Congressional Hearing Examines Housing Market’s Impact on Rising Rents
This week, the House Financial Services Committee convened for a Subcommittee on Oversight and Investigations hearing titled Where Have All the Houses Gone? Private Equity, Single Family Rentals, and America’s Neighborhoods. In her opening statement, Chairwoman of the Committee Maxine Waters (D-CA), said would-be homebuyers are increasingly pitted against Wall Street-backed investors and cannot compete with these institutional investors’ offers, which are often in cash and well above asking price. “We have institutional investors who simply go into these communities, and they buy up large numbers of homes. That if the financial institutions absolutely gave potential homebuyers, the loans that were needed to purchase some of these homes, they would be homeowners also,” she said. The Chairwoman also asked witnesses to discuss how corporate landlords and private equity firms impose aggressive rent increases. “Renters who live in single-family rental units owned by private equity investors pay higher rents compared to other renters and are more likely to see steeper rent hikes each year. Nationwide, rents have increased at the fastest rate in decades, with year-over-year U.S. single-family rents rising by 14 percent in April 2022, more than double compared to a year earlier,” said Chairwoman Waters.
The hearing also provided members an opportunity to highlight and discuss a recent report that showed rents in May were up 5.2 percent over last year and how tenants of corporate landlords frequently faced even higher rent and fee increases. Several committee members put the blame of rising rents on corporate landlords and blamed private equity firms for the predatory purchasing of single-family homes in bulk and increasing rent and fee prices, further exacerbating a housing crisis that predated the pandemic. The committee questioned how private companies expanded their portfolio of single-family homes by more than 75,000 properties between 2018 and 2021, and why companies tended to purchase homes in neighborhoods with a significantly larger Black population than the national average. By outbidding individual buyers and paying for the homes in cash, witnesses testified how private equity firms were responsible for unexpectedly raising rent prices. Several members questioned the overall impact of corporate housing purchases, stating that corporate landlords account for a small fraction of total home ownership. Members also heard testimony describing how homes owned by the firms are over-concentrated in specific metropolitan areas, causing rents to soar in some areas. However, other members disagreed and stated that the hearing was just an attempt to distract from the effects of inflation around the country, which they blamed on reckless spending from Congress. Several witnesses advocated for increased federal investments in housing to minimize the gap between the housing demand and units available and for federal rent controls.
Members also discussed several pieces of legislation that, if enacted to law, would address some of the rising costs in housing:
- H.R. 4495, the Down-payment Toward Equity Act would authorize $100 billion for a new HUD grant program to provide financial assistance to first-time, first-generation homebuyers to put towards a down-payment and other upfront costs to purchase a home. This funding would help address multigenerational inequities in access to homeownership and help close the racial wealth and homeownership gaps in the United States.
- Title IV of H.R. 5376, the Build Back Better Act would provide over $150 billion in fair and affordable housing investments to build, rehabilitate, and retrofit over one million homes, reduce the cost of housing, address homelessness, and increase access to homeownership.
- Preventing Unfair Foreclosures Act of 2022 would provide additional protections for homeowners with the goal of ensuring they can remain in their homes whenever possible, including by codifying CFPB’s Regulation X rule requiring 120 days of delinquency before the start of a foreclosure, improving written notices during the mortgage servicing process, improving data collection and reporting, establishing the Office of the Homeowner Advocate at the CFPB, improving language access, and otherwise improving the mortgage servicing process for homeowners.
The hearing concluded with a prediction that home prices will continue to rise in 2022, but at a slower pace.
To view the full committee hearing, click here.