Corporate influence on housing market squeezes homebuyers

By Flavia Mangan Colgan
Contributor

Flavia Mangan Colgan is a former political commentator and news
correspondent who works as a writer and in the nonprofit sector. She
lives in Idyllwild and San Diego.

Corporate influence on the single-family home market is growing at a
disturbing rate and is a nefarious problem that deserves more scrutiny.
Institutional investors have advantages over individual purchasers, such
as the ability to make cash offers above the asking price and the use of
greater computing power to make offers moments after a home hits the
market. Prices for single-family homes are skyrocketing, and individual
home buyers are being outbid by cash-only offers from corporate
investors.

Nationwide, real estate investors bought 18 percent of all single-family
homes in the U.S. in the fourth quarter of 2021. What happens is these
investors then turn a profit by creating thousands of new rental
properties, and decreasing supply of single-family homes erodes
communities by creating transient neighborhoods occupied primarily by
renters. It is common sense that when the tie between tenant, landlord
and community becomes a transaction between a faceless entity and one of
its many clients, the sense of community decays.

Institutional investors are targeting lower-priced fixer-upper homes,
competing with many first-time home buyers. I almost get calls from such
entities to make offers to purchase our cabin here, I am sure I am not
alone in this. The result when they pick up homes is that more
prospective new homeowners get squeezed out of home ownership and back
into the rental market they were trying to escape. This has occurred
repeatedly in the last decade, yielding a massive transfer of wealth
from the middle class to the top 1 percent.

The fear is that corporate control of huge segments of rental markets in
our region will lead to the same problems that have plagued other such
properties, namely increased evictions, increased rents, and worsening
customer service.

California’s shortfall of several hundred thousand residential home
units has also contributed to rising home prices. We are left with a
market characterized by dwindling supply and increasing corporate
influence. How do we advocate for the average citizen looking to break
into an impenetrable market? The goal is to give the individual a
helping hand against corporate interests and also tackle the demand
side.

At the federal level, Rep. Adam Smith, D-Washington, has introduced the
End Hedge Fund Control of American Homes Act, which would mandate that
hedge funds sell off all single-family homes over a ten-year period, and
eventually prevent them from holding these properties completely. In
California, the Legislature passed Assembly Bill 2011 and Senate Bill 6
designed to address housing supply, bills which Senate President pro
Tempore Emeritus Toni Atkins, D-San Diego, said “will result in both the
affordable and market-rate housing that our state desperately need.”
Will Rollins, a candidate in our CA-41 congressional district has
pledged to “lower housing costs by going after corporate investors who
are buying up homes.”

The availability of single-family homes to individual buyers is a
fundamental equality issue and key to maintaining the American dream for
all citizens. We ignore the issue of growing inequality in the housing
market at great peril. If the ability of large swaths of society to own
a home is compromised, they are shut out of upward mobility. The great
tensions that we see in our society are exacerbated in times of such
extreme inequality. As the late U.S. Supreme Court Justice Louis
Brandeis once said: “We may have democracy, or we may have wealth
concentrated in the hands of the few, but we cannot have both.”