June 29, 2022
Pressley Highlights How Private-Equity Backed Investors Exacerbate Housing Affordability Crisis
“This hearing is about homeownership but right now, homeownership isn’t even feasible
for many in my district who are being squeezed by predatory rent hikes imposed
by institutional investors.”
WASHINGTON – Today, in a House Financial Services Committee hearing, Congresswoman Ayanna Pressley (MA-07) highlighted how private-equity backed institutional investors have not only increased the racial homeownership gap but also worsened the affordability crisis for many renters in low-income majority Black neighborhoods.
In her line of questioning, Rep. Pressley criticized institutional investors for pricing out would-be homebuyers and forcing them to stay in the rental market, ultimately contributing to gentrification and the displacement of low-income residents, particularly in Black neighborhoods and communities of color.
A full transcript of her exchange with the witnesses is available below and the full video is available here.
Transcript: Pressley Highlights How Private Equity-Backed Institutional Investors Exacerbate Housing Affordability Crisis
June 29, 2022
REP. PRESSLEY: Thank you Madam Chair, first and foremost, for your leadership and for the class decorum and fairness that you exhibit every day in this role. Housing is a fundamental human right, yet across the country and in my district – the Massachusetts 7th, millions of people do not have access to a safe, decent, and affordable place to call home.
For decades, Black families have been locked out of homeownership opportunities due to discriminatory lending, and now, private equity-backed institutional landlords have pushed this dream even further out of reach, by gobbling up single family homes and worsening the housing crisis across the country.
Mrs. Pope, the five largest single-family rental companies own almost 300,000 homes. Now what are the consequences when institutional investors purchase these homes in bulk, often in cash, and how are they worsening housing affordability and forcing would-be homebuyers into the rental market?
MRS. POPE: Thank you for the question. Let me start and say when lenders hesitate to lend to low balance mortgages that means lower properties that’s in neighborhoods, buyers can’t purchase when they’re hesitating.
And what that does, it opens up the doors as I stated earlier for investors who pay cash. They buy in bulk the property for less money. Then there’s whole-selling. It displaces the residents and it creates low inventory for the neighborhood.
So when you have these cash buyers, and cash investors, and a homeowner can’t have that American dream because they’re bought out of a cash deal, it makes it very difficult. Then they have to go back and try to rebid on properties. Number one, that makes it harder because now there it gives many buyers who then are pricing higher than is normalcy which pushes them out the market.
It brings them into a mode where they have to rent because many of them are in a situation where the rental market is getting ready, or their rents are getting ready to either increase or it’s getting ready to ask so they have to either resign that lease another year. So it does cause a lot of provision from Black homeowners into buying homes.
REP. PRESSLEY: Thank you. And Mrs. Pope, most of the homes these institutional investors are buying up are in predominantly Black neighborhoods. Yes or no, based on what you are seeing, is the influx of institutional investors and cash buyers driving up home prices in predominantly Black communities?
MRS. POPE: Yes.
REP. PRESSLEY: And homebuyers, Mrs. Pope, are not the only ones impacted. Are these communities seeing rents go up as well as a result?
MRS. POPE: Absolutely.
REP. PRESSLEY: And would you say that institutional investors are accelerating gentrification of communities of color and displacing low-income residents?
MRS. POPE: Yes.
REP. PRESSLEY: Thank you. This is exactly what I’ve been hearing from people in cities across my district like Cambridge and Boston, where rents have risen by 30 and 27 percent higher than last year respectively. This is unsustainable and my most vulnerable constituents are drowning financially because they cannot afford these rent increases.
This hearing is about homeownership but right now homeownership isn’t even feasible for many in my district who are being squeezed by predatory rent hikes imposed by institutional investors.
Mr. Calhoun, you mentioned in your testimony that broad student debt cancellation would help address the racial homeownership gap. I agree. What other policies will provide relief to tenants facing unsustainable rent increases?
MR. CALHOUN: Again, a couple of things. We have to increase the supply of affordable rental housing as well. And then one of the provisions that expired in January, the Children’s Tax Credit, I mean, one of the things we talked about homeownership producing wealth. It’s also a manifestation of people’s existing wealth and existing financial security.
Another thing is actually, there’s recent Federal Reserve research that shows the expansion of Medicaid increases not just general financial security, but homeownership. Again, what you’ve talked about putting people in a stable financial position so that they can either securely rent or purchase a home.
If I may, I’d like to give a shout out to two programs that we need to lift up that have come out of Massachusetts. That is where one of the largest first-generation targeting programs was implemented. That was the basis for Chairwoman Waters’ provision.
And also, it has one of the largest statewide income loss insurance programs which again, we need those kinds of new approaches to provide efficient ways to address these housing problems.
REP. PRESSLEY: Thank you. I was trying not to be too parochial or boastful, but I appreciate your lifting up by those successful models. And again, thank you, Madam Chairwoman once again for your steadfast leadership.