On Tuesday, Rep. Alexandria Ocasio-Cortez (D-New York) called out real estate companies, some backed by huge private equity firms, for “gobbling up” homes across the country, especially in non-white and low-income neighborhoods.
In a hearing on inflation in the House Financial Services Committee, Ocasio-Cortez named real estate companies like Invitation Homes, which is backed by Blackstone, for buying a huge share of single family homes in the U.S. These corporations are seeking only to make a profit at the expense of families and individuals looking for a place to call home, she said.
“We have these major, often private equity-backed companies, that are gobbling up homes in our housing market, which is already creating excess scarcity on top of the housing scarcity that already exists,” Ocasio-Cortez said.
“And then, by constricting that supply, we’re also seeing a lot of these major, huge multi-million dollar companies then either flip those properties and resell them at a higher rate due to that artificially inflated price, or they hold on and hoard this housing stock and rent out at exorbitant prices,” she continued.
Mark Zandi, chief economist for Moody’s Analytics, said that individual investors and institutional investors made up a quarter of home sales at the end of 2021. Indeed, investors have been buying homes in record numbers.
According to Redfin, low- and mid-priced homes make up a large portion of investments, with low-priced homes being the most popular purchase. In the fourth quarter of 2021, single-family homes made up three-quarters of investors’ purchases.
These purchases are rapidly accelerating. In 2021, Blackstone-owned Invitation Homes spent nearly $2 billion buying 4,802 homes, while their revenue increased by 9.5 percent over the last year to nearly $2 billion total.
Large corporations have a huge advantage in the market, as they have the ability to buy homes before they’re even listed for public view, to use algorithms to determine what homes would be a good investment, and to buy homes with cash. Real estate firms also get lower interest rates than regular homebuyers.
Meanwhile, regular families and individuals looking to buy a home are left in the lurch as the housing market explodes. In the late 2010s, housing prices were plateauing, but in 2021, the average price of a home shot up; while the average new home cost about $392,000 in 2020, it cost $453,700 in 2021.
“[Regular people are] competing against the largest private equity firm in the world to purchase a home,” Ocasio-Cortez said. “In fact, companies like Blackstone, Zillow and Bedrock are buying up to 15 percent of available homes – but what I find interesting here is that they’re purchasing them in minority and low-income neighborhoods specifically.”
Indeed, companies like Invitation Homes are buying up a large share of affordable homes and homes in Black neighborhoods; in 2021, 30 percent of home sales in majority Black neighborhoods went to investors, compared with 12 percent in other areas, according to The Washington Post.
Meanwhile, people with no choice but to rent are facing landlords who are squeezing tenants for more money. In New York City, for instance, landlords are raising rents by up to 70 percent, forcing tenants to move and seek cheaper housing.
“This is the market that we have created for housing in America. Right now, 6 million renter households are currently behind on rent,” which is twice the amount of people who were behind rent pre-pandemic, Demond Drummer, managing director at PolicyLink, said in the hearing. The majority of people behind on rent are people of color, Drummer pointed out.
“In 2021 alone, rents increased by 10 percent in 149 metropolitan areas. What we’re seeing around the country is a failure of policy and law to address the acute shortage of housing,” Drummer said. “My view is that our current housing prices constitute a serious, significant series of market failures that require a robust policy response.”