Posted Aug 3, 2022, 9:30 am
Witnesses in a Tuesday hearing
detailed to a U.S. Senate committee how investors and stagnant wages are
driving an eviction and housing crisis across the U.S.
The chair of the Senate Banking,
Housing and Urban Affairs Committee, Ohio Sen. Sherrod Brown, said that
families are being priced out of buying homes, and rising rents mean
that tenants are “just one illness or job loss or car repair away from eviction.”
“More and more, investors are buying
up single-family homes — homes that first-time homebuyers usually buy —
and renting them out at sky-high rates,” Brown, a Democrat, said in his
opening statement. “Twenty-eight percent of homes sold at the beginning
of this year went to investors.”
One of the witnesses was Matthew Desmond, a sociology
professor at Princeton University and director of the Eviction Lab, the
main research team in the country dedicated to understanding the causes
and consequences of housing instability in America.
Desmond said that regions across the
country have experienced a huge surge in rents. Since 2000, median rent
has increased by 112% in the Midwest, 135% in the South, 189% in the
Northeast and 192% in the West, he said.
year, rents increased faster than they ever have on record,” he said,
adding that across the nation the median rent increased 17% in one
But some cities saw double that, he said, such as 40
percent in Portland, Oregon; 35 percent in Newark, New Jersey; 30
percent in Orlando, Florida; and 29 percent in Cincinnati, Ohio.
“When the cost of housing rises 15,
25, 30 percent, what can families do?” Desmond said. “They can’t
relocate to affordable housing because they often are already living in
the cheapest apartments available. All they can do is cut back on other
necessities, including health care, educational enrichments, and food.”
The ranking Republican on the
committee, Sen. Pat Toomey of Pennsylvania, blamed the Biden
administration for inflation and said that “government, and especially this administration, have often been the problem, not the solution, when it comes to housing.”
“Democrats’ wasteful spending,
growth-killing regulation and excessively accommodative monetary policy
are exactly what led to 40-year-high inflation and contracted our
economy,” he said in his opening statement.
Toomey asked one of the witnesses, Darion Dunn, who is the managing
partner of Atlantica Properties in Atlanta, Georgia, if government
actions that raise costs to landlords get passed on to tenants.
“Generally that is the case,” Dunn said. “Those costs have to be passed on because they’re such relatively small margins.”
Sen. Jon Tester, a Montana Democrat, said that people in his state are also having trouble finding affordable housing.
“The price points have gotten too high,” he said, adding that the median home sale price has increased about 40% in his state in the last year.
“This is pushing more people from potential homeownership to looking for homes to rent,” he said.
He asked one of the witnesses, Laura Brunner, the CEO
and president of the Port of Greater Cincinnati Development Authority,
what can happen to communities where homeownership is out of reach.
“There is a profound impact on local families when homeownership opportunities are taken away from them,” she said.
Investors buying houses
Institutional investors are market
actors that have access to capital and can be anything from private
equity firms to financial institutions through real estate investment
Brunner told senators that
institutional investors are changing the landscape of single-family
housing in Hamilton County, Ohio.
She said that access to affordable
rentals and housing has become increasingly more difficult due to
institutional investors. While investigating some of the worst
landlords in Cincinnati, her team found that more than 4,000 single
family homes in Hamilton County were bought by five institutional
investors since 2013.
One of those institutional investors, VineBrook Homes, was sued
by the city of Cincinnati for building code violations and by tenants
for poor living conditions and fraudulent security deductions.
Brown asked Brunner what Congress
could do to help places like Cincinnati keep homes affordable for
families and boost families to become homebuyers.
She said Ohio is typically a target area for these investors, because they buy homes in areas in the “state’s most disinvested neighborhoods.”
“This is something that is happening throughout Ohio,” Brunner said.
She said one way to make it easier
for local jurisdictions to find which properties are owned by
institutional investors, which typically file under LLCs, is to require
those investors to register with localities.
For example, VineBrook, was listed under 90 LLCs, making it difficult to track.
Desmond said that in 2021, it was
estimated that institutional investors made up about 2.3% of the single
family rental market, or 340,000 single family homes.
But while that’s small, he said,
these investors “have a much larger footprint” in some metropolitan
areas, particularly in sunbelt cities like Atlanta, Phoenix, Tampa,
Miami and Charlotte. And a recent report found that about 1 in 4 houses
sold in 2021 nationwide were purchased by an institutional investor — a
figure that grew to 31% in Arizona.
Brunner said in Hamilton County, that could mean 50% of the houses on the street are owned by institutional investors.
“When the geographical impact is so
concentrated, it has a game- changing effect on what it means to live in
that neighborhood,” she said.
These institutional investors are not building homes, she said.
“They are switching homeowner properties to rental properties and hiking up rents,” Brunner said.
Sen. Raphael Warnock, a Georgia Democrat, said that “there’s no question that we need more housing stock.”
He said that in his state, around 45%
of Georgians spend more than 30% of their income on rent and 1 in 5
spend more than half of their income on rent.
“Georgians are being crushed by rent all over the state,” he said.
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Warnock asked Diane Yentel, the president and CEO of the National Low Income Housing Coalition, how long it would take for housing supply to finally catch up.
“It will take years, if not more than a decade,” she said.
said that stagnant low wages and rising housing costs played a major
role in housing instability. The NLIHC is a nonprofit that advocates for
affordable housing in the U.S.
“Growing inflation, rising rents, and
declining real wages are particularly challenging for the lowest-income
renters,” she said.
Yentel said the average U.S.
minimum-wage worker would need to clock in 96 hours a week to afford
rent on a two-bedroom home, or work 79 hours a week to afford the rent
of a one-bedroom home at the fair market rate.
NLIHC estimates that a housing wage —
which is the hourly wage a full-time worker must make to afford an
apartment without spending more than 30% of their income — of $25.82 an
hour is needed for a modest two-bedroom home. The federal minimum wage
is $7.25. The city with the highest minimum wage in the country is SeaTac, Washington.
Yentel said that more than 24 million
people work in five of the lowest paying occupations — retail, food and
beverage services, personal care services, home health aid, building
cleaning services and food preparation.
Sen. Bob Menendez, a New Jersey
Democrat, said that in his state, a medium-income renter is barely able
to pay for a one-bedroom home. He asked Yentel how transportation can
also be an issue for low-income renters, who might rely on public
“We also have to be careful when we
work on transit, to not cause displacement or gentrification,” she said,
adding that existing affordable housing needs to be preserved.
Desmond said that even when wages increases, the relief from the burden of rental costs was only temporary. He said since 1985, rent prices have exceeded income gains by 325%.
He cited a study by the Federal Reserve Bank of Philadelphia that found “landlords quickly responded to the wage bumps by increasing rents, which diluted the effect of the policy.”
“The implication is that investing in
affordable housing isn’t only necessary to ease families’ rent burdens
and promote community stability,” he said. “It is also essential because
of the success of all other economic mobility effort depends on it.”
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White House summit
Separately, the White House held a summit Tuesday where Desmond, Yentel and other housing and eviction experts discussed lasting eviction reforms.
The White House said that as funds
for emergency rental assistance begin to wind down, the summit would
focus on “an all-out effort to build lasting reform,” including through
use of remaining emergency recovery funds.
This report was first published by the Arizona Mirror.
This content was originally published here.