Dozens of tenant activists who rent homes and apartments backed by federal mortgages across the country converged on the offices of a corporate mega-landlord in Washington, D.C. on Friday with a clear message: Rent is too damn high, and the Biden administration must act now to protect tenants from profiteering landlords who operate federally financed properties.
The tenant activists concluded a week of lobbying and advocacy with a loud protest at the offices of Starwood Capital Group, a private real estate equity firm that is also one of the largest corporate landlords in the nation.
“Not another nickel, not another dime, corporate rent hikes are a crime,” the protesters chanted in the hallway of the office building.
The Washington Post recently reported rent hikes at Starwood-owned apartments in Arizona and Florida as high as 30 percent annually. Barry Sternlicht, Starwood’s billionaire CEO, infamously called inflation an “extraordinary gift that keeps on giving” during a 2021 call with investors as housing costs — and corporate profits — skyrocketed during the COVID-19 pandemic.
The affordable housing crisis is a nightmare for tenants and a bonanza for corporate landlords and investors who enjoy enormous pricing power in a rapidly consolidating market. The cost of paying rent for residential space has increased by roughly 30 percent since the pandemic began in 2020, according to Alexei Alexandrov, an economist at the Urban Institute.
“Of course, that hits the most vulnerable populations first, so people with extremely low income — more than 20 percent [of them] are behind on rent,” Alexandrov said during a briefing for congressional staff on Monday. “Black renters — more than 20 percent are behind on rent, and those are staggering numbers.”
Due to a chronic shortage of housing units in neighborhoods across the country, tenants are forced to compete with each other for an affordable place to live, rather than landlords competing for customers by offering better homes at lower prices, Alexandrov said. Mortgage rates have reached historic highs, putting home ownership out of reach for millions of people and increasing demand in the rental market, which gives landlords more power to raise rents and push out lower-income tenants.
Rising rents are a key driver of inflation, with the consumer price index for rent of primary residence increasing 7.2 percent in October over last year, more than double the 3.2 percent increase in prices for all consumer products. The consumer price index for “shelter,” a measure of housing costs in general, increased 6.7 percent in October compared to a year ago, accounting for about 70 percent of total inflation.
Meanwhile, tenants have filed sweeping lawsuits against corporate landlord companies that stand accused of price gouging and colluding to artificially raise rents. The Department of Justice is reportedly getting involved in what is now a class-action lawsuit against a “cartel” of landlords and a residential data software company called RealPage.
Polling suggests the rising cost of living, including rent, remains the top issue for two-thirds of voters and a big problem for President Joe Biden, who has struggled to craft an economic message that resonates as he seeks reelection. While the White House boasts about low unemployment numbers, messaging about “jobs” does little to persuade people who are working but still can’t afford to pay their bills.
Speaking at a rally with tenants this week, Rep. Pramila Jayapal (D-Washington), chair of the Congressional Progressive Caucus, said the housing crisis is both an issue of economic justice and a “racial justice imperative” that Biden and the Democratic Party should champion.
“The housing crisis keeps working families trapped in a cycle of poverty,” said Jayapal. “Without a stable home or affordable rent, it is impossible to move out of unemployment or build up a financial safety net to safeguard against eviction and homelessness.”
Alexandrov said the U.S. faces a shortage of at least 4 million homes, including 2 million affordable units that are badly needed in specific areas. The Biden administration has rolled out a five-year plan to increase the housing supply, but Alexandrov said more aggressive action is needed. The housing crisis will not abate until millions of new homes are built, but there are policies the government can put in place now to “stem the bleeding.”
About 12 million rental units are in properties backed by Fannie Mae and Freddy Mac in a federal program created by Congress and managed by the Federal Housing Finance Agency (FHFA) that backs mortgages and home loans across the country. Each year, the agency oversees about $150 billion in financing for landlords by purchasing mortgages for approximately 25 percent of multi-family dwellings, according to the People’s Action Homes Guarantee campaign.
After months of organizing by tenants and housing justice groups, the Biden administration is now considering a proposal backed by top lawmakers to leverage the FHFA’s authority and attach rent controls and other tenant protections to federally financed home loans, which would be a major step forward in the Homes Guarantee campaign’s push to establish a national Renters Bill of Rights. The White House announced a blueprint for the bill of rights earlier this year.
“We’ve done months of research with economists and lawyers, we studied rent regulators and how they interact with supply. Based on this, we’ve determined that the most effective rent regulations would cap rent hikes at 3 percent annually at all properties backed by Fannie Mae and Freddie Mac,” said Alaysha Jenkins, a member of the Kansas City Tenants Union, during the congressional briefing. “This cap must be required. It cannot be voluntary or incentivized.”
At least in local markets, opponents of rent control will argue that rent caps prevent investors and developers from building the new homes needed to solve the affordable housing crisis. However, tenant activists and campaigns such as Homes Guarantee argue that the current system provides too much pricing power to landlords, who exploit the federal home loan system to gobble up large apartment buildings and keep prices high.
“The market today is really only benefiting a select few profiteers who have structured the market to benefit them,” said Tara Raghuveer, director of the Homes Guarantee campaign, in a recent interview with Fast Company. “A story of [millions] of tenant households across the country unable to pay the rent every month is not a story of market success; it’s a story of market failure.”
The FHFA is wrapping up a public comment period on the proposal to enforce renter protections at federally financed properties, and tenants and members of Congress are also calling for “good cause” eviction protections, the right to safe and habitable living conditions, the right to organize among tenants, and access to a national database of landlords who operate federally backed properties.
The campaign is also calling for anti-discrimination protects for renters such as Jenkins, who receive subsidies in the form of a housing voucher to pay rent. Landlords are notorious for pushing out renters on fixed incomes or exploiting their lack of options. Jenkins said that she and her two daughters were forced into a tiny apartment that Jenkins hates living in because her housing voucher was set to expire.
“I was forced to rent from a landlord of last resort, someone who knew my position and exploited it,” Jenkins said. “The rent is $1,200 a month for an 800-square-foot apartment.”
In August, 18 senators sent a letter to FHFA urging regulators to adopt the Renters Bill of Rights framework into policy, including Sen. Edward J. Markey (D-Massachusetts) Sen. Sherrod Brown (D-Ohio) and Sen. Bernie Sanders (I-Vermont). A coalition of Democrats in the House led a similar effort, and Jenkins said dozens of academics and economists back the Renters Bill of Rights.
Mortgages backed by Fannie Mae and Freddy Mac are also called “Enterprise-backed loans.”
“There have been repeated reports of investors using low-cost financing from Enterprise-backed loans to buy properties and then sharply raising rents, mistreating tenants, and allowing buildings to fall into disrepair,” the lawmakers wrote. “The most effective way to ensure that Fannie Mae and Freddie Mac are fulfilling their obligations is by implementing tenant protections for all renters living in properties they back.”