WASHINGTON – Investors and stagnant wages are fueling a eviction and housing crisis across the United States, witnesses told a US Senate committee Tuesday.
Ohio Sen. Sherrod Brown, chairman of the Senate Banking, Housing and Urban Affairs Committee, said families are being priced out of buying a home, and rising rents mean renters are one illness or job loss or car repair away from being evicted. He said.
“More and more, investors are buying single-family homes — which first-time home buyers often buy — and renting them out at higher rates,” Brown, a Democrat, said in his opening remarks. “About 28 percent of homes sold earlier this year went to investors.”
One of the witnesses was Matthew Desmond, professor of sociology at Princeton University and director of the Eviction Lab, the only research group in the country dedicated to understanding the causes and consequences of housing instability in America.
Desmond said states across the country have experienced significant rent increases. Since 2000, median rents have increased 112% in the Midwest, 135% in the South, 189% in the Northeast and 192% in the West, he said.
“Last year, rents increased faster than on record,” he said, adding that the average rent across the country increased by 17 percent in one year.
But some cities have seen double that, he said, like 40 percent in Portland, Oregon; 35 percent in Newark, New Jersey; 30 percent in Orlando, Florida; and 29 percent in Cincinnati, Ohio.
“What can families do when house prices go up 15, 25, 30 percent?” Desmond said. “They cannot move to affordable housing because they often live in very cheap apartments. What they can do is cut back on other essentials, including health care, education enhancements, and food.
Biden was criticized
Senator Pat Toomey of Pennsylvania, a Republican on the committee, blamed the Biden administration for inflation and said, “The government, and this administration in particular, is often the problem when it comes to housing, not the solution.”
“Democrats’ wasteful spending, growth-killing regulations, and excessively accommodative monetary policy are precisely what caused 40 years of high inflation and crippled our economy,” he said in his opening remarks.
Toomey asked one of the witnesses, Darion Dunn, a partner at Atlantic Properties Management in Atlanta, Georgia, if government measures that increase costs for landlords are passed on to tenants.
“That’s generally the case,” Dunn said. “These costs should be passed on because of the relatively small margins.”
Sen. Jon Tester, Democrat of Montana, said people in his state also have trouble finding affordable housing.
“The price points have gotten really high,” he said, adding that the median home sale price in the state has increased by nearly 40% in the past year. “This is pushing more people from home ownership to renting,” he said.
He asked one of the witnesses, Laura Brunner, CEO and president of the Port of Greater Cincinnati Development, what could happen to communities where home ownership is out of reach.
“There’s a huge impact on local families when home ownership opportunities are taken away from them,” she said.
Investors buy houses
Institutional investors are market participants with access to capital and can be anything from private equity firms to financial institutions through real estate investment trusts.
Brunner told senators that institutional investors are changing the face of single-family housing in Hamilton County, Ohio.
She said that access to affordable housing and rent is becoming difficult due to institutional investors. Researching the worst landlords in Cincinnati, her team found that more than 4,000 single-family homes in Hamilton County had been purchased by five institutional investors since 2013.
One of those institutional investors, VineBrook Homes, has been charged by the city of Cincinnati with building code violations and poor living conditions for tenants and fraudulent security deductions.
Brown asked Brunner what Congress could do to help places like Cincinnati keep housing affordable for families and help families become home buyers.
Ohio is typically a target for these investors, she said, because they buy homes in “the most deprived neighborhoods in the state.”
“This is something that’s happening all over Ohio,” Brunner said.
One way to make it easier for local jurisdictions to know which properties are owned by institutional investors registering under LLCs is to have those investors register with localities, she said.
VineBrook, for example, is listed under 90 LLCs, making it difficult to track. Desmond Institutional investors are estimated to own 2.3% of the single-family rental market, or 340,000 single-family homes, by 2021.
But even if that’s small, he said, these investors “have a very large footprint” in some metropolitan areas, especially cities like Atlanta, Georgia, Phoenix, Arizona, Tampa and Miami, Florida, and Charlotte, North Carolina.
Bruner said in Hamilton County, that means about 50% of the homes on the street are owned by institutional investors.
“If the geographic impact is so concentrated, it’s a game changer in what it means to live in that neighborhood,” she said. These institutional investors are not building houses, she said.
“They’re turning homeowners into rentals and raising rents,” Brunner said.
“There’s no question we need more housing stock,” said Sen. Raphael Warnock, Democrat of Georgia.
Statewide, 45% of Georgians spend more than 30% of their income on rent, and 1 in 5 spend more than half of their income on rent. “Georgians are being squeezed for rent across the state,” he said.
Warnock asked Yentel how long it would take for the housing supply to finally arrive. “It will take years, if not more than a decade,” she said.
Diane Yentel, president and CEO of the National Low Income Housing Coalition, Low wages and rising housing costs have played a major role in housing instability, he said. NLIHC is a non-profit organization that supports affordable housing in the US.
“Rising inflation, rising rents and falling real wages are particularly challenging for low-income renters,” she said.
He said the average American minimum wage worker would have to work 96 hours a week to afford rent on a two-bedroom home, or 79 hours a week to afford a one-bedroom home at fair market value.
The NLIHC estimates that the housing wage — which is the hourly wage a full-time worker would be paid to buy an apartment without spending more than 30% of their income — is $25.82 an hour needed for a modest two-bedroom apartment. The federal minimum wage is $7.25. Seattle, Washington is the city with the highest minimum wage in the country.
According to Yentel, more than 24 million people work in the five lowest-paid occupations – retail, food and beverage services, personal care services, home health support, building cleaning services and food preparation.
Senator Bob Mendez, Democrat of New Jersey, said there is a situation in his state where a middle-income renter cannot afford a one-bedroom apartment. Yentel asked how transportation would work for low-income renters who may rely on public services.
“When we work on transit, we have to be careful not to cause displacement or eviction,” she said, adding that there is a need to preserve existing affordable housing.
Desmond said that even as wages rise, the relief from the burden of rental costs is only temporary. He said that since 1985, rents have exceeded incomes by 325 percent.
“Landlords responded quickly to the wage squeeze by raising rents, nullifying the effect of the policy,” he said, citing a study by the Federal Reserve Bank of Philadelphia.
“The implication is that investing in affordable housing is not only important to ease the household rent burden and promote community stability,” he said. “It is also important because the success of all economic activity depends on it.”
White House meeting
Separately, the White House held a conference Tuesday where Desmond, Intel and other housing and eviction experts discussed sustainable eviction reforms.
The White House said the conference will use remaining emergency recovery funds to “focus on a comprehensive effort to build sustainable recovery” as funding for emergency rental assistance begins to decline.