Warren Calls Out Private Equity-Backed Firms for Increasing Rents, Driving Up Housing Costs, and Raking in Profits Amid Housing Shortage
Warren Questions Whether Increased Private Equity Investment in the Housing Market is Contributing To Squeeze on American Families; Raises Concerns that Firms are Shutting Families Out of Homeownership and Subjecting Tenants to Rent Hikes, Excessive Fees, and Needless Evictions.
Washington, D.C. — United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs Committee, sent letters to the CEOs of three private equity-backed firms—Progress Residential, American Homes 4 Rent, and Invitation Homes —calling out their growing activity in the housing market that has resulted in rent hikes and unaffordable homes for first-time buyers. In the letter, Senator Warren asks the CEOs to provide detailed information about their business practices to determine whether they have been taking advantage of the housing shortage to pad their pockets while raising housing costs, hiking up fees, and evicting Americans during the pandemic. These letters come as consumers are facing high inflation, with rapidly rising housing costs serving as one of the largest contributors to rising prices across the economy.
“Private equity firms and rich investors have been taking advantage of the housing shortage by purchasing large numbers of houses and raising rents for families, all to pad their bottom line. With record investor activity in the housing market, these firms need to answer for their business practices that shut Americans out of homeownership and strain their pocketbooks with rapidly rising rental costs. We can't solve the housing affordability crisis, and lower housing costs for consumers, unless we crack down on predatory practices by Wall Street investors. ” said Senator Warren.
Following the 2008 financial crisis, private equity firms took advantage of distressed mortgage sales to buy up swaths of homes to convert to rentals. While acquisitions slowed in the following years, pandemic-related financial pressures have created opportunities for private equity firms to increase their purchasing activity again in 2021. In the third quarter of 2021, investors spent over $63 billion to purchase more than 90,000 homes, an increase of more than 80% compared to the same point the year prior. This rise in investor activity has coincided with rapidly rising home values, which has pushed many first-time homebuyers to rent. Reflecting increased demand for rental housing, single-family rents in October increased 10.9% from the previous year, and rents have increased more than 20% in cities where investors have been most active. Reporting suggests that tenants in properties managed by private equity firms have been subjected to excessive fees and evictions over the course of the pandemic.
Senator Warren has been calling out corporations and private equity firms for using their market power and predatory practices to raise prices for consumers.
- Yesterday, while questioning Chair Powell on how corporate profiteering has played a role in driving up inflation, Chair Powell confirmed to Senator Warren that corporations “are raising prices because they can.”
- In December 2021, Senator Warren sent a letter to the CEOs of Kroger, Publix, and Albertsons, calling on them to justify rewarding executives and shareholders while raising food costs for American families.
- 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 (HUD) 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 CDC 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.
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