Editorial: Who’s Really Behind the Affordable Housing Crisis

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For aspiring homeowners, the housing market is a disheartening and confusing testament to the lack of affordable housing across the country.

Homeownership rates have yet to recover from the 2008 financial crisis, and the median home price has risen 28% over the past two years as the pandemic accelerated existing trends in housing costs. lodging. However, income has not increased in proportion to the cost of a house. The median house costs 4.5 to 5 times the median household income in the United States

When it comes time to assign blame, it’s important to understand the difference between buying a home from a private equity firm and buying a home from a real estate firm.

Understanding the current housing market means unraveling a complex system of real estate advertisers, real estate buyers, and how they compete with new homeowners. Social networks are trying to provide answers.

Twitter threads and viral TikToks have shed light on Zillow’s home buying practices, accusing the real estate company of manipulating prices in the already unaffordable housing market.

While it is true that Zillow tries to profit by renovating and reselling homes at or slightly above market value, the practices of this company are just a drop in the bucket of buying homes. ‘business.

When Zillow buys a house for resale, he assumes the risk if the house does not sell for its listed price. When Zillow successfully resells above market value, it contributes marginally to the problem of rising house prices. However, this is not always the case.

The real problem arises when businesses buy homes not to resell them, but to rent them out. Buying a home on Wall Street is one of the main drivers of the affordable housing crisis. When companies, such as American Homes 4 Rent and Invitation Homes, buy single-family homes, they increase the price of homes, creating a shortage in the market.

Meanwhile, they are acting as business owners, with rent prices at the mercy of Wall Street. The rental value of single-family homes has increased by about 15% since the start of the pandemic. Additionally, conditions in these rental properties are noticeably poor, and business owners are much more likely to evict tenants – or use the threat of eviction to their advantage.

Invitation Homes, for example, is a property management company spun off from Blackstone, a private equity firm. Invitation Homes is concentrated in the South and has properties in 16 US cities.

Due to the company’s considerable assets, Invitation Homes has the ability to secure mortgages at significantly lower interest rates than the average buyer: 1.4%, compared to 2-4% on average.

When Invitation Homes makes an offer on a property, it also tends to offer cash offers, which are particularly attractive in today’s seller’s market.

Twenty-two percent of home purchases in Charlotte are made by investors. By contrast, nationally, one in five homes was sold to investors last year.

Although only one to two percent of those sales were made by larger institutional investors, the increasing rate of acquisitions since the pandemic has proven that private equity firms are a powerful backbone of the single-family housing market – and are at the origin of its rarity.

The problem of corporate home buying is growing, with little action being taken to mitigate the effects of single family homes converted to rental properties by private equity firms.

Major cities are hit the hardest by corporate home buying, and it could get worse in Orange and Durham counties as the Triangle experiences economic growth and development.

The lack of affordable housing anywhere is a concern.

Once we know where to place the blame, we can advocate for legislation that targets Wall Street and pension companies. Our state governments should ban or cap the purchase of homes by businesses, especially when it comes to foreclosure auctions. For example, a 2020 California bill prevents the “bundling” of homes during foreclosure auctions.

Affordable housing should be subsidized locally and higher fines should be imposed on owners of poorly maintained properties.

There is no silver bullet to the institutionalized problems of the real estate market, which historically discriminated against black homeowners and opened the doors to predatory lending practices that led to the 2008 recession.

Nonetheless, these measures can protect potential homeowners and restore the idea that affordable, quality housing is a right.

@dthopinion

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