WASHINGTON — Witnesses at a hearing on Tuesday told a U.S. Senate committee how investors and stagnant wages are driving an eviction and housing crisis across the United States.
The chairman of the Senate Banking, Housing and Urban Affairs Committee, Ohio Sen. Sherrod Brown, said buying homes is expensive for families and rising rents mean renters are “just illness or job loss or car repair away from eviction.
“Increasingly, investors are buying single-family homes — homes that first-time buyers typically buy — and renting them out at exorbitant rates,” Brown, a Democrat, said in his opening statement. “Twenty-eight percent of homes sold earlier this year went to investors.”
One of the witnesses was Matthew Desmond, a professor of sociology at Princeton University and director of the Eviction Lab, the nation’s only research team dedicated to understanding the causes and consequences of America’s housing instability.
Desmond said areas of the country have seen huge increases in rents. Since 2000, the median rent has increased 112% in the Midwest, 135% in the South, 189% in the Northeast and 192% in the West, he said.
“Last year, rents rose faster than ever before,” he said, adding that across the country the median rent had risen 17% in one year.
But some cities have seen double, he said, like 40% in Portland, Oregon; 35% in Newark, New Jersey; 30% in Orlando, Florida; and 29% in Cincinnati, Ohio.
“When the price of housing increases by 15, 25, 30%, what can families do? Desmond said. “They cannot move into affordable housing because they are often already living in the cheapest apartments available. All they can do is cut back on other necessities, including health care, educational enrichment, and food.
The committee’s top Republican, Sen. Pat Toomey of Pennsylvania, blamed the Biden administration for inflation and said that “government, and in particular this administration, have often been the problem, not the solution, when it comes to housing.
“Democratic wasteful spending, growth-killing regulation and overly accommodative monetary policy are exactly what has led to high inflation in 40 years and shrunk our economy,” he said in his opening statement.
Toomey asked one of the witnesses, Darion Dunn, who is the managing partner of Atlantica Properties in Atlanta, Georgia, if government actions that increase costs for landlords are passed on to tenants.
“Usually it does,” Dunn said. “These costs need to be passed on because they are relatively small margins.”
Senator Jon Tester, a Democrat from Montana, said residents in his state are also struggling to find affordable housing.
“Prices have become too high,” he said, adding that the median sale of a house the price has increased by about 40% in his condition over the past year.
“It drives more potential homeowners to look for houses to rent,” he said.
He asked one of the witnesses, Laura Brunner, the CEO and Chairman of the Port of Greater Cincinnati Development Authority, what can happen to communities where home ownership is out of reach.
“There is a profound impact on local families when home ownership opportunities are taken away from them,” she said.
Investors buying houses
Institutional investors are market participants who have access to capital and can be anything from private equity firms to financial institutions to real estate investment trusts.
Brunner told senators that institutional investors are changing the landscape of single-family housing in Hamilton County, Ohio.
She said access to rentals and affordable housing has become increasingly difficult due to institutional investors. Investigating some of Cincinnati’s worst landlords, his team discovered that more than 4,000 single-family homes in Hamilton County had been purchased by five institutional investors since 2013.
One of these institutional investors, VineBrook Homes, was for follow-up by the City of Cincinnati for building code violations and by tenants for poor living conditions and fraudulent security deductions.
Brown asked Brunner what Congress could do to help places like Cincinnati keep homes affordable for families and entice families to become homebuyers.
She said one way to make it easier for local jurisdictions to find which properties are owned by institutional investors, who typically file under the responsibility of limited liability companies, is to require those investors to register with localities.
For example, VineBrook, was listed under 90 LLC, which makes it difficult to track.
Desmond said that in 2021, institutional investors were estimated to make up about 2.3% of the single-family rental market, or 340,000 single-family homes.
But while it’s small, he said, these investors “have a much bigger footprint” in some metro areas, especially Sunbelt cities like Atlanta, Georgia; Phoenix, Arizona; Tampa and Miami, Florida; and Charlotte, North Carolina.
Brunner said in Hamilton County, that could mean 50% of homes on the street are owned by institutional investors.
“When the geographic impact is so concentrated, it’s a game-changer of what it means to live in that neighborhood,” she said.
These institutional investors are not building houses, she said.
“They’re turning landlord properties into rental properties and raising rents,” Brunner said.
Senator Raphael Warnock, a Georgia Democrat, said that “there is no doubt that we need more housing.”
He said that in his state, about 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 crushed by rents across the state,” he said.
Warnock asked Yentel how long it would take for housing supply to finally be catch up.
“It will take years, if not more than a decade,” she said.
Diane Yentel, President and CEO of the National Low Income Housing Coalition, also said stagnating low wages and rising housing costs played a major role in housing instability. The NLIHC is a non-profit organization that advocates for affordable housing in the United States
“Rising inflation, rising rents and falling real wages are especially hard on tenants with the lowest incomes,” she said.
Yentel said the average U.S. minimum-wage worker would need to log in 96 hours a week to pay the rent for a two-bedroom house, or work 79 hours a week to pay the rent for a one-bedroom house at the fair rate. of the market.
The NLIHC estimates that a housing wage — which is the hourly wage a full-time worker must earn to afford an apartment without spending more than 30% of their earnings — of $25.82 from the hour is needed for a modest two-bedroom house. The federal minimum wage is $7.25. The city with the highest minimum wage in the country is Sea Tac, Washington.
Yentel said more than 24 million people work in five of the lowest-paying occupations – retail, food and beverage services, personal care services, home health assistance, building cleaning services and preparation. food.
Sen. Bob Menendez, a Democrat from New Jersey, said that in his state, a middle-income renter is barely able to afford a one-bedroom home. He asked Yentel how transportation can also be an issue for low-income tenants, who might depend on utilities.
“We also have to be careful when working on public transit, not to cause displacement or gentrification,” she said, adding that existing affordable housing must be preserved.
Desmond said that even when wages increased, the relief from the burden of rental costs was only temporary. He said since 1985, rental prices exceeded income gains by 325%.
He quoted a study speak Federal Reserve Bank of Philadelphia which revealed that “landlords reacted quickly to wage increases by raising rents, which diluted the effect of the policy”.
“The implication is that investing in affordable housing is not only necessary to ease the rent burden on families and promote community stability,” he said. “It is also essential because the success of all other economic mobility efforts depends on it.”
White House Summit
Separately, the White House held a summit on Tuesday where Desmond, Yentel and other housing and eviction experts discussed lasting eviction reforms.
The White House said that as funds for emergency housing assistance begin to run dry, the summit will focus on “an all-out effort to build lasting reform,” including using recovery funds emergency remaining.