Private Equity Is America's New Landlord

"The United States is short 4 million housing units, with a particular dearth of starter homes, moderately priced apartments in low-rises, and family-friendly dwellings. Interest rates are high, which has stifled construction and pushed up the cost of mortgages. As a result, more Americans are renting, and roughly half of those households are spending more than a third of their income on shelter."

"This crisis has many causes: restrictive zoning codes, arcane permitting processes, excessive community input, declining construction productivity, expensive labor, and expensive lumber. And, some say, the aggressive entry of private equity into the housing market. Institutional investors have bought up hundreds of thousands of American homes since the start of the coronavirus pandemic, outbidding families and pushing up rents-a trend lamented by everyone from Alexandria Ocasio-Cortez to J. D. Vance."

"Casting private equity as a central villain in the country's real-estate tragedy makes intuitive sense. Who's going to win in a bidding war for a three-bedroom in a suburb of Cincinnati: a single-income family with a scrabbled-together 10 percent down payment or a Wall Street LLC offering cash? Still, housing economists and policy analysts have argued that institutional investors have played at most a bit part."

The United States has a shortage of about four million housing units, especially starter homes, moderately priced low-rise apartments, and family dwellings. High interest rates have stifled construction and increased mortgage costs, increasing renting and causing roughly half of renter households to spend over a third of income on shelter. Causes include restrictive zoning, arcane permitting, excessive community input, declining construction productivity, expensive labor and lumber, and the growing presence of institutional investors. Private-equity firms and other institutional investors purchased hundreds of thousands of homes since the pandemic, sometimes outbidding families and pushing rents higher. Economists argue institutional investors remain a modest factor relative to long-standing supply constraints.

Read at The Atlantic