Wall Street and private equity are “gobbling up homes,” driving inflation and exacerbating the housing crisis
In a House Financial Services Committee hearing from the beginning of March examining inflation, both Representatives and witnesses continuously returned to one notable driver of this year’s record-breaking1 levels of inflation: housing. As Chairwoman Waters said in her opening statement, “every American knows whether they rent or own their home, that housing is also a key driver of inflation. For too long, we have not addressed the shortfall in our housing supply, and this lack of supply is driving up costs.” And importantly, the witnesses made clear that the lack of supply and soaring costs are not arbitrary – as Demond Drummer from Policy Link stated in his testimony, it is “corporate pricing power that drives inflation.” In questioning, Rep. Alma Adams and Rep. Alexandria Ocasio-Cortez honed in on how Wall Street, especially private equity-backed companies, are “gobbling up homes” and causing prices to soar, creating further barriers to homeownership, shrinking the already scarce affordable housing supply, and driving inflation.
Rep. Adams reported that in her district in North Carolina, 11,000 family homes are now owned by private equity firms or Wall-Street backed entities. She asked economist Dr. Mark Zandi to what extent the housing supply crunch has been exacerbated by Wall Street and private equity. Dr. Zandi replied that over ¼ of home sales in the last year were to investors, an increase of 10% from the year before. He also said in response to questioning from Rep. Ocasio-Cortez that in places like Atlanta, Phoenix, and Boise, investors represent as much as 40% of home sales in the market. These companies, Dr. Zandi explained, are changing market dynamics, making it harder for low income Americans and first time home buyers to purchase homes. Rep. Ocasio-Cortez reported that companies like Blackstone, Zillow and Bedrock are buying up to 15% of available homes, and that this concentration of corporate power is being disproportionately felt in low-income, working-class, Black and Latinx neighborhoods. She explained that the Wall Street and private equity-backed companies buy up properties and either flip them to resell at inflated prices or hoard the housing stock to rent at skyrocketing prices. Renters in Rep. Ocasio-Cortez’s district in Queens faced rent increases as large as 30-50%.