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housing
Billionaire Investors Are 'Supercharging' Housing Crisis: Report
"Billionaires see housing as a way to boost their bottom line, instead of a necessity to survive."
Oct 21, 2024
A new report out Monday puts "into numbers the trend that ordinary Americans have known to be true for years," said economic justice advocates behind the analysis: "Their everyday struggles of affording a home are made worse by the sweeping influence that billionaires have over the market."
The Institute for Policy Studies (IPS) joined Popular Democracy in compiling a 71-page report titledBillionaire Blowback on Housing, aiming to get to the bottom of growing concerns in recent years about how Wall Street, as Democratic vice presidential nominee and Minnesota Gov. Tim Walz said earlier this month, is "buying up housing and making them less affordable."
The two groups found that a small number of wealthy individuals and their investment arms, who control "huge pools of wealth," have spent some of their vast resources on "predatory investment and wealth-parking in luxury housing"—contributing significantly to the crises of unaffordable rents, out-of-reach homeownership, and homelessness.
Billionaires are "supercharging existing problems" in the housing market, according to the report.
The authors take issue with assumptions about what is driving the housing crisis, which is characterized by record-breaking homelessness in 2023 with more than 653,000 people unhoused; half of tenants paying more than 30% of their income on rent, making them cost-burdened; and a significantly widened gap between the income needed to buy a house and the actual cost of a home.
"The real estate industry would like you to believe the problem is entirely one based on supply and demand," and that regulations need to be changed to allow for the construction of more affordable housing, reads the report. But with 16 million vacant homes across the U.S.—28 for every unhoused person—"the reality is that the owners of concentrated wealth... are playing a more pronounced role in residential housing, thereby creating price inflation, distortions, and inefficiencies in the market."
Signifying the U.S. real estate market's "emerging status as global tax haven," the number of vacant units in some communities exceed the number of unhoused people partially because wealthy investors are acquiring property and intentionally leaving it vacant, found IPS and Popular Democracy.
"The reality is that the owners of concentrated wealth... are playing a more pronounced role in residential housing, thereby creating price inflation, distortions, and inefficiencies in the market."
For example, in 2017 there were more than 93,500 vacant units in Los Angeles and an estimated 36,000 unhoused residents, with vacancies treated as "a structural feature of the market thanks to the presence of a small class of wealthy investors who engage in speculative financial behavior."
Billionaires and their investment firms, such as Blackstone—now the world's largest corporate landlord—are also "taking advantage of the tight low-income rental market, lack of publicly funded affordable housing, displacement after the foreclosure crisis, and inaccessible homeownership to get into the business of single-family and multifamily home rentals, and buying up mobile home parks," the report reads.
In one section of North Minneapolis, private equity firms including Pretium Partners "snatched up blocks of single-family rental homes, added fees on top of rent, and then proceeded to neglect the maintenance and upkeep of their properties."
Blackstone now owns 300,000 residential units across the U.S. and nearly doubled its portfolio in 2021. With $1 trillion in assets, it owns 63,000 single-family homes, 149,000 apartment units, and 70 mobile home parks.
Corporate ownership of rental housing stock "has not translated into housing stability, particularly for working-class households and communities of color," reads the report. "Rather, corporate landlords have concentrated their predatory investment practices—flipping, rent gouging, habitability violations, and evictions—in lower-income communities of color."
The billionaire class and its private equity firms, said Chuck Collins, co-author of the report and director of the Program on Inequality and the Common Good at IPS, has "severely disrupted" the housing market.
"This is not your grandparent's gentrification—but a hyper-gentrification fueled by concentrated wealth driving up land and housing costs, expanding short-term rentals, and treating housing like a commodity to speculate on or a place to park wealth," said Collins. "The billionaires are displacing the millionaires, and the millionaires are disrupting the housing market for everyone else."
The report calls on policymakers to expand social housing—housing developed by the government or a not-for-profit entity to ensure individuals, households, and families are guaranteed housing as a human right, which cannot be sold for profit.
Social housing could be paid for by levying mansion taxes, regulating predatory practices in the real estate market, and taxing billionaires.
Local communities can also protect residents and generate revenue for affordable housing through actions including:
- Establishing "Housing First" programs to rapidly provide permanently affordable housing to the unhoused and end the criminalization of homelessness;
- Limiting corporate ownership of housing and passing laws requiring ownership transparency so corporations can no longer secretly buy up neighborhoods;
- Passing ordinances giving apartment and mobile home tenants the "first option to buy" when their communities come up for sale;
- Prohibiting owners from keeping units vacant for long periods of time; and
- Creating local Offices of Social Housing and Social Housing Development Authorities to function as supportive infrastructure, with the input of tenant unions, unhoused people's organizations, and other impacted community members.
"Billionaires see housing as a way to boost their bottom line, instead of a necessity to survive. This current system doesn't serve our communities," said Analilia Mejia and DaMareo Cooper, co-executive directors for Popular Democracy. "We need to do better. That starts with re-shaping our systems to look out for the needs and desires of working families, instead of billionaire investment and speculation. We need to safeguard renters' rights, and drastically expand the availability of permanently and truly affordable quality housing."
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Helene's Catastrophic Potential Stokes Fear Amid Florida Insurance Crisis
Florida already has one of the nation's largest shares of homeowners "who don't have meaningful insurance."
Sep 26, 2024
Hurricane Helene continued barreling toward Florida on Thursday, highlighting the impacts of the fossil fuel-driven climate emergency, including difficulties securing insurance coverage in regions most affected by extreme weather.
"The Air Force Hurricane Hunters found that the maximum sustained winds have increased to near 120 mph," the National Hurricane Center said Thursday afternoon. "This makes Helene a dangerous Category 3 major hurricane. Additional strengthening is expected before Helene makes landfall in the Florida Big Bend this evening."
Federal Emergency Management Agency Administrator Deanne Criswell said during a White House briefing that forecasts suggest Helene will make a "dead-on hit to Tallahassee" and "this is going to be a multistate event with the potential for significant impacts from Florida all the way to Tennessee."
Although this Atlantic hurricane season hasn't yet been as intense as U.S. scientists expected, trends in extreme weather disasters have led some insurance companies to exit the Florida market in recent years. Farmers Insurance announced last year that it would stop covering property in the state, in an effort to "effectively manage risk exposure."
While the Insurance Information Institute, an industry trade group, said in May that "legislative reforms passed in 2022 and 2023 have created a pathway to a stable Florida market," reporting from this week shows that residents—who aren't ultrarich—are still struggling to get and keep coverage.
"Florida ranks sixth among states with the largest shares of homeowners who don't have meaningful insurance. About 18% of homeowners across the state—about 1 in 6—are without it," NBC Newsnoted Wednesday. "Nearly 20% of Florida homeowners pay $4,000 or more a year for homeowners insurance—the largest share in the country, according to the Census Bureau."
According toThe Palm Beach Post, the global reinsurance broker Gallagher Re said in a Wednesday analysis that "landfall in the Big Bend or Panhandle region of Florida as a major hurricane (Category 3, 4, or 5) has historically translated to insured losses in the low single-digit billions."
"But Helene is not a typical storm," the firm explained. "Given Helene's very large wind radius, this would still bring hurricane-force wind gusts and high storm surge to coastal areas in the heavily populated Tampa Bay area, tropical storm force winds across most of the Florida peninsula, Georgia, the Carolinas, Tennessee, and southern Appalachia."
Gallagher Re suggested that "Helene's private insurance market losses should be expected to land in the range" of $3 billion to $6 billion, but if the hurricane "unexpectedly" moves toward Tampa, it could be over $10 billion.
Florida isn't the only state facing insurance trouble thanks to climate chaos. Voxreported last year that "insuring property in California has been a dicey proposition," pointing to torrential rainfall that "caused as much as $1.5 billion in insured losses" and "the costliest wildfires in U.S. history, including the 2018 Camp Fire, which led to more than $10 billion in losses."
Amid the intertwined climate and insurance crises, scientists, campaigners, and homeowners have demanded policy action—and elevated criticism of right-wing attacks on crucial programs.
In a June blog post, Rachel Cleetus, policy director with the Union of Concerned Scientists' Climate and Energy program, wrote that "Congress and regulators need to ensure more transparency in the insurance market on how companies are evaluating risks as they make decisions about premiums. There also needs to be better information on what kinds of incentives companies are providing for adaptation measures that would help reduce risks."
"Alongside the necessary but ultimately bounded role of insurance in a warming world, public and private decision-makers must also shift investments away from business-as-usual maladaptive and risky choices to more resilient ones," Cleetus continued. "The nation must scale up resources for climate resilience and ensure they are reaching communities in a just and equitable way. Funding for safe, affordable, and climate-resilient housing must be expanded."
The Climate & Community Institute on Wednesday also shared recommendations in a new report—Shared Fates: A Housing Resilience Policy Vision for the Home Insurance Crisis—using case studies from California, Florida, and Minnesota.
"We propose the creation of Housing Resilience Agencies (HRAs), either by states or the federal government," the institute said. These agencies would:
- Provide public disaster insurance that offers fair and equitable protections;
- Coordinate and oversee comprehensive, community-oriented disaster risk reduction;
- Address existing market failures by providing coverage for oft-neglected sectors such as multifamily housing providers, mobile home dwellers, and heirs properties; and
- Host public risk models, climate risk advisory councils, and diverse governing boards to inform decision-making in a transparent and democratic manner.
"In order to confront the growing housing safety and affordability crisis, we need to understand our fates as shared," the institute added. "We must reimagine our home insurance system for it to reduce risk and provide equitable and fair protection."
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Ocasio-Cortez, Smith Push Bill to Create Social Housing Authority
"Because we believe that housing is a human right, like food or healthcare, we believe that more Americans deserve the option of social housing."
Sep 18, 2024
"It's becoming nearly impossible for working-class people to buy and keep a roof over their heads. Congress must respond with a plan that matches the scale of this crisis."
That's according to U.S. Rep. Alexandria Ocasio-Cortez (D-N.Y.) and Sen. Tina Smith (D-Minn.), who on Wednesday introduced the Homes Act in a New York Timesopinion piece and an event with supporters of the proposal on Capitol Hill.
"Because we believe that housing is a human right, like food or healthcare, we believe that more Americans deserve the option of social housing," the pair wrote in the Times. "That's why we're introducing the Homes Act, a plan to establish a new, federally backed development authority to finance and build homes in big cities and small towns across America. These homes would be built to last by union workers and then turned over to entities that agree to manage them for permanent affordability: public and tribal housing authorities, cooperatives, tenant unions, community land trusts, nonprofits, and local governments."
"Our housing development authority wouldn't be focused on maximizing profit or returns to shareholders," the congresswomen continued. "Rent would be capped at 25% of a household's adjusted annual gross income. Homes would be set aside for lower-income families in mixed-income buildings and communities. And every home would be built to modern, efficient standards, which would cut residents' utility costs. Renters wouldn't have to worry about the prospect of a big corporation buying up the building and evicting everyone. Some could even come together to purchase their buildings outright."
In addition to establishing the new authority under the Department of Housing and Urban Development, the bill would repeal the Faircloth Amendment, which prevents the use of federal money for building new public homes. Under the new plan, construction would be funded by congressional spending and Treasury-backed loans.
"In New York, the average worker would need to clock in 104 hours a week to afford a one-bedroom apartment," Ocasio-Cortez said in a statement. "This country is staring down a full-blown housing crisis. A crisis where affordable housing is slipping out of reach."
"This bill would create more than 500,000 jobs and create 1.25 million affordable housing units," she noted, declaring that "everyone deserves a place to call home."
It's not just New York City where lower-wage people are struggling to keep a roof over their heads. Smith pointed out that "more than 90% of workers cannot afford a modest one-bedroom apartment. Americans across the country are bidding for homes against the wealthiest financial firms and they're losing."
"We have a severe housing crisis," she stressed. "The private market cannot meet this moment on its own. The Homes Act meets peoples' needs through social housing."
As Jacobin's Samuel Stein wrote Wednesday:
The housing system sketched out in the Homes Act looks nothing like what we are used to in the United States. Though we have an important social housing legacy, we have never normalized decommodification as the cornerstone of our housing system.
Introducing legislation like the Homes Act does not accomplish that goal in and of itself, but it offers us a concrete depiction of what that transition could look like. It also highlights the severe disjuncture between what our housing and urban planning system does right now—promote private profits in real estate while minimizing the public provision of housing—and what we need it to do.
The goal of legislation like this is not to pass it immediately, since no sober person would expect the current U.S. Congress to line up in support. Nor is the goal to supplant the messy work of organizing with the schematic and technical language of legislation. Instead, the point is to inspire organizing: to show that the status quo is not the only way our housing could operate, to give tenant organizations a concrete and affirmative vision to build toward, and to offer socialist candidates for office a platform to run on.
The bill to create a social housing authority—introduced less than two months out from the U.S. general election—is backed by the Center for Popular Democracy (CPD) and its affiliates from across the country.
"Working families are being forced to make sacrifices in order to pay the skyrocketing cost of keeping a roof over their heads, while corporate landlords and Wall Street executives are getting even richer," said CPD co-executive directors Analilia Mejia and DaMareo Cooper. "This legislation provides a clear alternative to for-profit housing. It creates a framework to make community-owned, permanently affordable green social housing a reality."
Advocates from both sponsors' states also spoke out in favor of the bill.
"In Greater Minnesota, counties and towns don't have staff to build affordable housing projects, financing is another huge issue. We don’t have as many philanthropic organizations or financial institutions as urban areas," explained Noah Hobbs, policy director at One Roof Community Housing in Duluth. "This bill is the first real investment we've had in years. We're incredibly proud to endorse this legislation."
Aisha Hernandez, secretary of the Coalition to Save Affordable Housing at Co-op City in the Bronx, said that "cooperative housing gave me the ability to co-own my home. A few years ago, my neighbors and I came together to ensure our housing stays affordable, that our management is working in the interest of homeowners and prevent any corporate takeover of Co-op City."
"We are co-owners, not at the whims of corporate landlords," Hernandez added. "I want my fellow Americans to have the same access to housing that co-op has afforded me. This bill has the ability to do that. So let's get it done."
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