HFSC Holds Hearing on Private Equity Firms’ Impact on Housing Affordability

The U.S. House Financial Services Committee’s (HFSC) Subcommittee on Oversight and Investigations held a hearing on June 28, “Where Have All the Houses Gone? Private Equity, Single Family Rentals, and America’s Neighborhoods.” The hearing investigated the growth in corporate ownership of single-family rental homes since the 2008 financial crisis.

Witnesses at the hearing included Jim Baker, executive director of the Private Equity Shareholder Project; Shad Bogany, agent for Better Homes and Gardens magazine; Sofia Lopez, deputy campaign director of housing at the Action Center on Race and the Economy; Elora Lee Raymond, assistant professor at the Georgia Institute of Technology; and Jenny Schuetz, senior fellow at the Brookings Institute.

In a memo for the hearing, the Subcommittee noted that in the wake of the financial crisis, institutional investors “acquired large portfolios of foreclosed homes” and that, as of 2021, such investors accounted for as many as 42% of new home sales in some areas. Communities that experienced high foreclosure rates during the financial crisis – disproportionately low-income communities and communities of color – have been particularly targeted by institutional investors. Studies show that these investors push significant rent increases on tenants, are less likely to perform basic property maintenance, and are significantly more likely to evict tenants than smaller landlords.

Jim Baker from the Private Equity Shareholder Project noted in his testimony that the widespread use of limited liability corporations (LLCs) in homebuying has decreased transparency and made it difficult for tenants to know who owns their home, thereby complicating efforts to hold negligent landlords responsible. Mr. Baker recommended that Congress establish a landlord registry, in which landlords would be required to disclose ownership ties and provide regular updates on eviction filings and rent increases. He also encouraged the enactment of federal, state, and local laws to increase tenant protections, including just cause eviction legislation that would require landlords to have “good cause” in order to file for an eviction and legislation limiting rent increases to 3% in properties owned by corporate landlords.

Sofia Lopez from the Action Center on Race and the Economy also emphasized the necessity of increasing landlord transparency and encouraged members to provide “massive federal investment in truly affordable housing that is not-profit motivated but instead is dedicated to fulfilling a fundamental right to housing.” 

Jenny Schuetz from the Brookings Institute emphasized that “the growth of institutional investors is a symptom, rather than a cause, of extremely tight housing markets.” Ms. Schuetz noted that the nation’s severe shortage of affordable rental housing, coupled with increasing demand, has pushed up the cost of housing. She recommended Congress engage in “sustained policy efforts from multiple angles” to address the growing cost of housing, including by creating incentive programs for local governments to relax zoning restrictions on smaller homes and multifamily properties, and helping low-income renters better afford housing through the expansion of tax credits, like the Child Tax Credit or the creation of a Renter’s Tax Credit.

Professor Raymond of the Georgia Institute of Technology emphasized the impact of institutional investors on eviction and gentrification, which is particularly pernicious because of the tendency of institutional investors to target communities of color.

Shad Bogany of Better Homes and Gardens noted that the conglomeration of single-family rentals under institutional investors could be particularly harmful “if the investors decide to sell and dump properties,” as this could “hurt whole neighborhoods [and] bring property values down for homeowners.”

Watch a recording of the hearing and read the Subcommittee’s memo at: https://bit.ly/3R0766r