutional buyers.
    So I would like to ask Ms. Lopez and then Dr. Fields, what 
do you think that we should be doing to level the playing field 
for ordinary home buyers so that large institutional buyers do 
not end up buying the large bulk of the available properties in 
certain regions, areas?
    Ms. Lopez. Thank you so much for the question. I am happy 
to answer. You are absolutely right in your characterization, 
and actually, from what I have seen, there are actually plans 
to revisit bulk sales. So HUD actually has a proposed bulk sale 
coming up, if I am not mistaken, in November, and from what I 
have seen there has been some discussion of ensuring that half 
of those properties make their way into the hands of community 
organizations. I personally would like to see a higher ratio of 
those properties end up in the hands of community organizations 
and not in the hands of the kinds of landlords that I described 
in my testimony and that you shared stories of just now.
    I think that is one start. I think there are a lot of other 
opportunities. Unfortunately, as people exit their mortgage 
forbearance period that we will start to see more foreclosures, 
and I think we do need to think very seriously about how to 
make sure that those end up in the hands of more homeowners, 
that people never lose their homes to begin with, and that, 
least of all, they go to these particular kinds of landlords.
    Senator Smith. Thank you very much.
    Dr. Fields, I would love to hear your response to this too, 
and it seems to me that it is virtually impossible for 
individual home buyers to participate, to compete in this bulk 
marketplace, and that puts them at a distinct disadvantage in 
terms of being able to make sure that these homes stay in 
single-family ownership.
    Ms. Fields. Thank you for the question, Senator. So I would 
like to mention that I think most of the large-scale single-
family operators that are active today and that are the largest 
players in the industry, most of them did acquire their homes 
not through bulk sales but through individual transactions. It 
is certainly true that investors have taken advantage of bulk 
sales, including fix-and-flip investors and some rent-to-own 
schemes that have not turned out so well for the people that 
are trying to purchase homes. So I think it is an issue, 
although not exactly within my core area of expertise.
    However, I do agree with Ms. Lopez that I think it is 
important to ensure that bulk sales, that we can level the 
playing field for bulk sales, and I think increasing the 
proportion of properties that can go into the hands of 
community-based organizations, and particularly community land 
trusts, would be incredibly important, because community land 
trusts do keep housing permanently affordable over the long 
term, and it really represents a very sustainable use of public 
funds.
    And the other thing I would say is that we could consider 
policies such as a cap on the assets under management of these 
large-scale investors as a way of potentially breaking up some 
of their monopoly power in the markets where they have the 
largest footprints. Thank you.
    Senator Smith. Thank you. Thank you very much, Mr. Chair.
    Chairman Brown. Senator Smith, if you have another question 
or two, feel free, because Senator Warnock is about to get 
back. But if you have any questions.
    Senator Smith. OK. I do have one more question, and then 
when Senator Warnock returns I am happy to cede back.
    My question is about property maintenance. Many of the 
concerns that I have heard from Minnesotans are around 
maintenance issues, and too often it seems like these single-
family rental properties are being mismanaged--we have heard 
stories about that today--by landlords that are thousands of 
miles away, that are clearly focused on squeezing profit out of 
these properties and not focused on building strong 
communities.
    Pretium, which bought HavenBrook Homes earlier this year, 
says they are trying to make up for past institutional owners' 
mismanagement, and, I mean, I hope that they are right. But so 
far Minnesotans just do not seem to be seeing any improvement. 
And even if there are new owners, even if these new owners are 
able to address these problems, it does not address the fact 
that the incentives for institutional buyers are simply never 
going to be aligned with building strong community.
    So I wonder--I will come back to Ms. Lopez and Dr. Fields--
what should policymakers be considering as we think about how 
to align property acquisition and property management 
incentives with what we need to accomplish, so that communities 
are not hurt by these large property owners?
    Ms. Lopez. I particularly appreciate the question. I would 
say, kind of starting with your characterization, I completely 
understand the dynamic where newer companies have come to 
acquire some of the homes and there is this challenging 
situation where tenants are dealing with poor maintenance 
issues. To me, the things that would be most beneficial are 
comprehensive tenant protections, including a right to counsel, 
to allow tenants to be able to fight back in situations where 
landlords' legal obligations to tenants are not being met.
    I think that there are also some aspects of expanding, 
perhaps, what some of the legal obligations actually are, so 
understanding the relationship between tenants and landlords as 
one of consumers, right, and if a consumer is not actually 
getting what they are paying for there has to be some kind of 
way that they can seek a redress for that.
    I would also say, though, that in a situation like this 
one, what seems important to me is actual opportunity for this 
particular landlord to talk to the tenants who are being 
impacted. I know that is something that the people in Minnesota 
have been asking for, for some time, and it has not happened, 
and I think given the statements of Pretium, in particular, 
they have an interest in actually having that conversation if, 
as they say, they plan to address some of those longstanding 
issues.
    Senator Smith. Thank you.
    Chairman Brown. Thank you, Senator Smith. Senator Warnock 
from Georgia is recognized for 5 minutes.
    Senator Warnock. Thank you so very much, Mr. Chair, for 
holding this important hearing on housing, and thank you for 
the way you have consistently emphasized that this is a 
Committee not just focused on banking, but we are also focused 
on housing and the concerns of ordinary people. That work is so 
critically important.
    Chairman Brown. Senator Warnock, that was one of the 
reasons I wanted you on this Committee, so thank you.
    Senator Warnock. Thank you. Thank you kindly.
    We are in the middle of a housing crisis, and we have seen 
it so clearly in Atlanta and in the State of Georgia. And it is 
so important that we understand how private equity affects the 
marketplace so that we can find solutions for ordinary people.
    Private investments in housing is a complicated issue, and 
it is important that we understand it correctly. Professional 
investors are less than 1.16 percent of the national single-
family rental market, a little over 1 percent. However, as Dr. 
Fields has already pointed out in her testimony, private equity 
landlords do not acquire properties uniformly across the 
country. In Georgia, over 5 percent of all homes are owned by 
single-family rental home companies, well above the national 
average. And in Atlanta, three companies--Invitation Homes, 
Tricon, and American Homes 4 Rent--own 21,727 properties, which 
is 70 percent more than the size of their portfolio in any 
other city.
    Dr. Fields, could you speak to the effects of this targeted 
private equity investment on the housing market in cities like 
Atlanta, and what guardrails have States or local governments 
successfully deployed to protect tenants in these homes, or to 
protect individual home buyers looking to compete with private 
investment companies to purchase a home in today's market?
    Ms. Fields. Thank you for the question, Senator Warnock. 
Starting with the last part of your question first, 
unfortunately I do not think we have seen a terrible amount of 
intervention by State and local governments, either in support 
of tenants of corporate landlords or in support of home buyers 
who are being outbid by these investors, which is why it is so 
important that we are having this hearing today.
    In terms of the kinds of consequences that we see for the 
housing markets where institutional investors have the largest 
footprints, we have already discussed many of these 
consequences. So the rent increases in places like Atlanta, 
Phoenix, Las Vegas, Tampa have all been above 10 percent, I 
believe as high as 13 percent on new leases in Atlanta in the 
past year. So we are seeing very rapid increases in rent. We 
are seeing, you know, the rollout of new kinds of fees that 
tack on extra costs to the cost of rent every month.
    And I think especially important to point out, in addition 
to shutting out home buyers from wealth creation while creating 
more demand for themselves, we are also learning that corporate 
landlords evict tenants and file for eviction at much higher 
rates than smaller-scale landlords, and this often works as a 
strategy of intimidation against tenants, and also fosters 
further housing insecurity by adding late fees, attorney fees, 
and other costs onto rent arrears.
    So I think overall the picture is one of increased costs in 
housing insecurity for tenants and diminished home ownership 
opportunities for people who are in a position to buy.
    And I think, you know, just to add on a little bit to some 
of what Ms. Lopez was saying, in addition to comprehensive 
tenant protections, I think we should also look at things like 
supporting tenant associations for these large-scale landlords. 
In many cases, because they are living in single-family homes, 
tenants are often atomized from one another, do not have any 
way of communicating with other tenants who rent from the same 
landlord and might be experiencing the same problems. And I 
think supporting tenant associations and perhaps even 
collective bargaining rights for tenants of large-scale 
landlords would go a long way toward easing of the power 
imbalance that tenants face in this market. Thank you.
    Senator Warnock. Thank you so much. I think it is 
critically important that we understand the impact of private 
equity on the housing market. You speak of rents being 
unaffordable and home ownership out of reach, which is we tried 
to offer some policy solutions. My Downpayment Toward Equity 
Act is an effort to address some of this. But there is a lot 
more that we have to do. So thank you so very much for your 
insights.
    Chairman Brown. Thank you, Senator Warnock. I apologize to 
the witnesses. Because we have had three votes today the 
attendance has been down, and I know a lot of people had 
questions, but I think we are going to adjourn the meeting.
    We have had some misinformation in today's hearing. I want 
to just clear up a few things. The percentage of homes private 
equity owns in the whole country really does not tell us much. 
These firms are not buying properties evenly across the 
country, as witnesses affirmed. They are buying in large 
volumes in a targeted group of communities, in a targeted group 
of neighborhoods within those communities, as Senator Warnock 
has seen in Atlanta, one of the centers of this. If you want to 
rent a home in the neighborhood where your kids go to school in 
Atlanta or Columbus, you do not have a lot of options. That is 
a lot of power for one single, big, national, Wall Street firm.
    I think we all tire of this idea that, quote, ``this talk 
would take away the incentive to work.'' We know people in this 
country want to work. The incentive to work is pretty basic. It 
is the same for the people in the middle class and people 
aspiring to the middle class, as it is someone in upper income 
brackets, it is to make enough money for your family.
    The idea that someone who is low income has some kind of 
pathology where they would not want to work to make more money, 
all because they got a $300 a month tax cut, the Child Tax 
Credit that Senator Warnock and I and others have worked on, 
the biggest tax cut for working families in this country in 
history, or they got help finding an affordable apartment, it 
is pretty ridiculous, and frankly, saying that they do not want 
to work is pretty offensive.
    Work unites all of us. That is why I talk so often about 
the dignity of work--it is why Dr. King and Pope Leo sort of 
invented the term--to do something productive for ourselves and 
our family, because all work has dignity. If some of my 
colleagues are so concerned about some Americans missing out on 
that inherent dignity I would suggest they look a little harder 
at the wealthiest sliver of the country, making millions off 
investment income, often much of it--pardon me for saying 
this--often much of it inherited. Perhaps we could attach a few 
work requirements to their tax breaks.
    The Senate Committee on Banking, Housing, and Urban Affairs 
is adjourned.
    [Whereupon, at 11:29 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    One thing seems to be pretty much certain in this economy: no 
matter what happens to most Americans--a financial crisis, a global 
pandemic--Wall Street will find a way to profit off of everybody else's 
pain.
    We all remember 2008.
    Nearly nine million workers lost their jobs. Workers' savings were 
wiped out.
    And nearly 10 million families lost their homes and everything that 
went with them--months and years of mortgage payments, their 
neighborhood school, the family pet, the stability of knowing where you 
live, where your kids would go to school, and where you'd attend church 
for the next 20 or 30 years.
    But as families watched their dreams crumble, Wall Street found new 
opportunities to profit from the devastation it created.
    As families--disproportionately families of color, who had been 
targeted with predatory loans--lost their homes, private equity funds 
with access to cheap cash were waiting to scoop them up.
    Following the 2008 financial crisis, private equity funds bought 
families' homes in cash, often at foreclosure auctions. And they bought 
the loans of the hardest-hit borrowers in bulk from FHA and the GSEs.
    These professional investors weren't shy about what made it 
possible--and profitable--for them to buy up tens of thousands of 
homes.
    They told investors: ``recent turbulence in U.S. housing and 
mortgage markets,'' created a ``unique opportunity.'' And the 
availability of large quantities of single-family homes at ``distressed 
prices,'' and ``strong demand from tenants'' meant the opportunity for 
``attractive yields.''
    ``Unique opportunity'' for ``attractive yields.''
    Think about that--in plain English, that meant take advantage of 
the foreclosure crisis--the crisis that turned homeowners' lives upside 
down and gutted their hard-earned savings--to give Wall Street 
billionaires the chance to buy up homes for less than they're worth, 
and rent them out at a steep profit.
    And let's also be clear--there would be, quote, ``strong demand 
from tenants'' because Wall Street preyed on people and cost them their 
homes. They would have to rent at those higher prices, locking in 
tenants, with no other options, for years into the future.
    The largest investors in the world went on a buying spree. And they 
shopped strategically.
    Neighborhoods with good schools in Atlanta, Phoenix, Tampa, and 
Charlotte became the centers of investment. By 2020, just seven cities 
contained more than half of the homes owned by institutional investors.
    And as some private equity funds were buying single-family homes, 
another group of funds started targeting manufacturing housing 
communities.
    The nearly 38,000 manufactured housing communities around the 
country have long been owned by small, local companies. The families 
who live there own their home, but rent the lot where their home is 
placed.
    Many of the families who live in manufactured housing communities 
are low-income or on fixed incomes. Their median income is $35,000 a 
year. That doesn't leave room for a rent increase or a broken down 
car--let alone being able to afford to pick up and relocate the home 
they own to a cheaper lot.
    But when big investors began buying up these communities after the 
crisis, many of them raised rents, added new fees, and changed their 
policies--all without fixing up the communities the way they promised 
residents they would.
    Residents like Ms. Hook, who we'll hear from today, and like 
manufactured homeowners I met in Iowa, are left with an impossible 
choice: abandon the home they own with nowhere to go--with literally 
nowhere else to take their home--or pay rent they can't afford.
    That private equity business model has been preying on people since 
the housing crisis. So no one should be surprised that in the turmoil 
of a public health and economic crisis, Wall Street is running a 
similar playbook.
    Today, in many cities and towns there are few affordable options. 
When private equity comes in and buys up homes in their town, many 
renters are left with no choice other than to accept the rising rents.
    One of the largest single-family rental firms reported ``record-
breaking results'' at the end of 2020, and a resource for manufactured 
home community investors reported that the properties just became more 
valuable.
    It's a variation on the same theme, no matter the industry:
    They buy up companies like Toys `R Us and Sears, lay off workers to 
show a profit on their balance sheet, then close the business.
    They buy up local newspapers, fire journalists, and any oversight 
or coverage of their corporate greed tends to disappear.
    They buy up nursing homes, raise the prices, and neglect residents.
    It's all the same--private equity profits depend on squeezing every 
last nickel from workers and renters, without any kind of real 
investment in their employers or their communities.
    It's a symptom of one of the biggest problems in our economy--the 
Wall Street system is not set up to prize long-term investment. Private 
equity is all about the quick buck--everyone else be damned.
    Today, we'll look at how these firms have changed the housing 
market--and not for the better.
    We'll hear from our witnesses about how this hurts pretty much 
everyone except the big investors--renters pay higher rents or are 
forced out and families hoping to someday own their own home are priced 
out.
    We'll also begin to hear what we need to do to make sure that every 
family--whether they rent or own, whether they're in Columbus or 
Atlanta or Charlotte--has a safe, affordable place to call home.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Thank you, Mr. Chairman. And welcome to our witnesses.
    I'm a bit puzzled by today's hearing topic. It seems intended to 
demonize people who use their own money to buy--and even build--as 
little as 1 percent of homes in the single family housing market.
    At least one of today's witnesses represents a group that rejects 
the concept of private property altogether, stating on their website 
that ``we envision a U.S. where land and housing are publicly owned.'' 
Let me just say for the record, private ownership is vastly preferable 
to the State. That's the American dream after all.
    There's nothing wrong with people renting homes instead of, or 
before, becoming homeowners. And there's nothing wrong with investors 
putting their own money to work to meet the needs of renters.
    Now if Democrats are concerned about investors crowding out 
homebuyers, I hope they would agree that taxpayers shouldn't subsidize 
loans to investors. Unfortunately, the Biden administration has a 
different view. It lifted existing restrictions on the ability of 
Fannie and Freddie to buy loans from single-family investors.
    That's a taxpayer giveaway. And it's why I'm introducing 
legislation to prohibit the GSEs from acquiring investor property 
mortgages. I hope my colleagues will cosponsor it.
    Today, what I think we need to focus on is the $3.5 trillion 
elephant-in-the-room: the Democrats' reckless tax-and-spend spree, 
which includes $300-plus billion for housing.
    Billions of this aid is not targeted. Some of these programs have 
weak means testing and loopholes. And forget work requirements--even 
for able-bodied childless adults. They, and many people of above-
average income, will do quite well under some of these programs.
    Let's consider a few of the bill's misguided housing provisions.
    Start with the $9 billion in downpayment assistance for ``first 
time'' and ``first generation'' homebuyers. It's rife with problems.
    First, you can qualify even if you or your parents previously owned 
a home. So much for ``first time'' and ``first generation.''
    Second, you don't have be low income. A member of Congress could 
qualify for a taxpayer-funded downpayment under this program.
    Third, it's an invitation to mortgage fraud. A homebuyer only has 
to attest to being a first generation homebuyer. No other diligence is 
required. In fact, lenders are exempt from liability even if they 
knowingly accept a false attestation.
    But worst of all, this program is a thinly disguised attempt to 
give assistance to homebuyers based more on the color of their skin 
than their financial need--something that's very likely 
unconstitutional.
    Democrat Chairwoman Maxine Waters has said the objective of this 
program is to ``help address the racial wealth and home ownership 
gaps.'' The director of the liberal National Fair Housing Alliance has 
said, ``you cannot address issues of racial inequity if you do not 
address housing inequity--it is an impossibility. They're so 
inextricably linked.'' Thus, the bill text directs the HUD Secretary to 
allocate funds in part based on ``racial disparities in home ownership 
rates.''
    Increasing wealth and home ownership rates amongst minorities is a 
fine goal. But designing race-based policies and benefits is not.
    The Democrats reckless tax-and-spend bill also has $80 billion for 
renovating public housing. But that's odd. The Biden administration 
requested only $40 billion. So why does this bill have $80 billion?
    It just so happens that the NYC housing authority wanted $40 
billion for itself. But our Democrat colleagues knew they couldn't pass 
a bill that sent 100 percent of the money to New York City. That would 
be a bit of a problem for the 48 Democratic senators who don't 
represent New York.
    So instead, Majority Leader Schumer promised to ``double down'' on 
the Administration's proposal and ``use all of my power as majority 
leader . . . to secure a funding package that can restore and transform 
[the NYC Housing Authority].''
    And lo and behold, we now have $80 billion not to be distributed 
using the existing formula but rather by executive fiat. This certainly 
looks a lot like Senator Schumer securing a $40 billion earmark, or 
``Schumark.'' So it looks like half of all the bill's public housing 
dollars will go to a housing authority plagued by scandals, bribery, 
and chronic mismanagement.
    It's distressing to see Democrats pouring billions into outdated 
public housing projects that concentrate poverty and crime and trap 
families in generational cycles of dependency and despair. Twenty years 
ago, both parties recognized the flaws in Government-controlled 
housing. That's why Congress capped the number of public housing units 
with the Faircloth amendment.
    Now, Democrats' reconciliation bill would waive this sensible law 
so new public housing units can go up. This is a remarkable return to 
Government-owned housing, and one that we will again regret.
    We need to try something different than Big Government socialism to 
help make housing affordable. We need to leverage the power of free 
enterprise--including private equity--to promote housing for all 
Americans.
    To that end, in March I proposed principles to guide housing 
finance reform discussions. Since then, the Administration has shown no 
interest in reform, and even missed a September 30th deadline to report 
on its reform plan.
    In light of the issues I've raised today, I hope this Committee 
will hold hearings soon on long overdue topics like housing finance 
reform, and markup any reconciliation legislation so we have an 
opportunity to debate and offer amendments.
                                 ______
                                 
                   PREPARED STATEMENT OF SOFIA LOPEZ
  Deputy Campaign Director on Housing, Action Center on Race and the 
                                Economy
                            October 21, 2021

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                    PREPARED STATEMENT OF HOLLY HOOK
    Manufactured Home Resident and MHAction Leader in Swartz Creek, 
                                Michigan
                            October 21, 2021
    Good morning and thank you, Chairman Brown, Ranking Member Toomey, 
and Members of the Committee. My name is Holly Hook and I'm a resident 
of Swartz Creek Estates in Swartz Creek, Michigan. I'm a member of 
MHAction, an organization made up of mobile home residents who organize 
our neighbors and fight to save our communities.
    Everyone has the right to a safe, affordable home and community. We 
need the Federal Government to work with us to ensure everyone this 
basic right, especially as predatory investors are threatening this 
human right for millions of families.
    I bought my manufactured home because I needed an affordable place. 
In our communities, seniors and families often own their homes but rent 
land from a common landlord. This creates lower housing costs. We loved 
our community. Like so many others, it was friendly, well-maintained, 
and walkable. In 7 years, I paid off my house and had reasonable lot 
rent that covered land, sewer, and garbage. My neighbors were mostly 
low-income seniors who retired to our community. No one knew that our 
community was for sale until a notice appeared on our doors in July 
2018 saying Havenpark Capital had bought us, and our lot rent was going 
up 22 percent. I needed answers, but Havenpark only offered a site for 
investors that stated, ``creating stable, long-term income.''
    It costs thousands to move our homes and many homes can't withstand 
a move. We had two options: pay the giant increases or lose our homes. 
Havenpark admited this on their investor website by stating, ``It is 
difficult for tenants to move their homes. As a result, operating cash 
flow is among the highest of any real estate class.''
    The rent hikes and fees continued. Havenpark unbundled 
administrative fees, school taxes, sewer charges, and trash fees from 
our rent. Monthly payments rose 40 percent by June of 2019 and as of 
this year, they've risen over 50 percent. My lot rent and fees have 
gone from $310 per month to over $500 per month.
    Our sense of security and independence is gone. My elderly and 
neighbors are hit the hardest. They live on fixed incomes. Havenpark 
now takes most of their income. Some fear losing their homes. Many 
moved out, including my 80-year-old neighbor who is now in a small 
senior apartment. Other residents are forced to use food pantries due 
to the increases. Some are even homeless.
    Havenpark kept raising rents and fees during COVID and sent letters 
threatening those who couldn't pay in full. They refused partial 
payments, though the CDC moratorium allowed them.
    In another Havenpark community across town, a lady named Mary 
worked multiple jobs to keep up with the increases until she got COVID 
last spring. She fell behind on the rent and Havenpark tried to evict 
her right away, while she waited for a rent relief payment. Havenpark 
only backed off when a reporter asked questions about Mary's case.
    And let's be clear--these big increases don't come back to us. 
Havenpark has cut back on maintenance. A nearby community they own lost 
their water in a storm, and they wouldn't fix it in a timely manner. 
The local government got involved after residents were without water 
for days.
    Our Michigan communities are not alone and Havenpark is not the 
only actor treating residents this way. Roughly 2 million people live 
in communities owned by the 50 largest community owners. Many operate 
like Havenpark, devastating seniors and families. And now some of the 
biggest private equity companies in the world are buying up mobile home 
parks.
    Outrageously, this trend is fueled by those who say they support 
affordable housing. We were astonished to learn that Havenpark Capital 
got their financing through a subsidiary of Enterprise Community 
Partners, the national affordable housing nonprofit, and Fannie Mae. 
Both Fannie Mae and Enterprise claim they advance affordable housing. 
But when they finance predatory investors like Havenpark, they destroy 
it.
    We've called on Fannie Mae and Freddie Mac and their regulator, the 
FHFA, to add safeguards against rent and fee gouging, unfair evictions, 
and unsafe conditions in their manufactured home community financing. 
We need financing to support us--the residents--not passive investors. 
We want financing products that will allow nonprofits, public entities, 
and resident owned cooperatives to buy our communities and keep them 
affordable and healthy. Thank you.
                  PREPARED STATEMENT OF NORBERT MICHEL
     Vice President and Director, Center for Monetary & Financial 
                      Alternatives, Cato Institute
                            October 21, 2021

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                 PREPARED STATEMENT OF MICHAEL HENDRIX
   Senior Fellow and Director for State and Local Policy, Manhattan 
                               Institute
                            October 21, 2021
    Chairman Brown, Ranking Member Toomey, and Members of the 
Committee, thank you for inviting me to participate in today's hearing. 
My name is Michael Hendrix, and I serve as a senior fellow and director 
of State and local policy at the Manhattan Institute. Along with my 
colleagues, we seek to advance freedom and opportunity across America's 
communities.
    Today's hearing topic seems misguided. Large investment firms, 
including those in private equity, buy just 1 to 2 percent of homes 
sold nationally today. And they own less than one-tenth of 1 percent of 
the housing market in America. Big finance is still a tiny player in 
housing.
    But housing's a hot market today, and investors both large and 
small are seeing opportunities to invest, so I'm open to discussing how 
these private dollars can go to expanding access and affordability for 
Americans looking for a place to call home. But it's difficult to be 
optimistic when many here are embracing this Administration's plans to 
regulate and legislate their way to a bigger Government role in 
housing.
    For instance, the reconciliation bill being considered in Congress 
doubles-down on failed public housing and throws more subsidy money at 
a limited supply of homes, a recipe for prices to keep rising. These 
are not answers to America's housing crisis. And make no mistake: it is 
a crisis. Housing demand is far outpacing housing supply. We have a 
shortage of nearly four million homes nationwide. But the roots of this 
crisis lie not in financial speculation but in Government regulation.
    Localities have made it practically illegal to build enough housing 
to meet demand, leading to inflated home prices. America is building 
homes at its slowest rate in 60 years, worsening a supply problem that 
has been decades in the making. Investors are snapping up homes because 
of supply restrictions, not in spite of them. The only answer to a 
housing shortage is to build more housing.
    Yet this hearing suggests a skepticism for the private sector 
investing in more housing. That's what institutional investors are 
doing, after all; they're not shrinking the supply of shelter. In fact, 
many are building more homes, which is what America needs if it's going 
to get out of this crisis. And as Vox notes, ``Since renters are on 
average less wealthy than mortgage-qualifying would-be homeowners, 
institutional investors might be creating more housing for lower-wealth 
Americans,'' particularly in desirable neighborhoods. \1\
---------------------------------------------------------------------------
     \1\ Demsas, Jerusalem. ``Wall Street Isn't To Blame for the 
Chaotic Housing Market''. Vox, June 11, 2021. https://www.vox.com/
22524829/wall-street-housing-market-blackrock-bubble.
---------------------------------------------------------------------------
    If not the private sector then, that leaves us with the public 
sector--and specifically, public housing. That is a mistake.
    Rather than helping the private sector solve a crisis of the 
Government's making, Congress' $3.5 trillion reconciliation bill plans 
to bail out America's failed public housing system. This money--an 
incredible $80 billion--has few limits on how it's spent. Senate 
Majority Leader Chuck Schumer has promised to hand over the bulk of 
these dollars to the scandal-plagued New York City Housing Authority 
(NYCHA). Worse yet, Sen. Schumer's colleagues want more failed NYCHAs 
through a backdoor repeal of limits on new public housing.
    Back in April, Sen. Schumer called on President Joe Biden to double 
his planned spending of $40 billion on public housing. He wanted all of 
the original money just to pay NYCHA's repair bill. And he got it: an 
increase to $80 billion in spending on public housing and enormous 
influence on securing half of it for a NYCHA bailout. And even this may 
not be enough: NYCHA estimates its repair costs may be as high as $68.5 
billion by 2028. In short, it's an $80 billion slush fund.
    NYCHA is what we get when we get more public housing. And that 
should scare every American, especially for the survivors of public 
housing. NYCHA is the Nation's oldest and largest public housing 
system, housing more people than the city of Atlanta, and long held up 
as a model of what Government can achieve when it takes charge of 
housing.
    And in 2018, NYCHA's own tenants sued the housing authority for its 
squalid living conditions. Then the Federal Government sued too, 
finding that the housing agency had worked harder to cover-up its 
``dangerous problems'' than to actually fix them. It turns out that the 
Nation's largest and greatest public housing system poisoned over a 
thousand children with lead exposure, then lied and covered it up. And 
just this month, New York City public health officials admitted that 
NYCHA residents are dying from COVID-19 at nearly twice the city rate.
    ``The real disaster is the management at NYCHA and its culture of 
deception,'' said the U.S. attorney who sued the agency, and he's 
right. Just the other month, Brooklyn's district attorney charged nine 
NYCHA contractors with bribery over the authority's no-bid contracts. 
There's an ``ecosystem of people willing to make and take bribes at 
NYCHA,'' found the Brooklyn DA.
    Despite record levels of funding, ``New York's public housing isn't 
getting better,'' admitted the New York Times. \2\ Sometimes more money 
means more problems. A new paint job won't fix NYCHA's problems. A 
public housing slush fund only harms accountability and leaves 
structural problems in place. Spending $40 billion to repair NYCHA 
amounts to roughly $250,000 for every family living in public housing 
in New York City. Do we really believe we won't get more of the same?
---------------------------------------------------------------------------
     \2\ The Editorial Board. ``New York's Public Housing Isn't Getting 
Better''. New York Times, July 30, 2019. https://www.nytimes.com/2019/
07/30/opinion/new-yorks-public-housing-nycha.html.
---------------------------------------------------------------------------
    We are now being promised more failure by striking a 1990s-era cap 
on public housing units known as the Faircloth Amendment. Housing 
authorities are being told they can build and expand, while it seems 
the private sector is being told the opposite. That means more demands 
for even more public housing dollars in the future. The backdoor repeal 
of the Faircloth Amendment in the reconciliation bill ensures America 
will trap more generations in public housing poverty.
    Public housing has failed--look no further than NYCHA. It's time we 
did better for Americans in need of more affordable housing. Bailing 
out scandal-plagued public housing authorities is not the answer. 
Neither is condemning private sector solutions to America's housing 
crisis. We can--we must--do better.
    Thank you.
                  PREPARED STATEMENT OF DESIREE FIELDS
   Assistant Professor of Geography and Global Metropolitan Studies, 
                   University of California, Berkeley
                            October 21, 2021

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                        FROM SOFIA LOPEZ

Q.1. The housing policy page on your organization's website 
states, ``[w]e envision a U.S. where land and housing are 
publicly owned and used for the overall public good to ensure 
that every person is guaranteed a home.'' \1\ While advocating 
for families to have access to safe and affordable housing is a 
fine goal, I am concerned with your organization's position 
that the pathway to accomplishing this goal requires increased 
Government ownership of housing stock.
---------------------------------------------------------------------------
     \1\ Action Center on Race and the Economy, accessed October 28, 
2021, https://acrecampaigns.org/issues/levelingtheplayingfield/.
---------------------------------------------------------------------------
    Does the statement on your organization's website, ``[w]e 
envision a U.S. where land and housing are publicly owned,'' 
mean that your organization supports collective ownership of 
all land or just a portion of land?
    Should the law prohibit individual ownership of homes?
    Do you oppose private property?

A.1. Senator, thank you for taking the time to engage with our 
website and for the chance to discuss the challenges of our 
current housing market.
    ACRE believes there are critical limitations to a profit-
based housing model, and the current affordability crises 
facing residents across the country are the result of this 
model. This means we need more democratic ownership of land, 
not less.
    In the United States, private home ownership has been the 
primary vehicle to build wealth, which is critical to 
weathering large, unexpected expenses, covering the cost of 
higher education, and more. ACRE does not argue that the law 
should prohibit individual ownership of homes, however, the 
fact that the median net worth for White households is $188,200 
compared to a median net worth of $24,100 for Black households 
is clear evidence of the limitations of relying on individual 
ownership to meet our Nation's housing needs and address the 
widening racial wealth gap. \2\
---------------------------------------------------------------------------
     \2\ Bhutta, Neil, Andrew C. Chang, Lisa J. Dettling, and Joanne W. 
Hsu (2020). ``Disparities in Wealth by Race and Ethnicity in the 2019 
Survey of Consumer Finances'', FEDS Notes. Washington: Board of 
Governors of the Federal Reserve System, September 28, 2020, https://
doi.org/10.17016/2380-7172.2797.
---------------------------------------------------------------------------
    ACRE would not say we are opposed to private property, but 
our Nation's history has shown that a profit-based housing 
model will never ensure that all people in the U.S. are housed. 
This will require alternative models, like public housing and 
community ownership to ensure that we are prioritizing the need 
for shelter over speculation and runaway profit.
                                ------                                


         RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
                        FROM SOFIA LOPEZ

Q.1. Rhode Islanders are experiencing a particularly acute 
shortage of affordable housing supply right now. How do private 
equity companies and iBuyers influence the housing supply 
crisis that is happening across the country right now?

A.1. There is a shortage of low-cost homes affordable to renter 
households and for purchase by first-time, first-generation 
buyers. What affordable homes are available to first-time 
buyers are typically within the same price and square footage 
range that private equity-backed landlords target for 
acquisition, putting prospective homeowners and large 
corporations with billions in cash in direct competition.\1\ 
\2\
---------------------------------------------------------------------------
     \1\ Mari, F. (2020, March 4). ``A $60 Billion Housing Grab by Wall 
Street''. New York Times Magazine. Retrieved from https://
www.nytimes.com/2020/03/04/magazine/wall-street-landlords.html.
     \2\ Investment Companies Pricing out Homebuyers. (2021, October 
6). NBC News. broadcast. Retrieved from https://www.nbcnews.com/
nightly-news/video/investment-companies-pricing-out-homebuyers-
122940997741.
---------------------------------------------------------------------------
    For example, in Shelby County Tennessee, where Memphis is 
located, Cerberus Capital Management, Pretium Partners, 
American Homes 4 Rent, and more, bought over 7,000 homes, 
combined, with a median value of $145,000. \3\ In 2021, Memphis 
is the metro area with the highest concentration of investor 
ownership, followed by cities with anticipated high price 
growth and few tenant protections. \4\
---------------------------------------------------------------------------
     \3\ Powell, A. (2021, October 16). ``Home Buying Competition From 
Investors Could Impact the Black-White Wealth Gap in Shelby County''. 
The Grio. Retrieved from https://thegrio.com/2021/10/16/home-buying-
competition-from-investors-black-wealth-gap/.
     \4\ Malone, T. (2021). ``Single-Family Investor Activity Surges in 
the Second Quarter''. CoreLogic, Inc. Retrieved from https://
www.corelogic.com/intelligence/single-family-investor-activity-surges-
in-the-second-quarter/.
---------------------------------------------------------------------------
    IBuyers have acknowledged the need to achieve scale for 
their businesses to be profitable. Opendoor, which recently 
went public via a SPAC, said they would be willing to buy the 
majority of homes for sale in the 40 markets where they operate 
today. \5\ While iBuyers argue that they purchase, fix, and 
sell homes to consumers, the reality is they often partner with 
private equity companies who are hungry to increase their 
inventory, while the iBuyers create the scale they need to turn 
a profit. This means, despite the claims of iBuyers, many of 
the homes they sell are never marketed to consumers. \6\
---------------------------------------------------------------------------
     \5\ Strachan, M. (2021, August 13). ``Zillow, Other Tech Firms Are 
in an `Arms Race' To Buy Up American Homes''. Vice. Retrieved from 
https://www.vice.com/en/article/93ymxz/zillow-other-tech-firms-are-in-
an-arms-race-to-buy-up-american-homes.
     \6\ Clark, P. (2021, May 21). ``Mega Landlords Are Snapping up 
Zillow Homes Before the Public Can See Them''. Bloomberg. Retrieved 
from https://www.bloomberg.com/news/articles/2021-05-21/mega-landlords-
are-snapping-up-zillow-homes-before-the-public-can-see-them.

Q.2. In what ways are ordinary homebuyers for owner-occupied 
housing disadvantaged when competing against iBuyers to 
purchase homes? How do these disadvantages compound when 
prospective homebuyers are first-time, first-generation, 
---------------------------------------------------------------------------
minorities, or women?

A.2. Homebuyers, particularly first-time, first-generation, 
minority and women prospective homebuyers are at a monumental 
disadvantage when it comes to competing with iBuyers.
    Companies like Offerpad, Rocket Homes, Opendoor, and until 
recently Zillow, have huge quantities of cash at their 
fingertips, as well as sophisticated algorithms to predict 
where homes are most likely to appreciate in the future. 
Analysts of the iBuyer market have noted that one possible 
factor in Zillow's withdrawal from the iBuying sector is the 
fact that they were habitually paying more than the market 
average for homes. In September 2021, for example, data show 
Zillow paid $65,000 above the market average per home. \7\
---------------------------------------------------------------------------
     \7\ Stokel-Walker, C. (2021, November 11). ``Why Zillow Couldn't 
Make Algorithmic House Pricing Work''. Wired. Retrieved from https://
www.wired.com/story/zillow-ibuyer-real-estate/?utm-source=WIR-REG-GATE.
---------------------------------------------------------------------------
    First-time, first-generation, households of color, and 
women prospective homebuyers do not have the luxury of paying 
in cash or taking the risk of buying homes sight-unseen, much 
less paying a $65,000 premium to bolster their competitive 
advantage. Instead, because they cannot access the same cash or 
credit, many households are trapped renting--at times paying 
more than a mortgage, without building any equity, to private 
equity companies who are able to outcompete them on the open 
market, and who are able to purchase from iBuyers in bulk.

Q.3. IBuyers tend to concentrate their purchases in particular 
geographic areas. How does this impact those local housing 
markets? What competitive concerns are raised by this buying 
strategy?

A.3. Opendoor has expressed its need for scale and its interest 
in buying the majority of homes in the markets where it 
operates, while also seeking a $2 billion dollar credit 
facility to ensure its ability to do so. \8\ Opendoor has yet 
to turn a profit, and Zillow recently left the iBuying 
business, and is selling their thousands of homes in inventory 
at steep discounts, with the first bulk sale of 2,000 homes 
going to Pretium Partners. \9\ Because iBuying companies focus 
on a handful of markets, and they frequently partner with 
private equity-backed single family rental landlords, there are 
concerns about what options residents have in choosing a home. 
The algorithms these companies use are proprietary, and 
analysts and regulators, much less the general public, don't 
know exactly how iBuyers weigh school quality or proximity to 
employment centers, though we know these are critical variables 
driving home prices in general. It is reasonable to imagine 
that using their algorithms, iBuyers can zero in on desirable 
properties and crowd homeowners out, and in some circumstances 
sell those same properties to private equity companies, who in 
turn rent these homes rather than make them available for 
purchase.
---------------------------------------------------------------------------
     \8\ Strachan, M. (2021, August 13). ``Zillow, Other Tech Firms Are 
in an `Arms Race' To Buy up American Homes''. Vice. Retrieved from 
https://www.vice.com/en/article/93ymxz/zillow-other-tech-firms-are-in-
an-arms-race-to-buy-up-american-homes.
     \9\ Strachan, M. (2021, November 10). ``Zillow Sells Thousands of 
Homes to Controversial Rental Powerhouse''. Vice. Retrieved from 
https://www.vice.com/en/article/k7wany/zillow-sells-thousands-of-homes-
to-controversial-rental-powerhouse.

Q.4. What actions would you recommend to Congress to further 
explore the impact of iBuyers and private equity companies on 
---------------------------------------------------------------------------
housing markets?

A.4. Members of Congress should dedicate time to engaging with 
tenants in properties owned by private equity landlords, 
homeowners who have bought from or sold to iBuyers, and people 
who have had to compete with both kinds of businesses to buy 
homes. These tenants and homeowners can speak most clearly to 
the detrimental impacts of both iBuyers and private equity and 
are well positioned to offer solutions.
    Based on these conversations, members of Congress should 
consider sending letters of inquiry to better understand and 
document the business practices and underlying risks associated 
with large scale iBuyers and private equity landlords. 
Furthermore, iBuyers should be required to disclose demographic 
information about who they buy from and sell homes to, to 
ensure they are not entrenching racism in housing.
    Lastly, one of the easiest ways to begin to understand the 
role of both iBuyers and private equity companies is to require 
disclosure of the beneficial owners of real estate. Both 
iBuyers and private equity companies employ LLCs which can make 
it very difficult to know the owner of a given property, much 
less the scale and concentration of ownership. Requiring 
disclosures would facilitate research into concentrations of 
ownership within given markets and allow regulators and tenants 
to pursue claims of monopoly power. Even without disclosure, 
investigations into price-setting and monopoly should be done 
in markets that have demonstrated high rates of private equity 
ownership. Congress could also demand to know what inputs feed 
into iBuyers' algorithms, to assess how data-informed 
speculation harms communities of color in particular, and locks 
households out of home ownership opportunities, access to high 
performing schools, quality jobs, and more.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                      FROM DESIREE FIELDS

Q.1. The Democrats' reconciliation bill contains a provision 
that would allocate $10 billion \1\ to fund a new downpayment 
assistance program. Under this program, homebuyers would 
qualify for a taxpayer-funded downpayment equivalent to $20,000 
or 10 percent of the purchase price of a home, whichever is 
greater. The program is purportedly targeted to ``first time'' 
and ``first generation'' homebuyers, even though an individual 
may qualify if they or their parents have previously owned a 
home. Chairwoman Waters has said that the objective of such a 
program is to ``narrow [ . . . ] the racial home ownership 
gap.''
---------------------------------------------------------------------------
     \1\ Based on the latest House Rules Committee text, released 
October 28, 2021, https://rules.house.gov/sites/
democrats.rules.house.gov/files/BILLS-117HR5376RH-RCP117-17.pdf.
---------------------------------------------------------------------------
    You have written extensively about race and housing, 
saying, for example, ``[housing] financialization may be placed 
in a much longer line of land and housing schemes where capital 
accumulation is predicated on the racialization of people and 
place'' and that ``financial violence is racial violence.'' \2\
---------------------------------------------------------------------------
     \2\ https://escholarship.org/uc/item/5gd214jn, accessed October 
28, 2021.
---------------------------------------------------------------------------
    Do you support a Federal downpayment assistance program 
that would, in part, target benefits based on race?

A.1. I have reviewed the relevant text of H.R. 5376 as reported 
by the Committee of the Budget, with modifications, focusing on 
Subtitle C-Homeownership Investments; Sec. 40201 First-
Generation Downpayment Assistance. \3\ As I understand it, this 
provision would allocate $6.825 billion in downpayment 
assistance funds to qualified homebuyers. It would also provide 
$2.275 billion for competitive grants for financial, community 
development organizations, and other nonprofit organizations 
that serve minority and low-income communities. Remaining funds 
would support prepurchase counseling required for eligible 
homebuyers to access downpayment assistance, as well as HUD 
administration and oversight of the program.
---------------------------------------------------------------------------
     \3\ Based on the text released November 3, 2021: https://
rules.house.gov/sites/democrats.rules.house.gov/files/BILLS-
117HR5376RH-RCP117-18.pdf.
---------------------------------------------------------------------------
    In accordance with the goal of this appropriation to 
``increase equal access to home ownership'', qualifying for 
downpayment assistance requires homebuyers be both a first-time 
and a first generation buyer. This focus recognizes that one's 
parents having owned a home facilitates intergenerational 
wealth transfers that increase home ownership opportunities for 
their offspring, e.g., by providing financial support for a 
downpayment on a home.
    Historic racial inequalities in access to mortgage 
financing and insurance (and thus in parental wealth), 
discriminatory real estate practices, and the detrimental 
effects of the 2008 foreclosure crisis on Black home ownership 
and wealth have inequitably distributed home ownership 
opportunities along racial lines in the United States. As of Q3 
2021, approximately 74 percent of White Americans own homes 
compared to 44 percent of Black Americans, 60 percent of Asian/
Native Hawaiian/Pacific Islander Americans, and 57 percent of 
Americans of other races. \4\ Since the 2008 financial crisis, 
the age gap between Black and White first-time buyers has 
grown, with Black first-time buyers now 6 years older than 
White first-time buyers (up from 3 years older in 2002). \5\ In 
2021, 83 percent of all home buyers were White \6\ whereas 
according to the Census Bureau, approximately 59 percent of the 
U.S. population identified as White in 2020. While first-
generation homebuyers can be defined in several ways, Black 
first-generation homebuyers outnumber White first-generation 
homebuyers according to every definition. \7\
---------------------------------------------------------------------------
     \4\ U.S. Census Bureau, ``Quarterly Residential Vacancies and 
Homeownership'', Third Quarter 2021; https://www.census.gov/housing/
hvs/files/currenthvspress.pdf.
     \5\ Consumer Financial Protection Bureau, ``Market Snapshot: 
First-Time Homebuyers'' (March 2020); https://
files.consumerfinance.gov/f/documents/cfpb-market-snapshot-first-time-
homebuyers-report.pdf.
     \6\ National Association of Realtors, ``2021 Home Buyers and 
Sellers Generational Trends''; https://www.nar.realtor/sites/default/
files/documents/2021-home-buyers-and-sellers-generational-trends-03-16-
2021.pdf.
     \7\ Urban Institute, ``Down Payment Assistance Focused on First-
Generation Buyers Could Help Millions Access the Benefits of 
Homeownership'' (April 2021); https://www.urban.org/urban-wire/down-
payment-assistance-focused-first-generation-buyers-could-help-millions-
access-benefits-homeownership.
---------------------------------------------------------------------------
    Based on these racialized inequities in home ownership, it 
is reasonable to infer that the downpayment assistance 
provision of H.R. 5376 could indeed help narrow the racial home 
ownership gap. However, I did not find any text in the bill 
stating that benefits would be targeted based on race, nor that 
certain groups would be excluded based on race. White Americans 
are simply less likely to be first-time, first-generation 
homebuyers than Americans of other racial backgrounds, 
particularly Black Americans. And as a result, minority racial 
groups are more likely to meet the eligibility requirements of 
the downpayment assistance program, though qualified White 
homebuyers would also be eligible. Home ownership is the 
primary wealth creation mechanism available to average 
Americans. It is logical and appropriate to direct downpayment 
assistance to those who face the greatest barriers to 
purchasing a home, i.e., first-time, first-generation 
homebuyers.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                      FROM DESIREE FIELDS

Q.1. What does your research say about the affordability of 
securitized single-family rental properties? What meaningful 
differences have you observed between securitized and 
nonsecuritized single-family rental properties, and why do you 
think these differences exist?

A.1. I preface my response to this question by noting that only 
about 10 landlords control enough single-family rental (SFR) 
homes to engage in securitization. Therefore, after a brief 
discussion of securitization and its purpose for SFR landlords, 
my response focuses on available data about such institutional 
scale operators. \1\
---------------------------------------------------------------------------
     \1\ Varying definitions of institutional ownership exist; here I 
use the term to indicate landlords that control upwards of 5,000 
properties.
---------------------------------------------------------------------------
    It is important to recognize that data limitations make it 
difficult to empirically assess affordability differences 
between institutional and smaller-scale operators. 
Institutional operators that are publicly listed as real estate 
investment trusts are required to publicly report some data but 
understandably are invested in representing themselves in the 
most favorable light possible in such reports. There is no 
public data and limited proprietary data that would enable 
fine-grained comparisons between landlords that control varying 
amounts of rental properties, particularly efforts to evaluate 
such differences across a range of metropolitan areas. Finally, 
securitization is only one difference that may play a role in 
affordability differences between institutional and 
noninstitutional operators.
    SFR securitization is a relatively novel practice, first 
carried out in 2013 by Invitation Homes, then controlled by 
Blackstone. \2\ The process of securitization bundles income 
streams, selling shares in the pool to investors as bonds. In 
the case of SFR securitization, the income streams are the rent 
checks that tenants pay to their landlord. Based on my 
research, about 50 SFR securitizations were publicly issued 
from 2013 to 2020. On average, each securitization has pooled 
the rent from about 3,500 homes. Institutional operators have 
raised nearly $30 billion in debt via SFR securitization.
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     \2\ Blackstone exited its stake in Invitation Homes in 2019.
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    Securitization is a form of leverage that allows SFR 
landlords to raise low-cost financing and generate higher 
returns for equity investors. \3\ According to a 2018 study, 
``By 2016 SFR REITs and other large institutional investors had 
moved to an almost 100 percent cash buying rate for new 
properties'' whereas smaller, individual investors purchased 
with all cash less than half the time. \4\ All-cash purchases 
allow institutional operators to reduce reliance on other forms 
of financing and borrowing, lowering their costs and giving 
them a competitive edge against smaller operators who are more 
reliant on mortgages. To summarize, securitization gives 
institutional operators a market advantage, but it also creates 
pressure to deliver returns to investors, which can put upward 
pressure on rents. \5\
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     \3\ Urban Institute, 2014; https://www.urban.org/sites/default/
files/publication/24676/412992-Single-Family-Securitized-Financing-A-
Blueprint-for-the-Future-.pdf.
     \4\ Chilton et al., 2018 ``The Impact of Single-Family Rental 
REITs on Regional Housing Markets: A Case Study of Nashville, TN''. 
Societies.
     \5\ Amherst Capital Management, 2016; https://
www.amherstcapital.com/documents/20649/22737/
US+SFR+Emerging+Asset+Class/9d84e0da-4a9f-4665-9880-88a4515d9d2b.
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    The above statement is especially true in an inflationary 
context. If operating expenses rise due to inflation, yields on 
leveraged portfolios will fall unless rents are increased to 
compensate. Similarly, yields are higher when purchase prices 
are lower; the rapid increase in house prices seen over the 
course of the pandemic could cut into the yields of 
institutional operators, prompting them to raise rents. As 
well, any rise in property taxes associated with increased home 
values is likely to be passed on to tenants in the form of rent 
increases.
    According to a 2020 study, \6\ the average monthly rent of 
the three largest publicly listed SFR landlords (Invitation 
Homes, American Homes 4 Rent, and Tricon American Homes) often 
outpaced the median rent of comparably sized rental units in 
markets where institutional operators have the biggest 
footprint. In Atlanta, the gross median rent for a 3-bedroom 
unit was $1,164/month (according to 2017 American Community 
Survey data) while average rents for these institutional 
operators ranged from $1,224-$1,525. In Tampa, the gross median 
rent for a 3-bedroom unit was $1,250/month (according to 2017 
American Community Survey data) while average rents for these 
institutional operators ranged from $1,484-$1,678. In Phoenix, 
average rents for these institutional operators ranged from 
$1,236-$1,322, more in line with the gross median rent of 
$1,280/month for a 3-bedroom unit (according to 2017 American 
Community Survey data).
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     \6\ Colburn et al., 2020; ``Capitalizing on Collapse: An Analysis 
of Institutional Single-Family Rental investors''. Urban Affairs 
Review.
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    In 2021, SFR rents have increased substantially, in 
September rising by 12.2 percent year-over-year, with increases 
varying substantially between markets. \7\ The markets in which 
institutional SFR operators have the biggest presence have seen 
particularly strong rental growth rates: rents increased 25 
percent year-over-year in Miami, 20 percent in Phoenix, 15 
percent in Las Vegas, 13 percent in Dallas, and 12 percent in 
Atlanta. \8\ Within these markets, institutional operators have 
announced even steeper increases on new leases this year. For 
example, in Q3 2021, Invitation Homes posted increases of 29 
percent on new leases in both Phoenix and Las Vegas, 20 percent 
in Atlanta, 18 percent in South Florida, and nearly 16 percent 
in Dallas. \9\ Due to the density of properties controlled by 
operators like Invitation Homes in markets where their 
footprint is the largest, it is possible such landlords could 
be driving higher-than-average rent growth seen in such 
markets. Their behavior may also breed imitation by smaller 
landlords, who are able to observe asking rents via the online 
portals of institutional landlords.
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     \7\ CoreLogic, 2021; https://www.corelogic.com/intelligence/u-s-
single-family-rents-up-10-2-year-over-year-in-september/.
     \8\ Ibid.
     \9\ Invitation Homes, 10-Q report, Q3 2021; https://sec.report/
Document/0001687229-21-000061/invh-20210930.htm.
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    However, data limitations make it challenging to offer a 
straightforward assessment of differences in affordability 
between institutional-scale operators who engage in 
securitization versus noninstitutional operators. 
Institutionally owned SFR properties tend to be more clustered 
in higher-income neighborhoods with higher rents than SFR 
properties more generally, which tend to be located in low- to 
mid-income, diverse neighborhoods. \10\ In order to conduct a 
robust comparison of rental rates between institutional and 
noninstitutional operators, it would be necessary to access 
data on rents for each type of landlord within the same or 
comparable neighborhoods. \11\
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     \10\ Immergluck, 2018; ``The Rise of Single-Family Rentership in 
the Sunbelt Metropolis''. Housing Policy Debate.
     \11\ Such data may exist on a proprietary basis, but a renewed 
commitment to public data on property owners and managers, such as the 
1998 Property Owners and Managers Survey carried out by the U.S. 
Census, would facilitate improved public understanding and research on 
such questions.
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    One further issue to consider is how institutional 
operators may affect the affordability of home ownership. Such 
landlords are directly competing with homebuyers for the same 
types of properties (properties priced below the area median 
and located in decent school districts) and in many cases have 
been able to outcompete potential owner-occupiers due to their 
ability to make all-cash offers. \12\ Homebuyers who lose out 
are diverted back to the rental market, increasing demand for 
homes like those controlled by institutional landlords (and 
potentially encouraging them to further increase rents). 
Moreover, the competition between big capital and owner-
occupiers could make housing permanently more expensive. \13\ 
Considerations of affordability related to institutional SFR 
operators should therefore also consider how investor activity 
may make housing more expensive for owner occupiers, putting 
home ownership beyond reach.
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     \12\ Dezember, R. (2021); ``If You Sell a House These Days, the 
Buyer Might Be a Pension Fund''. The Wall Street Journal. https://
www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-
a-pension-fund-11617544801
     \13\ John Burns Real Estate Consulting, 2021; ``Investor Mania 
2.0: How Data, Technology, and Yield-Chasing Are Revolutionizing 
Housing While Raising Risk Levels''.
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