Private Equity's Chokehold on Housing

Today's housing market is characterized by a disconnect between buyers and sellers. The root cause? Private equity (PE). Indeed, a select few private equity firms own at least 10% of all U.S apartments. While millions of tenants suffer through rent hikes, poor living conditions, and overall unaffordability, a faceless corporate landlord cannot adequately respond.

PE firms have become increasingly invested in the housing market over the past couple of decades. The strategy for these large firms is simple. Each time an economic shock occurs in the U.S, private equity ramps up its corporate acquisitions of residential areas. In 2008, after the financial crisis, the federal government essentially auctioned off foreclosed single-family homes, leading to private equity firms such as Blackstone buying entire neighborhoods in bulk. Simply put, as recessions and economic downturns force families into defaulting on their mortgages, private equity swoops in to own these homes. Empirically, after similar economic conditions resulting from COVID-19, private equity firms stuck to their patented strategy. Indeed, from the start of the pandemic to January 2022, various investment firms announced nearly $50 billion worth of transactions towards homes. Overall, while economic crisis hits hard for the average citizen, billion-dollar corporations only grow more powerful.

Rent spikes, unsafe conditions

The consequences of consolidation run deep. PE firms are interested in one key principle: profit. As financial gain acts as the leading motivator for the company's decision-making, people are often left in the dust. Independent researchers, activists, and journalists have uncovered how PE's never-ending pursuit of revenue growth comes at the detriment of inhabitants. In Atlanta, poorer communities of color are disproportionately affected by private equity's grasp on single-family residential homes. In predominantly black neighborhoods, PE firms employ a myriad of exploitative tactics to line their pockets. Firms set rental prices to unaffordable levels in an attempt to price tenants out of their own homes. Even worse, private equity often ignores pleas to fix substandard living conditions, health hazards, and faulty maintenance. When living spaces become uninhabitable, either due to affordability or health concerns, residents are clearly forced to leave. PE firms know this to be true. Moreover, they also know that a newly emptied house can be charged for even more on the market, thus increasing profits.

So, why do these companies not face accountability? That's because private equity is hard to track. With dozens of shell companies, it becomes nearly impossible to trace the funds all the way to the top. By and large, private equity gets away with clear anti-trust violations and monopolistic practices. Furthermore, private equity's actions are often overlooked because blame is placed on other factors, such as scarcity. The issue, however, is that private equity has created artificial scarcity within the housing market. In today's world, politicians constantly associate the housing crisis with a shortage of homes. Yet, reality paints an entirely different picture. In 2023, there was an average of 45.9 vacant homes per homeless person in the U.S. The problem isn't a lack of housing; instead, private equity's artificially inflated prices leave homes vacant.

Although private equity dodges accountability, state-level measures in regulating PE's dominant control have bipartisan support on both ends of the aisle. A legislative advocacy group quantifies that at least 32 states have taken action to limit rent fixing and corporate acquisition of homes. By further spreading awareness about private equity's chokehold on the housing market, real legislative solutions have the opportunity to be signed into law. Remember, even when corporate power isolates the working class, there is always a path forward.