February 10, 2022

At Hearing, Senator Warren Calls Out Private Equity and Other Wall Street Investors for Locking Families Out of Housing Opportunities and Exacerbating Inflation by Jacking Up Prices

Senator Warren also releases responses from three corporate landlords that have been increasing rents, driving up housing costs, and raking in profits amid housing shortage

Video of Hearing Exchange

American Homes 4 Rent Response | Progress Residential Response | Invitation Homes Response

Washington, D.C. – During a hearing of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee, United States Senator Elizabeth Warren (D-Mass.) called out private equity firms and other big investors for exacerbating inflation and locking families out of affordable housing opportunities. Senator Warren highlighted the need to release the housing market from Wall Street’s grip and pass provisions of the Build Back Better Act, which would help build more housing and expand opportunities for every family in America to pursue the dream of owning a home. 

Last month, Senator Warren asked three of the largest investor owners of single-family homes — Progress Residential, Invitation Homes, and American Homes 4 Rent — about their increased activity in the housing market over the past year, including their acquisitions, rent and fee hikes, and evictions. In their responses, the firms told Senator Warren that institutional investors play a relatively small role in the housing market and that by buying up homes to convert to rentals, they were increasing rental supply and making rental housing more accessible for those who preferred to rent. 

At the hearing, Senator Warren rebutted these claims and showed that big Wall Street firms are rapidly growing their footprint in the housing market. As a result, families are being denied opportunities to purchase homes and face increasing costs to rent. 

In response to Senator Warren, R. Michael Waller, the Executive Director at the Georgia Appleseed Center for Law and Justice, said that investors’ footprint is “growing quickly.” Waller stated that in just the third quarter of 2021, they were responsible for 40% for single-family home purchases in the Atlanta metropolitan area. In Atlanta’s five county region, investors were responsible for 76% of the eviction filings at the end of last year. This contrasts with statements made by the institutional investors who claimed to Senator Warren that they play a “small role” in the housing market. 

Sally Martin, the City of Cleveland’s Housing Director, told Senator Warren that these same big investors are not making it any easier for families to access affordable rental housing. In fact, Martin said that they’re witnessing “more scarcity” and “more of a concentration of poverty as tenants are forced to find substandard housing in areas they didn’t want to live in because the opportunities where they'd like to live are so scarce.” 

Senator Warren has been calling out private equity firms and other Wall Street investors for using their market power and predatory practices to raise prices for consumers.

  • At a Senate Banking, Housing, and Urban Affairs Committee nomination hearing and during an exchange with Senator Warren, a Department of Housing and Urban Development nominee committed to consider changes that facilitate sales of distressed homes to homeowners, not private equity firms.
  • In July 2021, Senator Warren called on large corporate landlords to avoid needless evictions as the Centers for Disease Control and Prevention eviction moratorium neared expiration. 
  • In April 2021, Senator Warren and Representative Emanuel Cleaver, II (D-Mo.) reintroduced the American Housing and Economic Mobility Act to bring down the costs for renters and buyers, level the playing field so working families can find a decent place to live at a decent price, reduce exclusionary zoning laws, and take a step towards addressing the effects of decades of housing discrimination on communities of color.
  • In May 2019, Senator Warren and Representative Dave Loebsack (D-Iowa) wrote to the private equity firms behind some of the country's largest manufactured housing communities to request information about their use of predatory practices to boost profits in the communities they own.

Transcript: How Institutional Landlords are Changing the Housing Market
U.S. Senate Banking, Housing, and Urban Affairs Committee
Thursday, February 10, 2022

Senator Elizabeth Warren: Thank you, Mr. Chairman.

So last year, while families were struggling to make ends meet during a pandemic, vulture investors saw a big opportunity. Private equity firms and other Wall Street investors were busy scooping up homes in communities across the country, even in the middle of a historic housing shortage.

So I recently wrote a letter to a few of the largest investors to get answers about their activities in the housing market. And they all told me not to worry. They gave similar defenses to what was going on. Part one: They told me that institutional investors play a relatively small role in the housing market. And part two: They said that by buying up homes to convert rentals, they were increasing the rental supply and making rental housing more accessible for those who prefer to rent.

So I want to see if we can just explore those two defenses from the industry. 

Mr. Waller, I'd like to start with you. Institutional investors are telling us that they’re just a small player in the housing market. You work closely with families across the state of Georgia. Is that what you’re seeing on the ground? 

Michael Waller: The role of institutional investors is growing, and growing quickly. So if you look at some of the research that's available. Just, I guess, in the last third quarter of last year, I think they were responsible for about 40 percent of single family home purchases in the Atlanta area. 

Senator Warren: Forty percent?

Waller: And in the five county region, they were also responsible for, I think, 76% of the eviction filings in the-- in the end of last year.  

Senator Warren: Wow. So-- Thank you. You know, we’ve reached the point where nation-wide more than one-in-every four single-family homes in America is purchased by investors. And that is a huge increase. And the vast majority of investor purchases, more than 75%, were made in cash which is really hard for a family to compete with. 

So if investors are buying up more and more homes, and new construction isn’t keeping up, who gets the short end of the stick? 

And I think the answer is pretty clear: families that dream of buying their first homes. When investor home purchases skyrocketed last year, the share of purchases by first-time homebuyers, most of whom can’t compete with those all-cash offers, fell to its lowest level since the crash of 2008.

So Ms. Martin, let me ask you. You spent 14 years leading South Euclid’s housing department. Families are being priced out of homeownership across the country, forcing many of them to rent even if they would have preferred to buy. Are big investors at least making it easier for families to access affordable rental housing the way that they claim they are? 

Sally Martin: Absolutely not. In my experience, that's not what's happening at all. I think what we’re seeing on the ground is more scarcity. We're seeing more of a concentration of poverty as tenants are forced to find substandard housing in areas that they didn't want to live in because the opportunities in areas that they'd like to live in are so scarce. These units are getting locked up and locked out of most of the people, you know, who are seeking housing just don't have a shot at it. 

Senator Warren: Well, thank you, Ms. Martin. And thank you, Mr. Waller. I appreciate your information on this. You know, institutional investors like to say that they are helping out renters and potential homebuyers across the country. But that’s just the story they want to tell while they just keep raking in the profits. With mountains of cash on hand and access to exclusive listings, these Wall Street firms are buying up already scarce homes from right under American families, and then, they jack up rents and exacerbate the inflation that’s straining family pocketbooks.

So think about what this means. Big investors are blocking the main path that families have traditionally had to build wealth and financial security. That is buy a home. They’re also standing in the way of opportunities to narrow the racial homeownership gap and the racial wealth gap that are a blight on our country.

So there’s a lot we need to do to fix the housing crisis. But we should-- And we should start with building more housing, just as Build Back Better would do. 

But we also need to loosen the grip that Wall Street investors have on our housing market. This would level the playing field so that every family in America has an opportunity to pursue the dream of owning a home.

Thank you, Mr. Chairman.