How Private Equity Landlords Are Changing the Housing Market, Senate hearing transcript (October 21, 2021), GovInfo CHRG-117shrg52203, PDF
Summary
The Senate Banking, Housing, and Urban Affairs Committee, chaired by Sherrod Brown, met on October 21, 2021 (S. Hrg. 117–667) to examine how the private equity business model has been preying on people since the housing crisis. Witnesses were Sofia Lopez of the Action Center on Race and the Economy; Holly Hook, a manufactured home resident and MHAction leader in Swartz Creek, MI; Norbert Michel of the Cato Institute; Michael Hendrix of the Manhattan Institute; and Desiree Fields of the University of California, Berkeley. Lopez testified that Pretium Partners, the second-largest single-family rental landlord, had filed 2,000 evictions since mid-March of 2020. The printed hearing adds prepared statements and answers to written questions from Senators Toomey, Reed and Sinema.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
S. HRG. 117–667
HOW PRIVATE EQUITY LANDLORDS ARE
CHANGING THE HOUSING MARKET
HEARING
BEFORE THE
COMMITTEE ON
BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING HOW THE PRIVATE EQUITY BUSINESS MODEL HAS BEEN PREYING
ON PEOPLE SINCE THE HOUSING CRISIS
OCTOBER 21, 2021
Printed for the use of the Committee on Banking, Housing, and Urban Affairs
(
Available at: https: //www.govinfo.gov /
U.S. GOVERNMENT PUBLISHING OFFICE
52–203 PDF WASHINGTON : 2023
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chairman
JACK REED, Rhode Island PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey RICHARD C. SHELBY, Alabama
JON TESTER, Montana MIKE CRAPO, Idaho
MARK R. WARNER, Virginia TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia KEVIN CRAMER, North Dakota
STEVE DAINES, Montana
LAURA SWANSON, Staff Director
BRAD GRANTZ, Republican Staff Director
ELISHA TUKU, Chief Counsel
MEGAN CHENEY, Professional Staff Member
DAN SULLIVAN, Republican Chief Counsel
JONATHAN MCKERNAN, Republican Detail
CAMERON RICKER, Chief Clerk
SHELVIN SIMMONS, IT Director
CHARLES J. MOFFAT, Hearing Clerk
(II)
C O N T E N T S
THURSDAY, OCTOBER 21, 2021
Page
Opening statement of Chairman Brown ................................................................ 1
Prepared statement ................................................................................... 28
Opening statements, comments, or prepared statements of:
Senator Toomey ................................................................................................ 3
Prepared statement ................................................................................... 29
WITNESSES
Sofia Lopez, Deputy Campaign Director on Housing, Action Center on Race
and the Economy .................................................................................................. 6
Prepared statement .......................................................................................... 31
Responses to written questions of:
Senator Toomey ......................................................................................... 78
Senator Reed .............................................................................................. 78
Holly Hook, Manufactured Home Resident and MHAction Leader in Swartz
Creek, MI .............................................................................................................. 7
Prepared statement .......................................................................................... 41
Norbert Michel, Vice President and Director, Center for Monetary & Financial
Alternatives, Cato Institute ................................................................................ 9
Prepared statement .......................................................................................... 42
Michael Hendrix, Senior Fellow and Director for State and Local Policy,
Manhattan Institute ............................................................................................ 10
Prepared statement .......................................................................................... 57
Desiree Fields, Assistant Professor of Geography and Global Metropolitan
Studies, University of California, Berkeley ....................................................... 12
Prepared statement .......................................................................................... 59
Responses to written questions of:
Senator Toomey ......................................................................................... 81
Senator Sinema ......................................................................................... 83
ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD
Statement submitted by ROC USA ........................................................................ 86
Statement submitted by Hometown America ........................................................ 89
Statement submitted by The Manufactured Housing Institute ........................... 93
Statement submitted by Inqulinxs Unidxs for Justicia (United Renters for
Justice) .................................................................................................................. 100
Letter submitted by Pretium .................................................................................. 105
Schu-Mark Graphic ................................................................................................. 107
‘‘Protecting Companies and Communities From Private Equity Abuse’’—
PESP ..................................................................................................................... 108
‘‘How Private Equity Landlords are Changing the Housing Market’’—PESP .... 135
(III)
HOW PRIVATE EQUITY LANDLORDS ARE
CHANGING THE HOUSING MARKET
THURSDAY, OCTOBER 21, 2021
U.S. SENATE,
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS,
Washington, DC.
The Committee met at 10 a.m., via Webex and in room 538,
Dirksen Senate Office Building, Hon. Sherrod Brown, Chairman of
the Committee, presiding.
OPENING STATEMENT OF CHAIRMAN SHERROD BROWN
Chairman BROWN. The Senate Committee on Banking, Housing,
and Urban Affairs will come to order. Today’s hearing is in a hy-
brid format. Our witnesses are testifying in person, one of them in
person—thank you for joining us in person, sitting by yourself—
and the other four virtually. Members have the option to appear ei-
ther in person or virtually.
For those joining remotely, a few reminders. Once you start
speaking there will be a slight delay. To minimize background
noise, please click your Mute button until it is your turn to speak.
You should also have one box on your screen labeled ‘‘Clock’’. For
those of you joining virtually you will hear a bell ring when you
have 30 seconds remaining and then again when your time has ex-
pired. If there is a technology issue we will move on and try to
come back.
Our speaking order will be as usual, by seniority, Republican,
Democrat, Republican, Democrat.
One thing seems to be pretty much certain in this economy: no
matter what happens to most Americans—a financial crisis, a glob-
al pandemic—Wall Street finds a way to profit off of everybody
else’s pain.
We remember 2008. That was my second year in the Senate. Sit-
ting on this Committee we saw what happened in our country.
Nine million workers lost jobs. Workers’ savings were wiped out.
Ten million families lost their homes and everything that went
with them—months and years of mortgage payments, their neigh-
borhood school, the family pet, the stability of knowing where you
live, where your kids would go to school, maybe even where you
would attend church for the next 20 or 30 years. All that changes
when someone is evicted or loses a home.
As families watched their dreams crumble, Wall Street—no sur-
prise—found new opportunities to profit from the devastation it
created. As families—disproportionately families of color, who had
been targeted with predatory loans—lost their homes, private eq-
(1)
2
uity firms with access to cheap cash were waiting to scoop them
up.
Following the financial crisis of ’08, private equity funds bought
families’ homes in cash, often at foreclosure auctions. They bought
the loans of the hardest-hit borrowers in bulk from FHA and the
GSEs. Professional investors were not shy about what made it pos-
sible, and profitable, for them to buy up tens of thousands of
homes.
They told investors, and these are all quotes, ‘‘Recent turbulence
in U.S. housing and mortgage markets,’’ created a ‘‘unique oppor-
tunity.’’ The availability of large quantities of single-family homes
at ‘‘distressed prices,’’ and ‘‘strong demand from tenants’’ meant the
opportunity for ‘‘attractive yields.’’
‘‘Unique opportunity’’ for ‘‘attractive yields.’’ What could possibly
go wrong for Wall Street?
Think about that. In plain English, that meant take advantage
of the foreclosure crisis, of course, the crisis that turned home-
owners’ lives upside down and gutted their hard-earned savings, to
give Wall Street billionaires the chance to buy up homes for less
than they are worth and rent them out at a steep profit. And this
is personal to me in the sense that the ZIP code that Connie and
I live in, in Cleveland, 44105, that ZIP code had more foreclosures
in 2007 than any ZIP code in the United States.
Let us also be clear. There would be, quote, ‘‘strong demand from
tenants’’ because Wall Street preyed on people and cost them their
homes. They would have to rent at those higher prices, locking in
tenants, with no other options, for years into the future.
The largest investors in the world went on a buying spree, and
they shopped strategically. Neighborhoods with good schools, in At-
lanta, Phoenix, Tampa, and Charlotte, became the centers of in-
vestment. By 2020, just seven cities contained more than half of
the homes owned by institutional investors. Nobody ever accused
them of being stupid.
And as some private equity funds were buying single-family
homes, another group of funds started targeting—and this is
maybe even worse, maybe not, but we will see—started targeting
manufacturing housing communities. The nearly 38,000 manufac-
tured housing communities around the country have traditionally
been owned by small, local companies. The families who live there
own their homes, but rent the lot where their home is placed.
Many of the families who live in manufactured housing commu-
nities are low-income or on fixed incomes. Their median income is
$35,000 a year. That does not leave room for a rent increase or a
broken-down car, let alone being able to afford to pick up and relo-
cate the home they own to a cheaper lot.
So when big investors began buying up these communities after
the crisis, many of them raised rents, they added new fees, they
changed their policies of the previous owner, all without fixing up
the communities the way they promised residents they would.
Residents like Ms. Hook, who is joining us remotely today, and
like manufactured homeowners I met in Iowa a couple of years ago,
are left with an impossible choice: abandon the home they own
with nowhere to go, with literally nowhere else to take their home,
or pay rent, or try to pay rent they cannot afford.
3
That private equity business model has been preying on people
since the housing crisis. No one should be surprised that in the tur-
moil of a public health and economic crisis, Wall Street runs a
similar playbook.
Today, there are few affordable options in many places. When
private equity comes in and buys up homes in their town, renters
are often left with no choice other than to accept the rising rents.
And remember what, in the book Evicted, Matthew Desmond says,
‘‘The rent eats first.’’ You have to pay your rent before you can do
almost anything else.
One of the largest single-family rental firms reported ‘‘record-
breaking results’’ at the end of 2020. A resource for manufactured
home community investors reported that properties just became
more valuable.
It is a variation on the same theme, no matter the industry.
They buy up companies like Toys ‘R Us and Sears, lay off workers
to show a profit on their balance sheet, then close the business.
They buy up local newspapers, fire journalists, and any oversight
or coverage of their corporate greed tends to disappear. They buy
up nursing homes, they raise the prices, and they neglect residents.
It is all the same. Private equity profits depend on squeezing
every last nickel from workers and renters, without any kind of
real investment in their employers or their communities.
It is a symptom of one of the biggest problems in our economy.
The Wall Street system is not set up to prize long-term investment.
Private equity is all about the quick buck; everyone else be
damned.
Today, we will look at how these firms have changed the housing
market. We will hear from witnesses about how this hurts pretty
much everyone except the big investors—renters pay higher rents
or are forced out, families hoping to someday own their own home
are priced out. We will begin to hear what we need to do to make
sure that every family, whether in Columbus or Atlanta or Char-
lotte, has a safe, affordable place to call home.
Ranking Member Toomey.
OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY
Senator TOOMEY. Thank you, Mr. Chairman, and welcome to our
witnesses.
I must say I am a bit puzzled by today’s hearing topic. It seems
intended to demonize people who use their own money to buy, and
even build, as little as 1 percent of the single-family houses in
America.
At least one of today’s witnesses represents a group that rejects
the concept of private property altogether, stating on their website
as they do, and I quote, ‘‘we envision a United States where land
and housing are publicly owned,’’ end quote. Let me just say for the
State ownership of homes. In fact, it is a big part of the American
dream.
Now there is nothing wrong with people renting homes instead
of, or before, becoming homeowners, and there is nothing wrong
with investors putting their own money to work to meet the needs
of renters.
4
Now if Democrats are concerned about investors crowding out
homebuyers then I hope they would agree that taxpayers certainly
should not subsidize loans to investors. Unfortunately, the Biden
administration has a different view. The Administration lifted ex-
isting restrictions on the ability of Fannie and Freddie to buy loans
from single-family investors.
That is a taxpayer giveaway. That is why I am introducing legis-
lation to prohibit the GSEs from acquiring investor property mort-
gages, and I hope my colleagues will cosponsor it.
Today what I think we need to focus on is the $3.5 trillion ele-
phant-in-the-room, the Democrats’ reckless tax-and-spend spree,
which includes $300-plus billion for housing.
Billions of this aid is not targeted. Some of these programs have
weak means testing and loopholes. Forget work requirements, even
for able-bodied adults with no dependents. They, and many people
of above-average income, will do quite well under some of these
programs.
Let us consider a few of the bill’s misguided housing provisions.
Start with the $9 billion in downpayment assistance for ‘‘first time’’
and ‘‘first generation’’ homebuyers. Well, this is rife with problems.
First of all, you can qualify even if you or your parents previously
owned a home. So much for ‘‘first time’’ and ‘‘first generation.’’
Second, you do not have be low income. A member of Congress
could qualify for a taxpayer-funded downpayment in Washington,
DC, under this program.
Third, there is an invitation to mortgage fraud. A homebuyer
only has to attest to being a first-generation homebuyer. There is
no other diligence is required. And in fact, lenders are explicitly ex-
empt from liability even if they knowingly accept a false attesta-
tion.
But worst of all, this program is a thinly disguised attempt to
give assistance to homebuyers based more on the color of their skin
than their financial need, something that is very likely unconstitu-
tional.
Democrat Chairwoman Maxine Waters has said the objective of
this program is to ‘‘help address the racial wealth and home owner-
ship gaps.’’ The director of the liberal National Fair Housing Alli-
ance has said, ‘‘you cannot address issues of racial inequity if you
do not address housing inequity. It is an impossibility. They’re so
inextricably linked.’’ And thus, the bill text directs the HUD Sec-
retary to allocate funds in part based on, quote, ‘‘racial disparities
in home ownership rates,’’ end quote.
Now increasing wealth and home ownership rates among minori-
ties is a fine goal, but designing race-based policies and benefits is
not.
The Democrats reckless tax-and-spend bill also has $80 billion
for renovating public housing. Now this is a bit odd because the
Biden administration requested only $40 billion. So why does this
bill have $80 billion?
Well, it just so happens that the New York City Housing Author-
ity wanted $40 billion all for itself. But our Democrat colleagues
knew they could not very well pass a bill that sent 100 percent of
that money to New York City. It might be a bit of a problem for
the 48 Democratic senators who do not represent New York.
5
So instead, Majority Leader Schumer publicly promised to, quote,
‘‘double down’’ on the Administration’s proposal and, quote, ‘‘use all
of my power as majority leader . . . to secure a funding package
that can restore and transform [the NYC Housing Authority],’’ end
quote.
And lo and behold, we now have $80 billion, not to be distributed
using the existing formula, mind you, but rather by executive fiat.
It certainly looks a lot like Senator Schumer is securing a $40 bil-
lion earmark, or should we call it the ‘‘Schumark.’’ So it looks like
half of all the bill’s public housing dollars will go to a housing au-
thority plagued by scandals, bribery, and chronic mismanagement.
It is also distressing to see Democrats pouring billions into out-
dated public housing projects that concentrate poverty and crime
and trap families in generational cycles of dependency and despair.
Twenty years ago, both parties recognized the flaws in Govern-
ment-controlled housing. That is why Congress capped the number
of public housing units with the Faircloth amendment. Now, Demo-
crats’ reconciliation bill would waive this sensible law so new pub-
lic housing units can go up. This is a remarkable return to Govern-
ment-owned housing, and one that we will once again regret.
So we need to try something different than Big Government so-
cialism to help make housing affordable. We need to leverage the
power of free enterprise, including private equity, to promote hous-
ing for all Americans. To that end, in March I proposed principles
to guide housing finance reform discussions. Since then, the Ad-
ministration has shown no interest in reform, and even missed a
September 30th deadline to report on its reform plan.
In light of the issues that I have raised today, I hope this Com-
mittee will hold hearings soon on long overdue topics like housing
finance reform, and mark up any reconciliation legislation so we
have an opportunity to debate and offer amendments on housing
policy.
Thank you, Mr. Chairman.
Chairman BROWN. Thank you, Senator Toomey.
I will introduce today’s witnesses. Sofia Lopez is the Deputy
Campaign Director for Housing at the Action Center on Race and
the Economy. She conducts research in support of housing and ra-
cial justice campaigns across the country.
Ms. Holly Hook is an independent author and resident of Swartz
Creek Estates in Swartz Creek, Michigan. She became involved
with MHAction in 2019, after the private equity firm Havenpark
Capital purchased her community.
Mr. Norbert Michel, who is joining us in person, is the Vice
President and Director of the Center for Monetary & Financial Al-
ternatives at the Cato Institute; Michael Hendrix is a Senior Fel-
low and Director for State and Local Policy at the Manhattan Insti-
tute; and Dr. Desiree Fields is an Assistant Professor of Geography
and Global Metropolitan Studies at the University of California,
Berkeley. Her research and writing is focused on housing
financialization.
Ms. Lopez, if you would proceed.
6
STATEMENT OF SOFIA LOPEZ, DEPUTY CAMPAIGN DIRECTOR
ON HOUSING, ACTION CENTER ON RACE AND THE ECONOMY
Ms. LOPEZ. Chairman and Ranking Member of the Committee, I
really appreciate the invitation to speak with you today about how
private equity landlords are changing the housing market. My
name is Sofia Lopez. I am the Deputy Campaign Director on Hous-
ing at the Action Center on Race and the Economy. We are a na-
tional organization working at the intersection of racial justice and
Wall Street accountability.
A common claim by the largest single-family landlords is that
their institutional capital is professionalizing the single-family
rental industry, but there are many stories from tenants who are
hurt by the so-called professionalization. For example, Dean, a
leader at Inquilinxs Unidxs por Justicia, or Renters United for Jus-
tice in Minneapolis, Minnesota. He moved into a HavenBrook home
unit and started to see fees pile up: A $10 ‘‘property administration
fee,’’ a payment portal that would crash and trigger 8 percent late
fees, and $25 service fees based on a requirement that Dean had
already complied with.
HavenBrook alleges that Dean owes thousands of dollars in fees,
and despite the threat of eviction he is fighting back because he
knows that these fees are wrong.
This is an example of the private equity business model in hous-
ing, which enables record-breaking profits, even during a pan-
demic. And it depends on exploiting tenants. This model includes
rent increases, and one particularly egregious example, an Invita-
tion Homes tenant in California faced a nearly $800-per-month
rent increase, to over $3,000 per month in rent. This year, single-
family rents rose to 13.9 percent from last year, beating even mul-
tifamily rental increases.
Second, fines and fees. In 2016, fees and tactics like withholding
rent, tenants’ security deposits generated $26 million in revenue
for Colony Capital, and one CEO described the failure to capture
fee revenue as, quote, ‘‘revenue leakage.’’
Third, inadequate maintenance. In Minneapolis, HavenBrook
tenants have reported waiting up to a year for essential repairs, in-
cluding holes in roofs and ceilings, broken stairways, flooding,
faulty electrical systems, broken appliances, pest infestation, black
mold, and more. Tenants are left to either fix these problems them-
selves or live in unsafe conditions.
Fourth, aggressive pursuit of evictions. Even during a pandemic,
Pretium Partners, the second-largest single-family rental landlord,
which includes HavenBrook Homes, Progress Residential, and
Front Yard Residential, led the pack, having filed 2,000 evictions
since mid-March of 2020.
And fifth, opaque and confusing ownership structures. Publicly
available landlord names are often a string of consonants, num-
bers. And in addition to that, confusing financial relationships with
holding companies and the use of multiple tenant-facing brands
make even asking questions an enormous challenge for tenants.
Despite the industry’s claims that they only make up 2 percent
of the Nation’s single-family rental market, institutional investor
ownership is most heavily concentrated in a handful of markets
and neighborhoods. In fact, Memphis, which is 64 percent Black,
7
has the lowest Black home ownership rate of the 50 largest cities
and the highest share of investor ownership. A recent Core Logic
report explains, quote, ‘‘Investors are likely more attracted to loca-
tions where tenant rights are far more favorable to landlords,’’ end
quote.
These landlords are focused on specific home price range, square
footage, and critical quality of school districts. Because of the mar-
ket segment focus, the fact that they have billions of dollars in cash
to spend, and are willing to buy properties sight unseen, first-time
and lower-income prospective home buyers are simply not able to
compete.
And often new units never even make it to market through ar-
rangements like build-to-rent. For example, the largest single-fam-
ily rental landlord, Invitation Homes, and the third-largest home-
building, Pulte Group, recently announced a partnership to build
more build-to-rent communities. It is not a stretch to imagine that
in some communities if you want to live in a particular part of
town, in a high-performing school district, you would have to rent
from one of these landlords.
The clearest fix for private equity’s abuses would be establishing
comprehensive, nationwide tenant protections from exorbitant rent
increases, prohibition on excessive fines and fees, just cause evic-
tion protections, and a tenant rights to counsel, to give tenants a
fair shot in defending themselves. This would benefit tenants
across all housing types. For example, a set of multifamily develop-
ments in New York are currently facing mass evictions by private
equity landlords, Greenpoint Partners and Carlyle Group, in an ef-
fort to boost their profits by increasing rent on existing tenants.
In addition, there are many avenues to regulate private equity
in housing by examining their financing, partnerships and mergers,
concentration of ownership in particular communities, and shed-
ding much-needed light on where and how they operate. At a min-
imum, the expansion of private equity into our homes is a moment
to create a more transparent housing market, where landlords can-
not hide behind LLCs and tenants know who the owners of their
homes are.
Our housing market is rapidly consolidating, and as the largest
landlords, builders, and financiers increasingly partner with one
another, our communities and neighbors will continue to feel the
consequences unless we follow the lead of tenants and housing jus-
tice organizers in creating a more just housing system.
Thank you.
Chairman BROWN. Thank you, Ms. Lopez.
Ms. Hook, you are recognized for 5 minutes.
STATEMENT OF HOLLY HOOK, MANUFACTURED HOME
RESIDENT AND MHACTION LEADER IN SWARTZ CREEK, MI
Ms. HOOK. OK. Thank you, Chairman Brown and Members of
the Committee. My name is Holly Hook and I am a resident of
Swartz Creek Estates in Swartz Creek, Michigan. I am a member
of MHAction, who are made up of mobile home residents who orga-
nize our neighbors and fight to save our communities.
Everyone has the right to a safe, affordable home and commu-
nity. We need the Federal Government to work with us to ensure
8
everyone this basic right. Right now, predatory investors threaten
this human right for millions of families.
I bought my manufactured home because I needed an affordable
place. In our communities, seniors and families often own their
homes but rent land from a common landlord. This creates lower
housing costs. We loved our community. Like so many others, it
was friendly, well-maintained, and walkable.
In 7 years, I paid off my house and had reasonable lot rent that
covered land, sewer, and garbage. My neighbors were mostly low-
income seniors who retired to our community.
Nobody knew that our community was for sale until a notice ap-
peared on our doors in July 2018, saying Havenpark Capital, a pri-
vate equity firm, had bought us, and our lot rent had gone up 22
percent, effective in 1 month. I needed answers, but Havenpark
only offered an investor site. At the top was a statement, quote,
‘‘creating stable, long-term income.’’
It costs thousands to move our homes. We had two options. We
could pay the giant increases or we could just walk away and lose
our homes. Havenpark admits this on their investor website by
stating, quote, ‘‘It is difficult for tenants to move their homes. As
a result, operating cash-flow is among the highest of any real es-
tate class.’’
The rent hikes and fees kept going. Havenpark unbundled ad-
ministrative fees, school taxes, sewer charges, and trash fees from
our rent. Monthly payments rose 40 percent by June of 2019, and
as of this year they have gone up over 50 percent. My old lot rent
was $310 per month, for just the lot. Now I am paying over $200
more.
Our sense of security and independence is gone. Worst hit is the
elderly and the disabled, who live on fixed incomes. Havenpark
now takes most of their income. Some fear losing their homes.
Many moved out, including my 80-year-old neighbor, who is now in
a small senior apartment, and we know of residents forced to use
food pantries due to the increases.
Havenpark kept raising rents and fees during COVID and sent
letters threatening those who could not pay in full. They refused
partial payments, though the CDC moratorium allowed them.
In another Havenpark community across town, a lady named
Mary worked five jobs to keep up with the increases until she got
COVID last spring. Havenpark tried evicting her while she waited
for a relief payment. Havenpark only backed off when a reporter
asked questions about her case.
And let us be clear. These big increases do not come back to us.
Havenpark has cut back on maintenance. A nearby community
they own lost their water in a storm, and they would not fix the
generator in a timely manner. State officials had to get involved
after residents went without water for several days.
Our communities are not alone and Havenpark is not the only
actor doing such things. Roughly 2 million people live in commu-
nities owned by the 50 largest community owners. Many operate
like Havenpark, devastating seniors and families. And now some of
the biggest private equity companies in the world are buying up
mobile home parks.
9
Outrageously, this trend is fueled by those who say they support
affordable housing. We were astonished to learn that Havenpark
Capital got their financing through a subsidiary of Enterprise Com-
munity Partners, the national affordable housing nonprofit, and
Fannie Mae. Both Fannie Mae and Enterprise claim they advance
affordable housing, but when they finance predatory investors like
Havenpark, they destroy it.
We have called on Fannie Mae and Freddie Mac and their regu-
lator, the FHFA, to add safeguards against rent and fee gouging,
unfair evictions, and unsafe conditions in their manufactured home
community financing. We need financing to support us, the resi-
dents, not passive investors. We want financing products allowing
nonprofits, public entities, and resident-owned cooperatives to buy
our communities and keep them affordable and healthy.
Thank you for your time.
Chairman BROWN. Thank you very much, Ms. Hook.
Mr. Michel, welcome, and thank you for joining us in person.
STATEMENT OF NORBERT MICHEL, VICE PRESIDENT AND DI-
RECTOR, CENTER FOR MONETARY & FINANCIAL ALTER-
NATIVES, CATO INSTITUTE
Mr. MICHEL. Good morning. Chairman Brown, Ranking Member
Toomey, and Members of the Committee, thank you for the oppor-
tunity to testify at today’s hearing. I am happy to be here in per-
son. My name is Norbert Michel. I am Vice President and Director
for the Center for Monetary and Financial Alternatives at the Cato
Institute. The views that I express in this testimony, however, are
my own, and they should not be construed as representing any offi-
cial position of the Cato Institute.
In my testimony today I will argue that private equity firms, or
other large investors, driven by a profit motive are not responsible
for price inflation in U.S. housing markets. Instead, failed Federal
policies that boost demand are the main culprit, and I will expand
on this argument with three main points.
First, the evidence does show that institutional investors have
played, and still play, a very small role in the single-family housing
market. Their share of purchases has varied over the last decade
or so, but they tend to account for somewhere between one-tenth
of a percent and 1.5 percent of home purchases. As of 2019, institu-
tional operators owned, at most, 2 percent of the roughly 15 million
detached, single-family rental homes in the United States, and less
than half-a-percent of the total number of single-family homes.
While their share is much smaller than that of individual inves-
tors, we should not fixate on that share or the share of other inves-
tors. We should, instead, embrace private investors in housing mar-
kets and not fall victim to the notion that investing in itself is a
harmful, zero-sum game, a principle that applies even to housing
markets.
Second, the share of institutional, corporate, and individual in-
vestors combined is extremely small compared to the level of in-
volvement of the Federal Government. Combined, Fannie, Freddie,
and the FHA, just those three, have been behind more than half
of outstanding mortgage debt for decades, even before the 2008 fi-
nancial crisis, and in some years responsible for a share of close to
10
70 percent. From 2009 to 2020, Fannie and Freddie’s annual share
of the total mortgage-backed securities market average 70 percent.
Including Ginnie Mae securities, the Federal share of the mort-
gage-backed securities market averaged 92 percent per year over
this period.
Virtually all Federal housing policies, even those outside of the
GSEs and FHA, are geared toward increasing demand, and because
housing markets are almost always supply constrained, these poli-
cies will consistently put upward pressure on prices and rents.
Such policies include providing housing allowances to military and
other Government employees.
I have personally been involved in my own, not entirely tragic
story, of having to bid against an embassy employee for a rental
home. That individual had a housing allowance that was tied to in-
flation, and he submitted a long-term lease application that offered
to pay an escalating rent each year. And I know from speaking to
other real estate agents that I am not alone in coming into this sit-
uation. The economic principles are exactly the same for other
types of assistance and subsidies that pay for housing. They place
upward pressure on prices.
My third and final point is that the Biden administration’s hous-
ing policies, as well as many that are being considered in the budg-
et reconciliation process, only double down on these types of failed
Federal policies from the past. They too will artificially boost de-
mand even more than we are used to in the housing markets, thus
promising to make price inflation worse and waste more taxpayer
money. These policies move the U.S. housing market further in the
wrong direction, which means toward less affordability.
The following list provides just a few examples: $10 billion for
First-Generation Downpayment Assistance Fund; $80 billion to cre-
ate new public housing projects; $72 billion for the HOME Invest-
ment Partnerships Program; $10 billion for a new housing invest-
ment fund; $75 billion for Section 8 rental housing vouchers, more
than triple the current level of funding. And the partial list of
items in my written testimony includes $4.5 billion just for the
HUD Secretary to, quote, ‘‘implement and oversee the programs,’’
many of which already exist. That figure alone represents an 8 per-
cent increase for HUD’s fiscal year 2022 budget.
The main problem with all of these policies is that they boost de-
mand while doing nothing to address supply constraints, and more
tragically, while doing nothing to address the underlying economic
and social issues that make it difficult for people to earn income
and build wealth. We should expect nothing from these policies but
the same poor results that they have produced in the past.
Thank you for your consideration, and I am happy to answer any
questions you might have.
Chairman BROWN. Thank you, Mr. Michel.
Mr. Hendrix is recognized remotely. Mr. Hendrix.
STATEMENT OF MICHAEL HENDRIX, SENIOR FELLOW AND DI-
RECTOR FOR STATE AND LOCAL POLICY, MANHATTAN IN-
STITUTE
Mr. HENDRIX. Chairman Brown, Ranking Member Toomey, and
Members of the Committee, thank you for inviting me to partici-
11
pate in today’s hearing. My name is Michael Hendrix, and I serve
as a Senior Fellow and Director of State and Local Policy at the
Manhattan Institute.
I have to say I agree with Ranking Member Toomey that today’s
hearing topic seems misguided. Large investment firms, including
those in private equity, buy just 1 to 2 percent of homes sold na-
tionally, and they own less than one-tenth-of-1-percent of the hous-
ing market in America. Big finance is still a tiny player in housing.
But housing is a hot market today, and investors both large and
small are seeing opportunities to invest, so I am open to discussing
how these private dollars can go to expanding access and afford-
ability for Americans looking for a place to call home. Yet many in
Congress are embracing this Administration’s plans to regulate and
legislate their way to a bigger Government role in housing.
For instance, the reconciliation bill being considered now doubles
down on failed public housing and throws more subsidy money at
a limited supply of homes, a recipe for prices to keep rising.
These are not answers to America’s housing crisis. Housing de-
mand is far outpacing housing supply. But the roots of this crisis
lie not in financial speculation but in Government regulation.
Localities have made it practically illegal to build enough homes
to meet demand, leading to inflated prices. Yet this hearing sug-
gests a skepticism for private sector investment in more housing
and more housing supply, and if not the private sector then that
leaves us with the public sector, specifically public housing. That
would be a mistake.
Rather than helping the private sector solve the Government’s
crisis, Congress plans to bail out failed public housing system. This
money has few limits on how it is spent. Senate Majority Leader
Chuck Schumer has promised to hand over the bulk of these dol-
lars to the scandal-plagued New York City Housing Authority, or
NYCHA. Back in April, Senator Schumer called on President Joe
Biden to double his planned spending of $40 billion on public hous-
ing. He wanted all of the original money just to pay NYCHA’s re-
pair bill, and he got it, an increase to $80 billion in spending on
public housing and enormous influence on securing half of it for a
NYCHA bailout.
Here is the reality: NYCHA is what we get when we get more
public housing, and that should scare every American, especially
for the survivors of public housing. NYCHA is the Nation’s oldest
and largest public housing system, housing more people than the
city of Atlanta, and long held up as a model of what Government
can achieve when it takes charge of housing.
And in 2018, NYCHA’s own tenants sued the Housing Authority
for its squalid living conditions. Then the Federal Government sued
too, finding that the housing agency had worked harder to cover-
up its, quote, ‘‘dangerous problems’’ than to actually fix them. It
turns out that the Nation’s largest and greatest public housing sys-
tem poisoned over a thousand children with lead exposure, then
lied and covered it up.
Sometimes more money means more problems. Despite record
levels of funding, quote, ‘‘New York public housing isn’t getting bet-
ter,’’ admitted the New York Times.
12
A public housing slush fund only harms accountability and
leaves structural problems in place. Spending $40 billion to repair
NYCHA amounts to roughly $250,000 for every family living in
public housing in New York City. Do we really believe we will not
get more of the same?
Bailing out scandal-plagued public housing authorities like
NYCHA is not the answer. Neither is condemning private sector so-
lutions to America’s housing crisis. It is time we did better for
Americans in need of affordable housing. We can and we must do
better.
Thank you.
Chairman BROWN. Thank you very much, Mr. Hendrix.
Dr. Fields, you are recognized for 5 minutes, remote.
STATEMENT OF DESIREE FIELDS, ASSISTANT PROFESSOR OF
GEOGRAPHY AND GLOBAL METROPOLITAN STUDIES, UNI-
VERSITY OF CALIFORNIA, BERKELEY
Ms. FIELDS. Thank you, Chair Brown, Ranking Member Toomey,
and Members of the Committee, for the opportunity to testify
today. My name is Desiree Fields and I am Assistant Professor of
Geography and Global Metropolitan Studies at the University of
California, Berkeley.
My research considers the intersection of financial processes,
housing, and digital technologies. A particular focus of my scholar-
ship is the role of institutional investors as landlords. I examined
how single-family rental homes have become the site of new finan-
cial asset classes, the organizational forms and growth strategies
common to institutional landlords, and the critical role of techno-
logical advances in the institutionalization of single-family rental,
or SFR.
Single-family homes have always been a meaningful share of the
U.S. rental housing sector, but before the 2008 financial crisis the
market was highly fragmented and largely opaque to institutional
investors. This also changed in the wake of 2008. Large pockets of
discounted but newer homes were available in suburban Sunbelt
markets. Mortgage credit was also constrained, and rental demand
was rising. Together with new information technologies, these mar-
ket conditions allowed investors to aggregate ownership of single-
family homes, efficiently coordinate management, and develop
structured finance opportunities in SFR.
Today, what began as an opportunistic trade has evolved into a
full-blown industry. Individually and through their lobby group,
the National Rental Home Council, SFR operators position them-
selves as strengthening communities and creating solutions to
America’s housing crisis. While compelling, this messaging does not
fully capture how private equity landlords are changing America’s
housing market nor how the new round of investor-led growth since
the start of the COVID–19 pandemic may deepen these changes.
The ways private equity landlords are changing the housing mar-
ket is linked to the geography of corporate SFR. The industry’s
messaging, as we have heard today, is that they comprise just 2
percent of the SFR market. But institutional landlords do not ac-
quire properties uniformly across the country. To achieve effi-
ciencies of scale, they have focused on suburban Sunbelt markets
13
hit hard by the 2008 crisis, concentrating especially on Florida,
Georgia, Texas, North Carolina, and Arizona.
Furthermore, they do not search uniformly across all single-fam-
ily homes in their target markets. Investors use a specific set of
neighborhood and built environment criteria, and they limit their
acquisitions to properties they can purchase near or below median
prices. This segmented geography sheds light on how corporate
landlords have been able to increase rent so dramatically during
the pandemic.
Amid the generally heightened demand for space and amenities
seen during the pandemic, a flood of capital into SFR is enabling
institutional investors to outcompete would-be homebuyers in their
target markets, channeling them back to renting and generating
spillover demand for SFR homes. Thus, while SFR operators claim
to provide quality, affordable housing, they have, in fact, pushed
outsized rent increases on tenants, especially during the pandemic.
Rent increases by the largest operators have ranged as high as 15
percent on new leases in some markets. Corporate landlords are
also creating new fees and ancillary services on top of rent as a
way of driving up revenues.
In addition to the implications of institutional SFR for housing
costs and home ownership opportunities, we should consider their
wider consequences. Corporate landlords advance a rhetoric of rein-
vesting in distressed communities and strengthening neighbors.
This rhetoric is contradicted by their behavior, which indicates they
put investment priorities ahead of community stability.
Large SFR owners are more likely to file for eviction than mom-
and-pop landlord, and they are more likely to use aggressive, serial
eviction filings as a rent collection strategy. They also employ spe-
cialists who petition for property tax reductions, seeking out cost
savings by minimizing contributions to the local tax base.
Finally, institutional operators use their financial clout in the po-
litical area, to organize against efforts to expand tenant protections
and to support politicians who are friendly to their interests. These
examples show how the SFR industry wields power that has impli-
cations for the public beyond the tenants who actually live in their
properties.
In closing, I would like to emphasize that institutional investors
backed by private equity have already changed the housing mar-
ket. Their behavior has potentially far-reaching social and eco-
nomic consequences, but so far they have effectively shielded them-
selves from meaningful public scrutiny and responsibility.
As I hope my testimony makes clear, institutional landlords
enjoy outsized power and influence in our housing market, and it
is vital to intervene with research-informed policies that support
tenants, homebuyers, and communities.
Thank you again, and I look forward to your questions.
Chairman BROWN. Thank you, Dr. Fields.
We have heard testimony today about private equity firms buy-
ing up manufactured housing communities and homes across the
country, and how residents, because of that, suffer.
I will start with you, Ms. Hook. When Havenpark and other pri-
vate equity firms buy a community and raise the rents, what sac-
14
rifices have you and other residents had to make to keep your
homes?
Ms. HOOK. Yeah, it is quite bad. In my community alone, a lot
of senior citizens on fixed income, they get $800 a month. I know
one woman who has to go to a food bank on occasion now. There
is another community north of me where people have had to band
together and start utilizing food banks because of the rent in-
creases. And I know of the other community, right across town,
this poor woman was working five jobs trying to keep up with these
rent increases, and I know a few seniors, just in my community
alone, where they have had to go back to work and come out of re-
tirement. You know, they have hip problems, back issues, they can-
not stand for very long, and they have to go back to working in a
grocery store in order to keep up with these rent increases. I have
also heard of where senior citizens and people with health issues
have had to choose between paying these heightened rent fees or
paying for medications that they need.
Chairman BROWN. Thank you, Ms. Hook.
Ms. Lopez, what are some of the most problematic elements of
the private equity single-family rental business model?
Ms. LOPEZ. Thank you for the question. As I enumerated, I think
that rent increases are a particularly damaging impact. I want to
begin, I guess, by focusing on the people who actually live in these
homes today who have reported these immense rent increases. I
was reading that Invitation Homes actually just this year an-
nounced that they would be increasing rent by 8 percent for ten-
ants who are planning to renew, and 11 percent for tenants who
are coming in to new, vacant properties. So that is a fairly dra-
matic issue.
I would add, on top of that, fines and fees, as I mentioned in my
testimony. This is the primary revenue-generating strategy for
these companies, and it is really across the board and has been
pretty well documented.
Inadequate maintenance, for sure. I submitted, in my written
testimony, a story of one tenant who said that there was flooding
in her home, in the basement, covering an outlet. So standing
water covering an outlet that had been improperly installed by her
landlord, Havenbrook Homes. And as the water rose over it she
was told that in order to turn off the electricity to defuse an other-
wise hazardous situation she would have to do it herself. And this
just fits with the pattern of what I have heard from tenants again
and again, this attitude that tenants need to fix these kinds of
things because no one is going to come fix it for them.
And then I would also touch on these aggressive eviction prac-
tices, which Dr. Fields also mentioned. In the interest of making
sure that these private equity-backed companies are able to meet
the obligations of the kinds of financing that they take on, evictions
are paramount, and these companies have to be aggressive in pur-
suing them. Otherwise, they risk the tool that allows them to pro-
cure and acquire more of these homes in the future.
Chairman BROWN. Thank you, Ms. Lopez.
Dr. Fields, we hear that these big investors only own, the esti-
mate 1 or 2 percent of single-family rental homes nationwide. We
know in some regions the percentages are much higher. Where are
15
these investors buying homes, and why are they choosing these
communities?
Ms. FIELDS. Sure. So the geography of the corporate single-family
rental market largely tracks with the markets where the housing
bubble before 2008 was the largest and where price declines were
the steepest afterwards. So some of the top areas for the major sin-
gle-family rental operators include Atlanta, Phoenix, Tampa, South
Florida, generally, and then the Dallas-Fort Worth region.
And investors are, you know, they are using acquisition engines
or acquisition algorithms in order to zero in on the properties that
meet their investment criteria. They are typically looking for three-
bedroom, two-bathroom, single-family homes, priced at the mid-
range of the local market, and Invitation Homes, for example, is
looking for homes that average about 1,800 square feet with three
bedrooms and two bathrooms in attractive neighborhoods, in infill
locations that have proximity to major employment centers, desir-
able schools, and transportation corridors.
In other words, I would suggest that the operators are competing
directly with would-be homebuyers——
Chairman BROWN. Dr. Fields, thank you, and I am sorry to inter-
rupt but I have just a few seconds.
Ms. Lopez, Dr. Fields mentioned algorithms and technology.
What are your thoughts about that, how investors use technology
to buy and manage homes around the country? Ms. Lopez.
Ms. LOPEZ. I appreciate that question. You know, what I find fas-
cinating is that some of the same private equity companies who in-
vest in actually acquiring the homes also invest in the technological
advances that allow them—and platforms, very specifically, that
allow them to purchase more of these homes. So I would say that
there is an interesting interplay between this field of iBuyers that
exists—so Zillow is an example, Redfin is an example, Opendoor
and Offerpad—and actually there has been an increasing interplay
between some of these iBuyers selling directly to institutional own-
ers, and for me I see all opportunity for the acquisition of homes
to rapidly accelerate because of those technological advances, be-
cause of the investments in the technology themselves, and also the
needs of companies on both sides. It is a partnership that is geared
toward consolidating the market even further.
Chairman BROWN. Thank you. Senator Toomey.
Senator TOOMEY. Thank you, Mr. Chairman. Public housing is a
veiled model of delivering assistance. Let’s face it. It is costly. It
traps families, often in multigenerational cycles of poverty.
A generation ago, by the way, there was a very broad, bipartisan
consensus to move away from public housing. In 1998, Congress
voted, with overwhelming bipartisan support, to cap the net num-
ber of public housing units. Senator Durbin even referred to public
housing as, quote, ‘‘vertical slums.’’
So that cap is still in place today. Such is the durability of this
consensus. But our Democratic colleagues now want to eliminate
that cap, and as I mentioned in my opening remarks, and I think
Mr. Hendrix did as well, Senator Schumer, in particular, appears
to have effectively added $40 billion for this ‘‘Schumark’’ to public
housing in order to bail out the New York City Housing Authority.
16
So my question for Mr. Hendrix is, is there really a justification
for the New York Housing Authority getting half of all of this
money? For instance, does New York City provide half of all the
public housing in America? Is the New York City Housing Author-
ity one of the best-run public housing authorities in America that
deserves the additional resources? Could you elaborate on that a
little bit?
Mr. HENDRIX. Thank you for the question. There is, in my opin-
ion, no justification for awarding failure. NYCHA has failed as pub-
lic housing and has failed to keep its residents safe. New York’s
progressive public advocate has named NYCHA the city’s worst
landlord for 3 years straight. The only justification for spending
$80 billion in public housing, that New York wanted $40 billion,
Senator Schumer promised to double support for public housing,
even though NYCHA’s share of public housing nationwide is only
20 percent. So half of all public housing funding, potentially even
more, going for 20 percent of housing. And they will take more if
they can get it.
No doubt, NYCHA has problems. It is falling apart. But a no-
strings-attached slush fund I believe is not the answer. How can
Congress trust NYCHA to safely house families when the families
cannot even trust the agency? We should be embracing private sec-
tor solutions to America’s housing crisis, not doubling down on
NYCHA.
Senator TOOMEY. Thank you. Mr. Michel, one of the concerns I
have is the lack of means testing, or at least the lack of sufficient
means testing and an almost complete lack of work requirements
in many of the housing provisions in the Democrat tax-and-spend
bills. One of my concerns is the effect this is going to have on the
incentives to work.
What are your thoughts on the effect that these programs will
have on the incentive to work and the ability of people to build a
middle-class, and if you could do that briefly, because I do have one
more question.
Mr. MICHEL. All right. It will continue to destroy it, as that has
been going on for decades now, well over 50 years. It becomes part
of an open-ended assistance system that literally destroys the in-
centive to become a productive member of society. It creates and
perpetuates a subculture, if you will.
Senator TOOMEY. And if you undermine and eliminate the incen-
tive to work you really undermine the ability to work your way into
the middle class, it seems to me.
Mr. MICHEL. Yes. When I say that, that is what I mean, elimi-
nate the incentive to build a career and build wealth.
Senator TOOMEY. Exactly. So this both for Mr. Michel and Mr.
Hendrix. There is no question housing prices have been going up.
They have been going up, actually, very dramatically, across the
board. If you ask me, the monetary policy that we have been pur-
suing, that has driven up the price of virtually every asset class I
can think of, from commodities to energy, equities, crypto assets,
real estate, that is a big part of this.
Let me ask you both briefly, and I apologize, I know there is not
much time. What could we be doing that would be a constructive
way—let us assume we got our monetary policy right sometime in
17
the reasonably near future—what could we be doing to increase the
availability of affordable housing?
Mr. MICHEL. Well, we have to stop increasing demand. You have
supply constrained markets in housing all the time, and all Federal
policy is geared toward doing is making it easy to get a loan and
increasing demand. There is no way that that policy ends in any-
thing on than higher prices. And the way that we do that is pri-
marily through Fannie and Freddie. So we have got to shrink their
footprint. There is no way around that.
Senator TOOMEY. Mr. Hendrix, did you have anything you want-
ed to add?
Mr. HENDRIX. I could not agree more with my fellow witness. We
have more money chasing after an ever-vanishing supply of homes.
We need to get the supply of homes increased. We need more pri-
vate sector investment. Investment in public housing is not the an-
swer. Having more Government money chasing after an ever-small-
er supply of homes is also not the answer.
Senator TOOMEY. Thanks very much, Mr. Chairman.
Chairman BROWN. Thank you, Senator Toomey. Senator Tester
is recognized from his office, remote.
Senator TESTER. Yeah. I have got a question for Ms. Hook before
Yeah. I have got a question for Ms. Hook. Before I start any ques-
tions, I just want to say that housing across this country has in-
creased because of demand, and if anybody on this call has a way
that we could increase supply so that houses become more afford-
able and what role the Government could play, I would love to hear
it. Because quite honestly, unless you are making a lot of money
right now you cannot afford a house in this country.
And so we have got a huge problem out there. We have got busi-
nesses who cannot startup. We have got businesses that cannot ex-
pand because there is no workforce housing. There is no housing
for people who make regular wages. And if we do not wake up to
what we are going to do—and I do not believe Government should
be building houses, but I will tell you this, freaking Fannie Mae
and Freddie Mac and doing away with the 30-year mortgage would
be insane. I just want to get that off of my chest.
All right. Ms. Hook, I want to thank you for being here today.
I want to thank you for your story. I have, unfortunately, heard
similar stories from folks in Montana facing challenges, I believe
from the same private equity firm that has impacted your commu-
nity in Michigan.
So could you expand, from your testimony, on what transition to
ownership was like for you and your neighbors? When this hap-
pened, what did it do? How much did your rent go up? And did any
of the benefits of your rental agreement change for the better?
Ms. HOOK. Thank you very much for your question, Senator
Tester. What happened when we changed ownership is we resi-
dents had zero say in who our park was sold to. We just received
notices taped to our doors saying, ‘‘Hey, We are Havenpark. We are
happy to acquire your community, and we are going to increase
your rent.’’ At the time it was about a 22 percent increase, which
was about $70. My original base rent was $300, just for the dirt
that my home sits on, and immediately it jumped up to $370,
which for me at the time, I am a writer. I do not make a ton of
18
money, and that was actually a pretty big increase for me at the
time, and for the seniors in my community on Social Security and
fixed income it was even worse because a lot of them, they cannot
go back to work and raise their income, like I can work harder and
make more money.
Senator TESTER. So are you familiar with resident-owned com-
munities?
Ms. HOOK. I am somewhat familiar with resident-owned commu-
nities. I know my friend in Montana, who lives in Great Falls, was
pursuing that option. You may have heard of her. We know that
there are not very many resident-owned communities right now. I
know ROC USA specializes in resident-owned. What we would like
to see out of Fannie and Freddie is more funding for resident-
owned community options so that residents can purchase their own
communities and run their own communities and ensure that all
investments and rent actually goes back into the community and
making conditions better for all residents.
But unfortunately, these private investors come in and they pay
such a high dollar for our communities that we can never afford
to buy them back, so it effectively closes the market to us and pret-
ty much they own the entire local market because they tend to buy
groups of communities.
Senator TESTER. Yeah, and I do not care what percentage it is,
if you live in one of those communities and your rent is jacked up
and you have no way to increase the amount of money that you are
making, other than working two or three or four or five jobs, as you
pointed out in your testimony, the street becomes the option. And
for a country that has the rich history that we have had, and a vi-
brant middle class that we have, to put folks in that middle class
out on the street is something we should be very, very concerned
about.
And make no mistake about it. I have lived a very good life. I
have been able to pay my bills without having to work three or four
jobs. I have worked two most of my life, but not three or four. But
if you are put in a situation where your fixed costs are going up,
especially if you are on a fixed income, you do not have a lot of op-
tions. There are not a lot of options out there.
I want to talk to Dr. Fields for a second. Dr. Fields, the private
equity firm that has bought some of the manufactured home places
has also bought multifamily housing, in Great Falls, in particular,
and maybe in other communities within our State that I am just
not aware of. They bought apartment buildings, and it is similar
problems that have arisen with the rents. The rents have been
jacked to the point where people are having to make decisions that,
quite honestly, are not reasonable.
And, in fact, HUD–VASH vouchers, in some cases, are no longer
effective, for a number of reasons. So what more do we need to do?
I am talking about the U.S. Senate, Congress, the agencies out
there, to make sure that those HUD–VASH vouchers are not taken
advantage of in these private equity transitions.
Ms. FIELDS. Sure. Thanks for the question. Yeah, certainly I
think the kinds of rent increases that you are describing are com-
mon whether we are talking about single-family rental homes,
apartment buildings, manufactured housing, and that is because
19
investors are really trying to deliver returns to their investors and
to pay back the debts they have taken out to finance their portfolio
acquisitions.
In terms of what the Senate can do in order to ensure that HUD
vouchers, you know, can actually cover the cost of housing in com-
munities controlled by these types of investors, you know, I do
think it is important that we do think about housing as a public
good, even if we do not have the Government involved in, you
know, building new housing and owning new housing. You know,
the fact is that these investors are providing a good that everyone
needs in order to survive, and, you know, if they are able to take
out huge credit facilities and deliver returns to investors and pay
themselves, there is no reason that they would not be able to keep
rents at a moderate level that would ensure that people could actu-
ally use their HUD housing vouchers.
Senator TESTER [presiding]. All right. Thanks, Dr. Fields. I will
pass it off to my friend, Senator Tillis.
Senator TILLIS. Thank you, Senator Tester, and thank you all for
being here. I know this hearing is supposed to be about structural
issues and housing, but, Mr. Hendrix, I want to go back and touch
on NYCHA. We have our friends on the other side of the aisle on
what I believe is a spending spree to redistribute a mass amount
of taxpayer dollars, $80 billion to public housing.
Half of this total, though, $40 billion, has been earmarked by
Senator Schumer to go directly to New York. In fact, he publicly
said he will use ‘‘all of my power as majority leader to secure a
funding package that can restore and transform NYCHA,’’ half of
$80 billion. It would seem that Senator Schumer believes that the
American taxpayer simply exists to funnel money to New York, and
we know its long history of sex scandals, bribery, general incom-
petence.
So Mr. Hendrix, how does $40 billion compare to NYCHA’s usual
budget?
[No response.]
Senator TILLIS. Mr. Hendrix.
[No response.]
Senator TILLIS. Mr. Michel? We will try to see if the Committee
staff have coms problems.
Mr. MICHEL. Sorry. I do not know their annual budget. Sorry.
Senator TILLIS. Well, I think that the Democrats’ $80 billion
funding total was equivalent to $85,000 for every family in public
housing. We will see if we can get Mr. Hendrix back online, be-
cause I would like to cover some of this.
But while we are waiting I wanted to talk about the landscape.
You know, again, we are here talking about, under the pretense of
examining structural deficiencies and problems in national housing
market, yet the target of the hearing, in part, has been on private
equity businesses and really private housing enterprises writ large.
But they are only an exceedingly low portion of the Nation’s hous-
ing stock. Eighty-five percent of single-family residence homes are
owned by individuals and small proprietors. Twenty-two percent
are in the rural markets. Institutional ownership of single-family
housing rentals accounts for 0.19 percent of the U.S. housing mar-
ket.
20
So if we are trying to find a way to provide better housing, more
affordable housing, one of the things that I think that our Com-
mittee should focus on, and I saw this when I was Speaker of the
House in North Carolina, are the obstacles to building affordable
housing—regulatory overreach, waters of the U.S. That is one of
my favorites, because it brought a bipartisan opposition to my
State of North Carolina, at the city, and the county, and the State
level, because it was artificially inflating the cost of housing, hurt-
ing the people that this Committee, I think, wants to focus on the
most. The barriers, we are creating the barriers. We are, I think,
creating an artificial crisis with the amount of institutional invest-
ment that is moving into the real estate market. I do not know
what it is, but I do not think it is a disturbing number now.
Mr. Michel, do you have anything to say about that?
Mr. MICHEL. Yes. So I am from New Orleans, and I am familiar
with some regulatory issues.
Senator TILLIS. I lived in Westwego.
Mr. MICHEL. Oh, OK. So you know, the entire metropolitan area
is essentially wetlands, so that is a problem, and that is still going
on. It is a supply problem. It is not a demand problem. And what
we have done with Federal policy is——
Senator TILLIS. We are at about a 60 percent low for new hous-
ing starts. Is that right?
Mr. MICHEL. Somewhere between 50 and 60, I believe that is cor-
rect, yes. And at the same time, we are continuing to increase de-
mand. That can only end one way, and that makes housing less af-
fordable. And the houses themselves are less affordable, which also
does impact rents. So it is a two-pronged problem on that side of
the market.
Senator TILLIS. I just recall—and then I will turn to Senator
Warren—but back shortly after I became Speaker I met with a
town who wanted me to provide—we spent 45 minutes of an hour-
long meeting talking about affordable housing. It was a great dis-
cussion, things that we could do at the State and local level, work-
force housing, a number of things that we need. Rural areas, urban
areas, they are all in need. In the last 15 minutes, they pitched me
on the idea of giving them local authority to require that every new
single-family home be mandated to have fire suppression systems,
sprinkler systems, which, for a $100,000 house would probably in-
crease that house by about 10 or 15 percent.
But that is the sort of mentality that we have to get past if we
really want to get to a point to where we are producing affordable
housing and we are reducing the regulatory barriers that are the
real cause, or, I think, a substantial cause for why we continue to
have the challenges that we do.
Senator TILLIS [presiding]. On behalf of the Chair I turn to Sen-
ator Warren.
Senator WARREN. I appreciate that, but I think we are not con-
nected with our folks online. Is that right? We are connected? We
are not connected?
So we are just going to adjourn temporarily? Recess. That is
right. We are not adjourning. Recess. Thank you. I am glad one us
is a lifer in this. OK. Thank you.
Chairman BROWN [presiding]. Senator Warren.
21
Senator WARREN. Thank you very much, Mr. Chairman. This is
an important hearing for us to have. Yesterday, in my Economic
Policy Subcommittee, witnesses discussed the damage the private
equity industry has done to communities across this country. It is
good that we are continuing this discussion today, specifically in
the context of housing.
Manufactured or quote/unquote ‘‘mobile homes’’ are a critical av-
enue to affordable housing for millions of Americans. A few decades
ago, these communities were generally owned by mom-and-pop
businesses. But the private equity industry saw an opportunity.
Residents of manufactured home communities often own their own
homes but not the land underneath, and since most of these homes
are not actually mobile, Wall Street vultures realized that families
were effectively stuck in place, sitting ducks.
One of these vultures is a private equity-backed company called
Hometown America. In 2006, Hometown purchased a manufac-
tured housing community called Oakhill, that is home to 175 resi-
dent families in Attleboro, Massachusetts. Now, Ms. Lopez, from
what you have seen, when private equity or other Wall Street firms
purchase a manufactured home community does the quality of life
for residents of that community generally improve?
Ms. LOPEZ. Thank you so much for the question, Senator. No. I
mean, what is typical from my experience when private equity pur-
chases housing, whether it is mobile home parks, single-family
rentals, multifamily properties, they typically follow the same play-
book—rent increases, the tenants are hit with impossible new fees
and fines, and maintenance almost always deteriorates. And in this
case, because tenants have bought their own trailers, as mentioned,
it really expensive, if not impossible, to relocate, and absolutely,
that is a quality that they are banking on.
Senator WARREN. Yeah. So when companies like Hometown buy
up these communities they have responsibilities, legal responsibil-
ities, as landlords, like responsibility to maintain the property. And
this is particularly important for the residents at Oakhill because
the home sites in this area are subject to flooding.
So, Ms. Lopez, from your experience observing how corporate
landlords behave, do you think that Hometown was proactive in
making the repairs to make sure that residents have quality living
conditions?
Ms. LOPEZ. I do not know the specifics of the situation, but based
on all of the patterns that I have seen I think it would be highly
unlikely.
Senator WARREN. Well, you guess right on this one. Hometown
implemented a policy that specifically put the burden of these re-
pairs on the residents, and yet, at the same time, Hometown in-
creased the rents so that they could further pad their own profits.
Now remember, as you say, most of these homes are not on wheels,
so the residents have to choose between either paying the higher
rent or, in some cases, just abandoning their housing.
Nobody should be surprised that the private equity industry is
forcing residents to make this choice, and doing it just so that they
can pad their own profits. Private equity firms get rich by loading
companies and real estate they buy with debt, then stripping out
all the assets, extracting whatever value they can, and charging ex-
22
orbitant fees. That is the business model. And for communities like
Oakhill this means increasing the rents, refusing to make home re-
pairs, and squeezing every penny out of the residents that they
possibly can.
Ms. Lopez, what does Congress need to do to ensure that resi-
dents at Oakhill and other manufactured home communities across
this country are not being gouged by private equity firms?
Ms. LOPEZ. I appreciate this question. To me, the most effective
way to stop private equity abuses, as I mentioned in my testimony,
would be a comprehensive set of tenant protections that would
safeguard against things like exorbitant rent increases, excessive
fines and fees, providing just cause eviction protections, and also
a tenant’s right to counsel, to protect against the worst parts of
what you are describing.
On the other side, there are many ways to begin to regulate pri-
vate equity. I think the Stop Wall Street Looting Act is an excellent
piece of legislation that starts to take away the ability to take on
excessive risks in ways that harm tenants and workers.
But I also think that taking a look at the financing that these
companies engage in, the mergers and acquisitions that they en-
gage in, and the ways in which they geographically target are all
ways that we could begin to develop legislation that takes on ex-
actly the role of private equity in housing.
Senator WARREN. Thank you. That is a very comprehensive an-
swer, and I think you are right, there are a lot of ways that we
can approach this. I very much appreciate your mentioning my
Stop Wall Street Looting Act, because it would fundamentally re-
form the private equity industry and end its most predatory prac-
tices. That would leave the residents in Oakhill and other manufac-
tured home communities safer from Wall Street’s clutches. So I am
going to keep working on that one, and I am looking forward to get-
ting some help on it.
Thank you very much, Mr. Chairman.
Chairman BROWN. Thank you, Senator Warren. Senator Smith
from Minnesota is recognized from her office.
Senator SMITH. Thank you very much, Chair Brown. Thank you
for holding today’s hearing. This is an important issue and some-
thing that is directly affecting the lives of my constituents in Min-
nesota. As large institutional landlords have increasingly been buy-
ing up swaths of previously affordable single-family homes in Min-
nesota, there are a number of concerns that I have heard from my
constituents about this. And Ms. Lopez has cited some specific sto-
ries from Minnesota renters in her opening statement, but I would
just like to just share a couple of other examples of what I have
heard from my office in Minnesota.
Shanika Henderson, for example, says, ‘‘Starting at the begin-
ning of the pandemic, Havenbrook stopped responding to repair re-
quests in my home. The basement leaks during the winter and has
ruined many of the items in my home. In my home there are issues
with the porch falling in, electrical issues, broken steps, broken
windows, screens that are broken. I have been reporting many of
these issues since October of 2020,’’ she says, ‘‘and had to do many
of the fixes myself.’’
23
And then one more from Jimmy Harris, who described heat not
working, and ‘‘a large hole of dirt, around three feet tall in the
basement, where a rat has come through, leaving an infestation.’’
And these are just some of the concerns that I have heard.
Mr. Chair, I ask that the full statement from Renters United for
Justice be entered into the record, as well as a Minneapolis Star-
Tribune story describing the situation more fully.
Chairman BROWN. Without objection, so ordered.
Senator SMITH. Thank you very much.
With these concerns in mind I have a question, something that
I discussed with Julia Gordon, who is the Federal Housing Com-
missioner nominee, a few months ago. So many of the properties
that we are talking about today were required by institutional
landlords through bulk sales by Federal agencies after the 2008 fi-
nancial crisis. So that got the properties off the books of the Fed-
eral Government, but it concentrated them in the hands of large
institutional buyers.
So I would like to ask Ms. Lopez and then Dr. Fields, what do
you think that we should be doing to level the playing field for or-
dinary home buyers so that large institutional buyers do not end
up buying the large bulk of the available properties in certain re-
gions, areas?
Ms. LOPEZ. Thank you so much for the question. I am happy to
answer. You are absolutely right in your characterization, and ac-
tually, from what I have seen, there are actually plans to revisit
bulk sales. So HUD actually has a proposed bulk sale coming up,
if I am not mistaken, in November, and from what I have seen
there has been some discussion of ensuring that half of those prop-
erties make their way into the hands of community organizations.
I personally would like to see a higher ratio of those properties end
up in the hands of community organizations and not in the hands
of the kinds of landlords that I described in my testimony and that
you shared stories of just now.
I think that is one start. I think there are a lot of other opportu-
nities. Unfortunately, as people exit their mortgage forbearance pe-
riod that we will start to see more foreclosures, and I think we do
need to think very seriously about how to make sure that those end
up in the hands of more homeowners, that people never lose their
homes to begin with, and that, least of all, they go to these par-
ticular kinds of landlords.
Senator SMITH. Thank you very much.
Dr. Fields, I would love to hear your response to this too, and it
seems to me that it is virtually impossible for individual home buy-
ers to participate, to compete in this bulk marketplace, and that
puts them at a distinct disadvantage in terms of being able to
make sure that these homes stay in single-family ownership.
Ms. FIELDS. Thank you for the question, Senator. So I would like
to mention that I think most of the large-scale single-family opera-
tors that are active today and that are the largest players in the
industry, most of them did acquire their homes not through bulk
sales but through individual transactions. It is certainly true that
investors have taken advantage of bulk sales, including fix-and-flip
investors and some rent-to-own schemes that have not turned out
so well for the people that are trying to purchase homes. So I think
24
it is an issue, although not exactly within my core area of exper-
tise.
However, I do agree with Ms. Lopez that I think it is important
to ensure that bulk sales, that we can level the playing field for
bulk sales, and I think increasing the proportion of properties that
can go into the hands of community-based organizations, and par-
ticularly community land trusts, would be incredibly important, be-
cause community land trusts do keep housing permanently afford-
able over the long term, and it really represents a very sustainable
use of public funds.
And the other thing I would say is that we could consider policies
such as a cap on the assets under management of these large-scale
investors as a way of potentially breaking up some of their monop-
oly power in the markets where they have the largest footprints.
Thank you.
Senator SMITH. Thank you. Thank you very much, Mr. Chair.
Chairman BROWN. Senator Smith, if you have another question
or two, feel free, because Senator Warnock is about to get back. But
if you have any questions.
Senator SMITH. OK. I do have one more question, and then when
Senator Warnock returns I am happy to cede back.
My question is about property maintenance. Many of the con-
cerns that I have heard from Minnesotans are around maintenance
issues, and too often it seems like these single-family rental prop-
erties are being mismanaged—we have heard stories about that
today—by landlords that are thousands of miles away, that are
clearly focused on squeezing profit out of these properties and not
focused on building strong communities.
Pretium, which bought HavenBrook Homes earlier this year,
says they are trying to make up for past institutional owners’ mis-
management, and, I mean, I hope that they are right. But so far
Minnesotans just do not seem to be seeing any improvement. And
even if there are new owners, even if these new owners are able
to address these problems, it does not address the fact that the in-
centives for institutional buyers are simply never going to be
aligned with building strong community.
So I wonder—I will come back to Ms. Lopez and Dr. Fields—
what should policymakers be considering as we think about how to
align property acquisition and property management incentives
with what we need to accomplish, so that communities are not hurt
by these large property owners?
Ms. LOPEZ. I particularly appreciate the question. I would say,
kind of starting with your characterization, I completely under-
stand the dynamic where newer companies have come to acquire
some of the homes and there is this challenging situation where
tenants are dealing with poor maintenance issues. To me, the
things that would be most beneficial are comprehensive tenant pro-
tections, including a right to counsel, to allow tenants to be able
to fight back in situations where landlords’ legal obligations to ten-
ants are not being met.
I think that there are also some aspects of expanding, perhaps,
what some of the legal obligations actually are, so understanding
the relationship between tenants and landlords as one of con-
sumers, right, and if a consumer is not actually getting what they
25
are paying for there has to be some kind of way that they can seek
a redress for that.
I would also say, though, that in a situation like this one, what
seems important to me is actual opportunity for this particular
landlord to talk to the tenants who are being impacted. I know that
is something that the people in Minnesota have been asking for, for
some time, and it has not happened, and I think given the state-
ments of Pretium, in particular, they have an interest in actually
having that conversation if, as they say, they plan to address some
of those longstanding issues.
Senator SMITH. Thank you.
Chairman BROWN. Thank you, Senator Smith. Senator Warnock
from Georgia is recognized for 5 minutes.
Senator WARNOCK. Thank you so very much, Mr. Chair, for hold-
ing this important hearing on housing, and thank you for the way
you have consistently emphasized that this is a Committee not just
focused on banking, but we are also focused on housing and the
concerns of ordinary people. That work is so critically important.
Chairman BROWN. Senator Warnock, that was one of the reasons
I wanted you on this Committee, so thank you.
Senator WARNOCK. Thank you. Thank you kindly.
We are in the middle of a housing crisis, and we have seen it so
clearly in Atlanta and in the State of Georgia. And it is so impor-
tant that we understand how private equity affects the market-
place so that we can find solutions for ordinary people.
Private investments in housing is a complicated issue, and it is
important that we understand it correctly. Professional investors
are less than 1.16 percent of the national single-family rental mar-
ket, a little over 1 percent. However, as Dr. Fields has already
pointed out in her testimony, private equity landlords do not ac-
quire properties uniformly across the country. In Georgia, over 5
percent of all homes are owned by single-family rental home com-
panies, well above the national average. And in Atlanta, three com-
panies—Invitation Homes, Tricon, and American Homes 4 Rent—
own 21,727 properties, which is 70 percent more than the size of
their portfolio in any other city.
Dr. Fields, could you speak to the effects of this targeted private
equity investment on the housing market in cities like Atlanta, and
what guardrails have States or local governments successfully de-
ployed to protect tenants in these homes, or to protect individual
home buyers looking to compete with private investment companies
to purchase a home in today’s market?
Ms. FIELDS. Thank you for the question, Senator Warnock. Start-
ing with the last part of your question first, unfortunately I do not
think we have seen a terrible amount of intervention by State and
local governments, either in support of tenants of corporate land-
lords or in support of home buyers who are being outbid by these
investors, which is why it is so important that we are having this
hearing today.
In terms of the kinds of consequences that we see for the housing
markets where institutional investors have the largest footprints,
we have already discussed many of these consequences. So the rent
increases in places like Atlanta, Phoenix, Las Vegas, Tampa have
all been above 10 percent, I believe as high as 13 percent on new
26
leases in Atlanta in the past year. So we are seeing very rapid in-
creases in rent. We are seeing, you know, the rollout of new kinds
of fees that tack on extra costs to the cost of rent every month.
And I think especially important to point out, in addition to shut-
ting out home buyers from wealth creation while creating more de-
mand for themselves, we are also learning that corporate landlords
evict tenants and file for eviction at much higher rates than small-
er-scale landlords, and this often works as a strategy of intimida-
tion against tenants, and also fosters further housing insecurity by
adding late fees, attorney fees, and other costs onto rent arrears.
So I think overall the picture is one of increased costs in housing
insecurity for tenants and diminished home ownership opportuni-
ties for people who are in a position to buy.
And I think, you know, just to add on a little bit to some of what
Ms. Lopez was saying, in addition to comprehensive tenant protec-
tions, I think we should also look at things like supporting tenant
associations for these large-scale landlords. In many cases, because
they are living in single-family homes, tenants are often atomized
from one another, do not have any way of communicating with
other tenants who rent from the same landlord and might be expe-
riencing the same problems. And I think supporting tenant associa-
tions and perhaps even collective bargaining rights for tenants of
large-scale landlords would go a long way toward easing of the
power imbalance that tenants face in this market. Thank you.
Senator WARNOCK. Thank you so much. I think it is critically im-
portant that we understand the impact of private equity on the
housing market. You speak of rents being unaffordable and home
ownership out of reach, which is we tried to offer some policy solu-
tions. My Downpayment Toward Equity Act is an effort to address
some of this. But there is a lot more that we have to do. So thank
you so very much for your insights.
Chairman BROWN. Thank you, Senator Warnock. I apologize to
the witnesses. Because we have had three votes today the attend-
ance has been down, and I know a lot of people had questions, but
I think we are going to adjourn the meeting.
We have had some misinformation in today’s hearing. I want to
just clear up a few things. The percentage of homes private equity
owns in the whole country really does not tell us much. These firms
are not buying properties evenly across the country, as witnesses
affirmed. They are buying in large volumes in a targeted group of
communities, in a targeted group of neighborhoods within those
communities, as Senator Warnock has seen in Atlanta, one of the
centers of this. If you want to rent a home in the neighborhood
where your kids go to school in Atlanta or Columbus, you do not
have a lot of options. That is a lot of power for one single, big, na-
tional, Wall Street firm.
I think we all tire of this idea that, quote, ‘‘this talk would take
away the incentive to work.’’ We know people in this country want
to work. The incentive to work is pretty basic. It is the same for
the people in the middle class and people aspiring to the middle
class, as it is someone in upper income brackets, it is to make
enough money for your family.
The idea that someone who is low income has some kind of pa-
thology where they would not want to work to make more money,
27
all because they got a $300 a month tax cut, the Child Tax Credit
that Senator Warnock and I and others have worked on, the big-
gest tax cut for working families in this country in history, or they
got help finding an affordable apartment, it is pretty ridiculous,
and frankly, saying that they do not want to work is pretty offen-
sive.
Work unites all of us. That is why I talk so often about the dig-
nity of work—it is why Dr. King and Pope Leo sort of invented the
term—to do something productive for ourselves and our family, be-
cause all work has dignity. If some of my colleagues are so con-
cerned about some Americans missing out on that inherent dignity
I would suggest they look a little harder at the wealthiest sliver
of the country, making millions off investment income, often much
of it—pardon me for saying this—often much of it inherited. Per-
haps we could attach a few work requirements to their tax breaks.
The Senate Committee on Banking, Housing, and Urban Affairs
is adjourned.
[Whereupon, at 11:29 a.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and addi-
tional material supplied for the record follow:]
28
PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
One thing seems to be pretty much certain in this economy: no matter what hap-
pens to most Americans—a financial crisis, a global pandemic—Wall Street will find
a way to profit off of everybody else’s pain.
We all remember 2008.
Nearly nine million workers lost their jobs. Workers’ savings were wiped out.
And nearly 10 million families lost their homes and everything that went with
them—months and years of mortgage payments, their neighborhood school, the fam-
ily pet, the stability of knowing where you live, where your kids would go to school,
and where you’d attend church for the next 20 or 30 years.
But as families watched their dreams crumble, Wall Street found new opportuni-
ties to profit from the devastation it created.
As families—disproportionately families of color, who had been targeted with
predatory loans—lost their homes, private equity funds with access to cheap cash
were waiting to scoop them up.
Following the 2008 financial crisis, private equity funds bought families’ homes
in cash, often at foreclosure auctions. And they bought the loans of the hardest-hit
borrowers in bulk from FHA and the GSEs.
These professional investors weren’t shy about what made it possible—and profit-
able—for them to buy up tens of thousands of homes.
They told investors: ‘‘recent turbulence in U.S. housing and mortgage markets,’’
created a ‘‘unique opportunity.’’ And the availability of large quantities of single-
family homes at ‘‘distressed prices,’’ and ‘‘strong demand from tenants’’ meant the
opportunity for ‘‘attractive yields.’’
‘‘Unique opportunity’’ for ‘‘attractive yields.’’
Think about that—in plain English, that meant take advantage of the foreclosure
crisis—the crisis that turned homeowners’ lives upside down and gutted their hard-
earned savings—to give Wall Street billionaires the chance to buy up homes for less
than they’re worth, and rent them out at a steep profit.
And let’s also be clear—there would be, quote, ‘‘strong demand from tenants’’ be-
cause Wall Street preyed on people and cost them their homes. They would have
to rent at those higher prices, locking in tenants, with no other options, for years
into the future.
The largest investors in the world went on a buying spree. And they shopped stra-
tegically.
Neighborhoods with good schools in Atlanta, Phoenix, Tampa, and Charlotte be-
came the centers of investment. By 2020, just seven cities contained more than half
of the homes owned by institutional investors.
And as some private equity funds were buying single-family homes, another group
of funds started targeting manufacturing housing communities.
The nearly 38,000 manufactured housing communities around the country have
long been owned by small, local companies. The families who live there own their
home, but rent the lot where their home is placed.
Many of the families who live in manufactured housing communities are low-in-
come or on fixed incomes. Their median income is $35,000 a year. That doesn’t leave
room for a rent increase or a broken down car—let alone being able to afford to pick
up and relocate the home they own to a cheaper lot.
But when big investors began buying up these communities after the crisis, many
of them raised rents, added new fees, and changed their policies—all without fixing
up the communities the way they promised residents they would.
Residents like Ms. Hook, who we’ll hear from today, and like manufactured home-
owners I met in Iowa, are left with an impossible choice: abandon the home they
own with nowhere to go—with literally nowhere else to take their home—or pay
rent they can’t afford.
That private equity business model has been preying on people since the housing
crisis. So no one should be surprised that in the turmoil of a public health and eco-
nomic crisis, Wall Street is running a similar playbook.
Today, in many cities and towns there are few affordable options. When private
equity comes in and buys up homes in their town, many renters are left with no
choice other than to accept the rising rents.
One of the largest single-family rental firms reported ‘‘record-breaking results’’ at
the end of 2020, and a resource for manufactured home community investors re-
ported that the properties just became more valuable.
It’s a variation on the same theme, no matter the industry:
They buy up companies like Toys ‘R Us and Sears, lay off workers to show a profit
on their balance sheet, then close the business.
29
They buy up local newspapers, fire journalists, and any oversight or coverage of
their corporate greed tends to disappear.
They buy up nursing homes, raise the prices, and neglect residents.
It’s all the same—private equity profits depend on squeezing every last nickel
from workers and renters, without any kind of real investment in their employers
or their communities.
It’s a symptom of one of the biggest problems in our economy—the Wall Street
system is not set up to prize long-term investment. Private equity is all about the
quick buck—everyone else be damned.
Today, we’ll look at how these firms have changed the housing market—and not
for the better.
We’ll hear from our witnesses about how this hurts pretty much everyone except
the big investors—renters pay higher rents or are forced out and families hoping
to someday own their own home are priced out.
We’ll also begin to hear what we need to do to make sure that every family—
whether they rent or own, whether they’re in Columbus or Atlanta or Charlotte—
has a safe, affordable place to call home.
PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
Thank you, Mr. Chairman. And welcome to our witnesses.
I’m a bit puzzled by today’s hearing topic. It seems intended to demonize people
who use their own money to buy—and even build—as little as 1 percent of homes
in the single family housing market.
At least one of today’s witnesses represents a group that rejects the concept of
private property altogether, stating on their website that ‘‘we envision a U.S. where
land and housing are publicly owned.’’ Let me just say for the record, private owner-
ship is vastly preferable to the State. That’s the American dream after all.
There’s nothing wrong with people renting homes instead of, or before, becoming
homeowners. And there’s nothing wrong with investors putting their own money to
work to meet the needs of renters.
Now if Democrats are concerned about investors crowding out homebuyers, I hope
they would agree that taxpayers shouldn’t subsidize loans to investors. Unfortu-
nately, the Biden administration has a different view. It lifted existing restrictions
on the ability of Fannie and Freddie to buy loans from single-family investors.
That’s a taxpayer giveaway. And it’s why I’m introducing legislation to prohibit
the GSEs from acquiring investor property mortgages. I hope my colleagues will co-
sponsor it.
Today, what I think we need to focus on is the $3.5 trillion elephant-in-the-room:
the Democrats’ reckless tax-and-spend spree, which includes $300-plus billion for
housing.
Billions of this aid is not targeted. Some of these programs have weak means test-
ing and loopholes. And forget work requirements—even for able-bodied childless
adults. They, and many people of above-average income, will do quite well under
some of these programs.
Let’s consider a few of the bill’s misguided housing provisions.
Start with the $9 billion in downpayment assistance for ‘‘first time’’ and ‘‘first gen-
eration’’ homebuyers. It’s rife with problems.
First, you can qualify even if you or your parents previously owned a home. So
much for ‘‘first time’’ and ‘‘first generation.’’
Second, you don’t have be low income. A member of Congress could qualify for
a taxpayer-funded downpayment under this program.
Third, it’s an invitation to mortgage fraud. A homebuyer only has to attest to
being a first generation homebuyer. No other diligence is required. In fact, lenders
are exempt from liability even if they knowingly accept a false attestation.
But worst of all, this program is a thinly disguised attempt to give assistance to
homebuyers based more on the color of their skin than their financial need—some-
thing that’s very likely unconstitutional.
Democrat Chairwoman Maxine Waters has said the objective of this program is
to ‘‘help address the racial wealth and home ownership gaps.’’ The director of the
liberal National Fair Housing Alliance has said, ‘‘you cannot address issues of racial
inequity if you do not address housing inequity—it is an impossibility. They’re so
inextricably linked.’’ Thus, the bill text directs the HUD Secretary to allocate funds
in part based on ‘‘racial disparities in home ownership rates.’’
Increasing wealth and home ownership rates amongst minorities is a fine goal.
But designing race-based policies and benefits is not.
30
The Democrats reckless tax-and-spend bill also has $80 billion for renovating pub-
lic housing. But that’s odd. The Biden administration requested only $40 billion. So
why does this bill have $80 billion?
It just so happens that the NYC housing authority wanted $40 billion for itself.
But our Democrat colleagues knew they couldn’t pass a bill that sent 100 percent
of the money to New York City. That would be a bit of a problem for the 48 Demo-
cratic senators who don’t represent New York.
So instead, Majority Leader Schumer promised to ‘‘double down’’ on the Adminis-
tration’s proposal and ‘‘use all of my power as majority leader . . . to secure a fund-
ing package that can restore and transform [the NYC Housing Authority].’’
And lo and behold, we now have $80 billion not to be distributed using the exist-
ing formula but rather by executive fiat. This certainly looks a lot like Senator
Schumer securing a $40 billion earmark, or ‘‘Schumark.’’ So it looks like half of all
the bill’s public housing dollars will go to a housing authority plagued by scandals,
bribery, and chronic mismanagement.
It’s distressing to see Democrats pouring billions into outdated public housing
projects that concentrate poverty and crime and trap families in generational cycles
of dependency and despair. Twenty years ago, both parties recognized the flaws in
Government-controlled housing. That’s why Congress capped the number of public
housing units with the Faircloth amendment.
Now, Democrats’ reconciliation bill would waive this sensible law so new public
housing units can go up. This is a remarkable return to Government-owned housing,
and one that we will again regret.
We need to try something different than Big Government socialism to help make
housing affordable. We need to leverage the power of free enterprise—including pri-
vate equity—to promote housing for all Americans.
To that end, in March I proposed principles to guide housing finance reform dis-
cussions. Since then, the Administration has shown no interest in reform, and even
missed a September 30th deadline to report on its reform plan.
In light of the issues I’ve raised today, I hope this Committee will hold hearings
soon on long overdue topics like housing finance reform, and markup any reconcili-
ation legislation so we have an opportunity to debate and offer amendments.
31
PREPARED STATEMENT OF SOFIA LOPEZ
DEPUTY CAMPAIGN DIRECTOR ON HOUSING, ACTION CENTER ON RACE AND THE
ECONOMY
OCTOBER 21, 2021
32
33
34
35
36
37
38
39
40
41
PREPARED STATEMENT OF HOLLY HOOK
MANUFACTURED HOME RESIDENT AND MHACTION LEADER IN SWARTZ CREEK,
MICHIGAN
OCTOBER 21, 2021
Good morning and thank you, Chairman Brown, Ranking Member Toomey, and
Members of the Committee. My name is Holly Hook and I’m a resident of Swartz
Creek Estates in Swartz Creek, Michigan. I’m a member of MHAction, an organiza-
tion made up of mobile home residents who organize our neighbors and fight to save
our communities.
Everyone has the right to a safe, affordable home and community. We need the
Federal Government to work with us to ensure everyone this basic right, especially
as predatory investors are threatening this human right for millions of families.
I bought my manufactured home because I needed an affordable place. In our
communities, seniors and families often own their homes but rent land from a com-
mon landlord. This creates lower housing costs. We loved our community. Like so
many others, it was friendly, well-maintained, and walkable. In 7 years, I paid off
my house and had reasonable lot rent that covered land, sewer, and garbage. My
neighbors were mostly low-income seniors who retired to our community. No one
knew that our community was for sale until a notice appeared on our doors in July
2018 saying Havenpark Capital had bought us, and our lot rent was going up 22
percent. I needed answers, but Havenpark only offered a site for investors that stat-
ed, ‘‘creating stable, long-term income.’’
It costs thousands to move our homes and many homes can’t withstand a move.
We had two options: pay the giant increases or lose our homes. Havenpark admited
this on their investor website by stating, ‘‘It is difficult for tenants to move their
homes. As a result, operating cash flow is among the highest of any real estate
class.’’
The rent hikes and fees continued. Havenpark unbundled administrative fees,
school taxes, sewer charges, and trash fees from our rent. Monthly payments rose
40 percent by June of 2019 and as of this year, they’ve risen over 50 percent. My
lot rent and fees have gone from $310 per month to over $500 per month.
Our sense of security and independence is gone. My elderly and neighbors are hit
the hardest. They live on fixed incomes. Havenpark now takes most of their income.
Some fear losing their homes. Many moved out, including my 80-year-old neighbor
who is now in a small senior apartment. Other residents are forced to use food pan-
tries due to the increases. Some are even homeless.
Havenpark kept raising rents and fees during COVID and sent letters threatening
those who couldn’t pay in full. They refused partial payments, though the CDC mor-
atorium allowed them.
In another Havenpark community across town, a lady named Mary worked mul-
tiple jobs to keep up with the increases until she got COVID last spring. She fell
behind on the rent and Havenpark tried to evict her right away, while she waited
for a rent relief payment. Havenpark only backed off when a reporter asked ques-
tions about Mary’s case.
And let’s be clear—these big increases don’t come back to us. Havenpark has cut
back on maintenance. A nearby community they own lost their water in a storm,
and they wouldn’t fix it in a timely manner. The local government got involved after
residents were without water for days.
Our Michigan communities are not alone and Havenpark is not the only actor
treating residents this way. Roughly 2 million people live in communities owned by
the 50 largest community owners. Many operate like Havenpark, devastating sen-
iors and families. And now some of the biggest private equity companies in the
world are buying up mobile home parks.
Outrageously, this trend is fueled by those who say they support affordable hous-
ing. We were astonished to learn that Havenpark Capital got their financing
through a subsidiary of Enterprise Community Partners, the national affordable
housing nonprofit, and Fannie Mae. Both Fannie Mae and Enterprise claim they ad-
vance affordable housing. But when they finance predatory investors like
Havenpark, they destroy it.
We’ve called on Fannie Mae and Freddie Mac and their regulator, the FHFA, to
add safeguards against rent and fee gouging, unfair evictions, and unsafe conditions
in their manufactured home community financing. We need financing to support
us—the residents—not passive investors. We want financing products that will
allow nonprofits, public entities, and resident owned cooperatives to buy our commu-
nities and keep them affordable and healthy. Thank you.
42
PREPARED STATEMENT OF NORBERT MICHEL
VICE PRESIDENT AND DIRECTOR, CENTER FOR MONETARY & FINANCIAL
ALTERNATIVES, CATO INSTITUTE
OCTOBER 21, 2021
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
PREPARED STATEMENT OF MICHAEL HENDRIX
SENIOR FELLOW AND DIRECTOR FOR STATE AND LOCAL POLICY, MANHATTAN
INSTITUTE
OCTOBER 21, 2021
Chairman Brown, Ranking Member Toomey, and Members of the Committee,
thank you for inviting me to participate in today’s hearing. My name is Michael
Hendrix, and I serve as a senior fellow and director of State and local policy at the
Manhattan Institute. Along with my colleagues, we seek to advance freedom and op-
portunity across America’s communities.
Today’s hearing topic seems misguided. Large investment firms, including those
in private equity, buy just 1 to 2 percent of homes sold nationally today. And they
own less than one-tenth of 1 percent of the housing market in America. Big finance
is still a tiny player in housing.
But housing’s a hot market today, and investors both large and small are seeing
opportunities to invest, so I’m open to discussing how these private dollars can go
to expanding access and affordability for Americans looking for a place to call home.
But it’s difficult to be optimistic when many here are embracing this Administra-
tion’s plans to regulate and legislate their way to a bigger Government role in hous-
ing.
For instance, the reconciliation bill being considered in Congress doubles-down on
failed public housing and throws more subsidy money at a limited supply of homes,
a recipe for prices to keep rising. These are not answers to America’s housing crisis.
And make no mistake: it is a crisis. Housing demand is far outpacing housing sup-
ply. We have a shortage of nearly four million homes nationwide. But the roots of
this crisis lie not in financial speculation but in Government regulation.
Localities have made it practically illegal to build enough housing to meet de-
mand, leading to inflated home prices. America is building homes at its slowest rate
in 60 years, worsening a supply problem that has been decades in the making. In-
vestors are snapping up homes because of supply restrictions, not in spite of them.
The only answer to a housing shortage is to build more housing.
Yet this hearing suggests a skepticism for the private sector investing in more
housing. That’s what institutional investors are doing, after all; they’re not shrink-
ing the supply of shelter. In fact, many are building more homes, which is what
America needs if it’s going to get out of this crisis. And as Vox notes, ‘‘Since renters
are on average less wealthy than mortgage-qualifying would-be homeowners, insti-
tutional investors might be creating more housing for lower-wealth Americans,’’ par-
ticularly in desirable neighborhoods. 1
If not the private sector then, that leaves us with the public sector—and specifi-
cally, public housing. That is a mistake.
Rather than helping the private sector solve a crisis of the Government’s making,
Congress’ $3.5 trillion reconciliation bill plans to bail out America’s failed public
housing system. This money—an incredible $80 billion—has few limits on how it’s
spent. Senate Majority Leader Chuck Schumer has promised to hand over the bulk
of these dollars to the scandal-plagued New York City Housing Authority (NYCHA).
Worse yet, Sen. Schumer’s colleagues want more failed NYCHAs through a backdoor
repeal of limits on new public housing.
Back in April, Sen. Schumer called on President Joe Biden to double his planned
spending of $40 billion on public housing. He wanted all of the original money just
to pay NYCHA’s repair bill. And he got it: an increase to $80 billion in spending
on public housing and enormous influence on securing half of it for a NYCHA bail-
out. And even this may not be enough: NYCHA estimates its repair costs may be
as high as $68.5 billion by 2028. In short, it’s an $80 billion slush fund.
NYCHA is what we get when we get more public housing. And that should scare
every American, especially for the survivors of public housing. NYCHA is the Na-
tion’s oldest and largest public housing system, housing more people than the city
of Atlanta, and long held up as a model of what Government can achieve when it
takes charge of housing.
And in 2018, NYCHA’s own tenants sued the housing authority for its squalid liv-
ing conditions. Then the Federal Government sued too, finding that the housing
agency had worked harder to cover-up its ‘‘dangerous problems’’ than to actually fix
them. It turns out that the Nation’s largest and greatest public housing system
poisoned over a thousand children with lead exposure, then lied and covered it up.
1 Demsas, Jerusalem. ‘‘Wall Street Isn’t To Blame for the Chaotic Housing Market’’. Vox, June
11, 2021. https://www.vox.com/22524829/wall-street-housing-market-blackrock-bubble.
58
And just this month, New York City public health officials admitted that NYCHA
residents are dying from COVID–19 at nearly twice the city rate.
‘‘The real disaster is the management at NYCHA and its culture of deception,’’
said the U.S. attorney who sued the agency, and he’s right. Just the other month,
Brooklyn’s district attorney charged nine NYCHA contractors with bribery over the
authority’s no-bid contracts. There’s an ‘‘ecosystem of people willing to make and
take bribes at NYCHA,’’ found the Brooklyn DA.
Despite record levels of funding, ‘‘New York’s public housing isn’t getting better,’’
admitted the New York Times. 2 Sometimes more money means more problems. A
new paint job won’t fix NYCHA’s problems. A public housing slush fund only harms
accountability and leaves structural problems in place. Spending $40 billion to re-
pair NYCHA amounts to roughly $250,000 for every family living in public housing
in New York City. Do we really believe we won’t get more of the same?
We are now being promised more failure by striking a 1990s-era cap on public
housing units known as the Faircloth Amendment. Housing authorities are being
told they can build and expand, while it seems the private sector is being told the
opposite. That means more demands for even more public housing dollars in the fu-
ture. The backdoor repeal of the Faircloth Amendment in the reconciliation bill en-
sures America will trap more generations in public housing poverty.
Public housing has failed—look no further than NYCHA. It’s time we did better
for Americans in need of more affordable housing. Bailing out scandal-plagued pub-
lic housing authorities is not the answer. Neither is condemning private sector solu-
tions to America’s housing crisis. We can—we must—do better.
Thank you.
2 The Editorial Board. ‘‘New York’s Public Housing Isn’t Getting Better’’. New York Times,
July 30, 2019. https://www.nytimes.com/2019/07/30/opinion/new-yorks-public-housing-
nycha.html.
59
PREPARED STATEMENT OF DESIREE FIELDS
ASSISTANT PROFESSOR OF GEOGRAPHY AND GLOBAL METROPOLITAN STUDIES,
UNIVERSITY OF CALIFORNIA, BERKELEY
OCTOBER 21, 2021
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
FROM SOFIA LOPEZ
Q.1. The housing policy page on your organization’s website states,
‘‘[w]e envision a U.S. where land and housing are publicly owned
and used for the overall public good to ensure that every person is
guaranteed a home.’’ 1 While advocating for families to have access
to safe and affordable housing is a fine goal, I am concerned with
your organization’s position that the pathway to accomplishing this
goal requires increased Government ownership of housing stock.
Does the statement on your organization’s website, ‘‘[w]e envision
a U.S. where land and housing are publicly owned,’’ mean that
your organization supports collective ownership of all land or just
a portion of land?
Should the law prohibit individual ownership of homes?
Do you oppose private property?
A.1. Senator, thank you for taking the time to engage with our
website and for the chance to discuss the challenges of our current
housing market.
ACRE believes there are critical limitations to a profit-based
housing model, and the current affordability crises facing residents
across the country are the result of this model. This means we need
more democratic ownership of land, not less.
In the United States, private home ownership has been the pri-
mary vehicle to build wealth, which is critical to weathering large,
unexpected expenses, covering the cost of higher education, and
more. ACRE does not argue that the law should prohibit individual
ownership of homes, however, the fact that the median net worth
for White households is $188,200 compared to a median net worth
of $24,100 for Black households is clear evidence of the limitations
of relying on individual ownership to meet our Nation’s housing
needs and address the widening racial wealth gap. 2
ACRE would not say we are opposed to private property, but our
Nation’s history has shown that a profit-based housing model will
never ensure that all people in the U.S. are housed. This will re-
quire alternative models, like public housing and community own-
ership to ensure that we are prioritizing the need for shelter over
speculation and runaway profit.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
FROM SOFIA LOPEZ
Q.1. Rhode Islanders are experiencing a particularly acute shortage
of affordable housing supply right now. How do private equity com-
panies and iBuyers influence the housing supply crisis that is hap-
pening across the country right now?
A.1. There is a shortage of low-cost homes affordable to renter
households and for purchase by first-time, first-generation buyers.
What affordable homes are available to first-time buyers are typi-
1 Action Center on Race and the Economy, accessed October 28, 2021, https://
acrecampaigns.org/issues/levelingtheplayingfield/.
2 Bhutta, Neil, Andrew C. Chang, Lisa J. Dettling, and Joanne W. Hsu (2020). ‘‘Disparities
in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances’’, FEDS Notes.
Washington: Board of Governors of the Federal Reserve System, September 28, 2020, https://
doi.org/10.17016/2380-7172.2797.
79
cally within the same price and square footage range that private
equity-backed landlords target for acquisition, putting prospective
homeowners and large corporations with billions in cash in direct
competition.1 2
For example, in Shelby County Tennessee, where Memphis is lo-
cated, Cerberus Capital Management, Pretium Partners, American
Homes 4 Rent, and more, bought over 7,000 homes, combined, with
a median value of $145,000. 3 In 2021, Memphis is the metro area
with the highest concentration of investor ownership, followed by
cities with anticipated high price growth and few tenant protec-
tions. 4
IBuyers have acknowledged the need to achieve scale for their
businesses to be profitable. Opendoor, which recently went public
via a SPAC, said they would be willing to buy the majority of
homes for sale in the 40 markets where they operate today. 5 While
iBuyers argue that they purchase, fix, and sell homes to con-
sumers, the reality is they often partner with private equity compa-
nies who are hungry to increase their inventory, while the iBuyers
create the scale they need to turn a profit. This means, despite the
claims of iBuyers, many of the homes they sell are never marketed
to consumers. 6
Q.2. In what ways are ordinary homebuyers for owner-occupied
housing disadvantaged when competing against iBuyers to pur-
chase homes? How do these disadvantages compound when pro-
spective homebuyers are first-time, first-generation, minorities, or
women?
A.2. Homebuyers, particularly first-time, first-generation, minority
and women prospective homebuyers are at a monumental dis-
advantage when it comes to competing with iBuyers.
Companies like Offerpad, Rocket Homes, Opendoor, and until re-
cently Zillow, have huge quantities of cash at their fingertips, as
well as sophisticated algorithms to predict where homes are most
likely to appreciate in the future. Analysts of the iBuyer market
have noted that one possible factor in Zillow’s withdrawal from the
iBuying sector is the fact that they were habitually paying more
than the market average for homes. In September 2021, for exam-
1 Mari, F. (2020, March 4). ‘‘A $60 Billion Housing Grab by Wall Street’’. New York Times
Magazine. Retrieved from https://www.nytimes.com/2020/03/04/magazine/wall-street-land-
lords.html.
2 Investment Companies Pricing out Homebuyers. (2021, October 6). NBC News. broadcast.
Retrieved from https://www.nbcnews.com/nightly-news/video/investment-companies-pricing-
out-homebuyers-122940997741.
3 Powell, A. (2021, October 16). ‘‘Home Buying Competition From Investors Could Impact the
Black–White Wealth Gap in Shelby County’’. The Grio. Retrieved from https://thegrio.com/
2021/10/16/home-buying-competition-from-investors-black-wealth-gap/.
4 Malone, T. (2021). ‘‘Single-Family Investor Activity Surges in the Second Quarter’’.
CoreLogic, Inc. Retrieved from https://www.corelogic.com/intelligence/single-family-investor-ac-
tivity-surges-in-the-second-quarter/.
5 Strachan, M. (2021, August 13). ‘‘Zillow, Other Tech Firms Are in an ‘Arms Race’ To Buy
Up American Homes’’. Vice. Retrieved from https://www.vice.com/en/article/93ymxz/zillow-
other-tech-firms-are-in-an-arms-race-to-buy-up-american-homes.
6 Clark, P. (2021, May 21). ‘‘Mega Landlords Are Snapping up Zillow Homes Before the Public
Can See Them’’. Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2021-
05-21/mega-landlords-are-snapping-up-zillow-homes-before-the-public-can-see-them.
80
ple, data show Zillow paid $65,000 above the market average per
home. 7
First-time, first-generation, households of color, and women pro-
spective homebuyers do not have the luxury of paying in cash or
taking the risk of buying homes sight-unseen, much less paying a
$65,000 premium to bolster their competitive advantage. Instead,
because they cannot access the same cash or credit, many house-
holds are trapped renting—at times paying more than a mortgage,
without building any equity, to private equity companies who are
able to outcompete them on the open market, and who are able to
purchase from iBuyers in bulk.
Q.3. IBuyers tend to concentrate their purchases in particular geo-
graphic areas. How does this impact those local housing markets?
What competitive concerns are raised by this buying strategy?
A.3. Opendoor has expressed its need for scale and its interest in
buying the majority of homes in the markets where it operates,
while also seeking a $2 billion dollar credit facility to ensure its
ability to do so. 8 Opendoor has yet to turn a profit, and Zillow re-
cently left the iBuying business, and is selling their thousands of
homes in inventory at steep discounts, with the first bulk sale of
2,000 homes going to Pretium Partners. 9 Because iBuying compa-
nies focus on a handful of markets, and they frequently partner
with private equity-backed single family rental landlords, there are
concerns about what options residents have in choosing a home.
The algorithms these companies use are proprietary, and analysts
and regulators, much less the general public, don’t know exactly
how iBuyers weigh school quality or proximity to employment cen-
ters, though we know these are critical variables driving home
prices in general. It is reasonable to imagine that using their algo-
rithms, iBuyers can zero in on desirable properties and crowd
homeowners out, and in some circumstances sell those same prop-
erties to private equity companies, who in turn rent these homes
rather than make them available for purchase.
Q.4. What actions would you recommend to Congress to further ex-
plore the impact of iBuyers and private equity companies on hous-
ing markets?
A.4. Members of Congress should dedicate time to engaging with
tenants in properties owned by private equity landlords, home-
owners who have bought from or sold to iBuyers, and people who
have had to compete with both kinds of businesses to buy homes.
These tenants and homeowners can speak most clearly to the detri-
mental impacts of both iBuyers and private equity and are well po-
sitioned to offer solutions.
Based on these conversations, members of Congress should con-
sider sending letters of inquiry to better understand and document
7 Stokel-Walker, C. (2021, November 11). ‘‘Why Zillow Couldn’t Make Algorithmic House Pric-
ing Work’’. Wired. Retrieved from https://www.wired.com/story/zillow-ibuyer-real-estate/?utm-
source=WIR-REG-GATE.
8 Strachan, M. (2021, August 13). ‘‘Zillow, Other Tech Firms Are in an ‘Arms Race’ To Buy
up American Homes’’. Vice. Retrieved from https://www.vice.com/en/article/93ymxz/zillow-
other-tech-firms-are-in-an-arms-race-to-buy-up-american-homes.
9 Strachan, M. (2021, November 10). ‘‘Zillow Sells Thousands of Homes to Controversial Rent-
al Powerhouse’’. Vice. Retrieved from https://www.vice.com/en/article/k7wany/zillow-sells-
thousands-of-homes-to-controversial-rental-powerhouse.
81
the business practices and underlying risks associated with large
scale iBuyers and private equity landlords. Furthermore, iBuyers
should be required to disclose demographic information about who
they buy from and sell homes to, to ensure they are not entrench-
ing racism in housing.
Lastly, one of the easiest ways to begin to understand the role
of both iBuyers and private equity companies is to require disclo-
sure of the beneficial owners of real estate. Both iBuyers and pri-
vate equity companies employ LLCs which can make it very dif-
ficult to know the owner of a given property, much less the scale
and concentration of ownership. Requiring disclosures would facili-
tate research into concentrations of ownership within given mar-
kets and allow regulators and tenants to pursue claims of monopoly
power. Even without disclosure, investigations into price-setting
and monopoly should be done in markets that have demonstrated
high rates of private equity ownership. Congress could also demand
to know what inputs feed into iBuyers’ algorithms, to assess how
data-informed speculation harms communities of color in par-
ticular, and locks households out of home ownership opportunities,
access to high performing schools, quality jobs, and more.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
FROM DESIREE FIELDS
Q.1. The Democrats’ reconciliation bill contains a provision that
would allocate $10 billion 1 to fund a new downpayment assistance
program. Under this program, homebuyers would qualify for a tax-
payer-funded downpayment equivalent to $20,000 or 10 percent of
the purchase price of a home, whichever is greater. The program
is purportedly targeted to ‘‘first time’’ and ‘‘first generation’’ home-
buyers, even though an individual may qualify if they or their par-
ents have previously owned a home. Chairwoman Waters has said
that the objective of such a program is to ‘‘narrow [ . . . ] the racial
home ownership gap.’’
You have written extensively about race and housing, saying, for
example, ‘‘[housing] financialization may be placed in a much
longer line of land and housing schemes where capital accumula-
tion is predicated on the racialization of people and place’’ and that
‘‘financial violence is racial violence.’’ 2
Do you support a Federal downpayment assistance program that
would, in part, target benefits based on race?
A.1. I have reviewed the relevant text of H.R. 5376 as reported by
the Committee of the Budget, with modifications, focusing on Sub-
title C-Homeownership Investments; Sec. 40201 First-Generation
Downpayment Assistance. 3 As I understand it, this provision
would allocate $6.825 billion in downpayment assistance funds to
qualified homebuyers. It would also provide $2.275 billion for com-
petitive grants for financial, community development organizations,
and other nonprofit organizations that serve minority and low-in-
1 Based on the latest House Rules Committee text, released October 28, 2021, https://
rules.house.gov/sites/democrats.rules.house.gov/files/BILLS-117HR5376RH-RCP117-17.pdf.
2 https://escholarship.org/uc/item/5gd214jn, accessed October 28, 2021.
3 Based on the text released November 3, 2021: https://rules.house.gov/sites/demo-
crats.rules.house.gov/files/BILLS-117HR5376RH-RCP117-18.pdf.
82
come communities. Remaining funds would support prepurchase
counseling required for eligible homebuyers to access downpayment
assistance, as well as HUD administration and oversight of the
program.
In accordance with the goal of this appropriation to ‘‘increase
equal access to home ownership’’, qualifying for downpayment as-
sistance requires homebuyers be both a first-time and a first gen-
eration buyer. This focus recognizes that one’s parents having
owned a home facilitates intergenerational wealth transfers that
increase home ownership opportunities for their offspring, e.g., by
providing financial support for a downpayment on a home.
Historic racial inequalities in access to mortgage financing and
insurance (and thus in parental wealth), discriminatory real estate
practices, and the detrimental effects of the 2008 foreclosure crisis
on Black home ownership and wealth have inequitably distributed
home ownership opportunities along racial lines in the United
States. As of Q3 2021, approximately 74 percent of White Ameri-
cans own homes compared to 44 percent of Black Americans, 60
percent of Asian/Native Hawaiian/Pacific Islander Americans, and
57 percent of Americans of other races. 4 Since the 2008 financial
crisis, the age gap between Black and White first-time buyers has
grown, with Black first-time buyers now 6 years older than White
first-time buyers (up from 3 years older in 2002). 5 In 2021, 83 per-
cent of all home buyers were White 6 whereas according to the Cen-
sus Bureau, approximately 59 percent of the U.S. population identi-
fied as White in 2020. While first-generation homebuyers can be
defined in several ways, Black first-generation homebuyers out-
number White first-generation homebuyers according to every defi-
nition. 7
Based on these racialized inequities in home ownership, it is rea-
sonable to infer that the downpayment assistance provision of H.R.
5376 could indeed help narrow the racial home ownership gap.
However, I did not find any text in the bill stating that benefits
would be targeted based on race, nor that certain groups would be
excluded based on race. White Americans are simply less likely to
be first-time, first-generation homebuyers than Americans of other
racial backgrounds, particularly Black Americans. And as a result,
minority racial groups are more likely to meet the eligibility re-
quirements of the downpayment assistance program, though quali-
fied White homebuyers would also be eligible. Home ownership is
the primary wealth creation mechanism available to average Amer-
icans. It is logical and appropriate to direct downpayment assist-
ance to those who face the greatest barriers to purchasing a home,
i.e., first-time, first-generation homebuyers.
4 U.S. Census Bureau, ‘‘Quarterly Residential Vacancies and Homeownership’’, Third Quarter
2021; https://www.census.gov/housing/hvs/files/currenthvspress.pdf.
5 Consumer Financial Protection Bureau, ‘‘Market Snapshot: First-Time Homebuyers’’ (March
2020); https://files.consumerfinance.gov/f/documents/cfpb-market-snapshot-first-time-home-
buyers-report.pdf.
6 National Association of Realtors, ‘‘2021 Home Buyers and Sellers Generational Trends’’;
https://www.nar.realtor/sites/default/files/documents/2021-home-buyers-and-sellers-
generational-trends-03-16-2021.pdf.
7 Urban Institute, ‘‘Down Payment Assistance Focused on First-Generation Buyers Could Help
Millions Access the Benefits of Homeownership’’ (April 2021); https://www.urban.org/urban-
wire/down-payment-assistance-focused-first-generation-buyers-could-help-millions-access-benefits-
homeownership.
83
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
FROM DESIREE FIELDS
Q.1. What does your research say about the affordability of
securitized single-family rental properties? What meaningful dif-
ferences have you observed between securitized and nonsecuritized
single-family rental properties, and why do you think these dif-
ferences exist?
A.1. I preface my response to this question by noting that only
about 10 landlords control enough single-family rental (SFR) homes
to engage in securitization. Therefore, after a brief discussion of
securitization and its purpose for SFR landlords, my response fo-
cuses on available data about such institutional scale operators. 1
It is important to recognize that data limitations make it difficult
to empirically assess affordability differences between institutional
and smaller-scale operators. Institutional operators that are pub-
licly listed as real estate investment trusts are required to publicly
report some data but understandably are invested in representing
themselves in the most favorable light possible in such reports.
There is no public data and limited proprietary data that would en-
able fine-grained comparisons between landlords that control vary-
ing amounts of rental properties, particularly efforts to evaluate
such differences across a range of metropolitan areas. Finally,
securitization is only one difference that may play a role in afford-
ability differences between institutional and noninstitutional opera-
tors.
SFR securitization is a relatively novel practice, first carried out
in 2013 by Invitation Homes, then controlled by Blackstone. 2 The
process of securitization bundles income streams, selling shares in
the pool to investors as bonds. In the case of SFR securitization,
the income streams are the rent checks that tenants pay to their
landlord. Based on my research, about 50 SFR securitizations were
publicly issued from 2013 to 2020. On average, each securitization
has pooled the rent from about 3,500 homes. Institutional operators
have raised nearly $30 billion in debt via SFR securitization.
Securitization is a form of leverage that allows SFR landlords to
raise low-cost financing and generate higher returns for equity in-
vestors. 3 According to a 2018 study, ‘‘By 2016 SFR REITs and
other large institutional investors had moved to an almost 100 per-
cent cash buying rate for new properties’’ whereas smaller, indi-
vidual investors purchased with all cash less than half the time. 4
All-cash purchases allow institutional operators to reduce reliance
on other forms of financing and borrowing, lowering their costs and
giving them a competitive edge against smaller operators who are
more reliant on mortgages. To summarize, securitization gives in-
stitutional operators a market advantage, but it also creates pres-
1 Varying definitions of institutional ownership exist; here I use the term to indicate landlords
that control upwards of 5,000 properties.
2 Blackstone exited its stake in Invitation Homes in 2019.
3 Urban Institute, 2014; https://www.urban.org/sites/default/files/publication/24676/
412992-Single-Family-Securitized-Financing-A-Blueprint-for-the-Future-.pdf.
4 Chilton et al., 2018 ‘‘The Impact of Single-Family Rental REITs on Regional Housing Mar-
kets: A Case Study of Nashville, TN’’. Societies.
84
sure to deliver returns to investors, which can put upward pressure
on rents. 5
The above statement is especially true in an inflationary context.
If operating expenses rise due to inflation, yields on leveraged port-
folios will fall unless rents are increased to compensate. Similarly,
yields are higher when purchase prices are lower; the rapid in-
crease in house prices seen over the course of the pandemic could
cut into the yields of institutional operators, prompting them to
raise rents. As well, any rise in property taxes associated with in-
creased home values is likely to be passed on to tenants in the form
of rent increases.
According to a 2020 study, 6 the average monthly rent of the
three largest publicly listed SFR landlords (Invitation Homes,
American Homes 4 Rent, and Tricon American Homes) often out-
paced the median rent of comparably sized rental units in markets
where institutional operators have the biggest footprint. In Atlanta,
the gross median rent for a 3-bedroom unit was $1,164/month (ac-
cording to 2017 American Community Survey data) while average
rents for these institutional operators ranged from $1,224–$1,525.
In Tampa, the gross median rent for a 3-bedroom unit was $1,250/
month (according to 2017 American Community Survey data) while
average rents for these institutional operators ranged from $1,484–
$1,678. In Phoenix, average rents for these institutional operators
ranged from $1,236–$1,322, more in line with the gross median
rent of $1,280/month for a 3-bedroom unit (according to 2017 Amer-
ican Community Survey data).
In 2021, SFR rents have increased substantially, in September
rising by 12.2 percent year-over-year, with increases varying sub-
stantially between markets. 7 The markets in which institutional
SFR operators have the biggest presence have seen particularly
strong rental growth rates: rents increased 25 percent year-over-
year in Miami, 20 percent in Phoenix, 15 percent in Las Vegas, 13
percent in Dallas, and 12 percent in Atlanta. 8 Within these mar-
kets, institutional operators have announced even steeper increases
on new leases this year. For example, in Q3 2021, Invitation
Homes posted increases of 29 percent on new leases in both Phoe-
nix and Las Vegas, 20 percent in Atlanta, 18 percent in South Flor-
ida, and nearly 16 percent in Dallas. 9 Due to the density of prop-
erties controlled by operators like Invitation Homes in markets
where their footprint is the largest, it is possible such landlords
could be driving higher-than-average rent growth seen in such
markets. Their behavior may also breed imitation by smaller land-
lords, who are able to observe asking rents via the online portals
of institutional landlords.
However, data limitations make it challenging to offer a straight-
forward assessment of differences in affordability between institu-
tional-scale operators who engage in securitization versus non-
5 Amherst Capital Management, 2016; https://www.amherstcapital.com/documents/20649/
22737/US+SFR+Emerging+Asset+Class/9d84e0da-4a9f-4665-9880-88a4515d9d2b.
6 Colburn et al., 2020; ‘‘Capitalizing on Collapse: An Analysis of Institutional Single-Family
Rental investors’’. Urban Affairs Review.
7 CoreLogic, 2021; https://www.corelogic.com/intelligence/u-s-single-family-rents-up-10-2-
year-over-year-in-september/.
8 Ibid.
9 Invitation Homes, 10-Q report, Q3 2021; https://sec.report/Document/0001687229-21-
000061/invh-20210930.htm.
85
institutional operators. Institutionally owned SFR properties tend
to be more clustered in higher-income neighborhoods with higher
rents than SFR properties more generally, which tend to be located
in low- to mid-income, diverse neighborhoods. 10 In order to conduct
a robust comparison of rental rates between institutional and non-
institutional operators, it would be necessary to access data on
rents for each type of landlord within the same or comparable
neighborhoods. 11
One further issue to consider is how institutional operators may
affect the affordability of home ownership. Such landlords are di-
rectly competing with homebuyers for the same types of properties
(properties priced below the area median and located in decent
school districts) and in many cases have been able to outcompete
potential owner-occupiers due to their ability to make all-cash of-
fers. 12 Homebuyers who lose out are diverted back to the rental
market, increasing demand for homes like those controlled by insti-
tutional landlords (and potentially encouraging them to further in-
crease rents). Moreover, the competition between big capital and
owner-occupiers could make housing permanently more expen-
sive. 13 Considerations of affordability related to institutional SFR
operators should therefore also consider how investor activity may
make housing more expensive for owner occupiers, putting home
ownership beyond reach.
10 Immergluck, 2018; ‘‘The Rise of Single-Family Rentership in the Sunbelt Metropolis’’. Hous-
ing Policy Debate.
11 Such data may exist on a proprietary basis, but a renewed commitment to public data on
property owners and managers, such as the 1998 Property Owners and Managers Survey car-
ried out by the U.S. Census, would facilitate improved public understanding and research on
such questions.
12 Dezember, R. (2021); ‘‘If You Sell a House These Days, the Buyer Might Be a Pension
Fund’’. The Wall Street Journal. https://www.wsj.com/articles/if-you-sell-a-house-these-days-
the-buyer-might-be-a-pension-fund-11617544801
13 John Burns Real Estate Consulting, 2021; ‘‘Investor Mania 2.0: How Data, Technology, and
Yield-Chasing Are Revolutionizing Housing While Raising Risk Levels’’.
86
ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD
STATEMENT SUBMITTED BY ROC USA
87
88
89
STATEMENT SUBMITTED BY HOMETOWN AMERICA
90
91
92
93
STATEMENT SUBMITTED BY THE MANUFACTURED HOUSING
INSTITUTE
94
95
96
97
98
99
100
STATEMENT SUBMITTED BY INQULINXS UNIDXS FOR JUSTICIA
(UNITED RENTERS FOR JUSTICE)
101
102
103
104
105
LETTER SUBMITTED BY PRETIUM
106
107
SCHU-MARK GRAPHIC
108
‘‘PROTECTING COMPANIES AND COMMUNITIES FROM PRIVATE
EQUITY ABUSE’’—PESP
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
‘‘HOW PRIVATE EQUITY LANDLORDS ARE CHANGING THE HOUSING
MARKET’’—PESP
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
File and source
- File
- CHRG-117shrg52203.pdf
- Size
- 41,448,957 bytes
- SHA-256
- b6426a1c0ea23f23311c554146191afbbacce2944ec366646772d84d7dd748a7
- Our copy
- CHRG-117shrg52203.pdf
- Original
- www.govinfo.gov