FOR IMMEDIATE RELEASE

Nov. 19, 2024

CONTACT
Carter Dougherty, carter@ourfinancialsecurity.org
Alexis Harper, ah1802@georgetown.edu
Elizabeth Brennan, elizabeth@eabstrategies.com

Pension Funds Should Use Retirement Savings to Build Housing
Unions and policymakers can mine rich history of examples to help ease crisis

Pension funds that provide a secure retirement for workers around the country have the potential to help alleviate the nation’s housing crisis by investing directly in efforts to ease the terrible shortage of homes, according to a new report, Investing for the Common Good: How Workers’ Pensions Can Help Solve the Housing Crisis.

The money saved for worker retirement, the raw material with which many private equity and hedge funds do their often-destructive work, could instead be harnessed to provide adequate, affordable housing for working families and buttress support for essential taxpayer contributions to public-sector pension funds.

“I am a 78 year old senior citizen, widower, and grandmother. I know first hand about the housing crisis. I live on a fixed income and pay 70% of my income on rent. As a CalPERS beneficiary, I believe pension funds should not be investing in bad landlords like Blackstone. Blackstone is the largest landlord in the world and since 2021, they have increased rents here in San Diego by 38% – almost double the citywide average,” said Barbara Pinto, member, Alliance of Californians for Community Empowerment. “Pension funds should help rebuild our communities. We need investments in affordable housing, for tenants and for home ownership. Pension funds need to help ensure beneficiaries can afford a roof over their head so we don’t face the threat of becoming unhoused due to the greed of Wall Street Landlords.”

“Wealthy investment firms and their billionaire owners have treated workers’ pensions – their hard earned money – as their piggy banks for decades under the guise that it’s the only way for them to have enough money to retire,” said Sara Myklebust, Bargaining for the Common Good Research Director, Georgetown Kalmanowitz Initiative. “As this research shows,  there are several reasonable alternatives that actually help workers and their communities instead of poisoning the environment, ruining our healthcare and housing systems, and exploiting all of us.”

“Nothing in this paper is particularly radical. There are models in it from North Dakota as well as California,” noted Tom Sgouros, senior policy fellow, Americans for Financial Reform Education Fund. “These are common-sense solutions to policy problems that have worked in other places and other times and there’s no reason not to try them again.”

“The idea of a ‘win-win’ may be a cliche but it has the merit of being true in this case,” said Aditi Sen, managing director of research and campaigns at Americans for Financial Reform Education Fund. “Worker savings can and have driven solutions to urgent problems that workers – indeed all people – have, notably the need for affordable housing. Now more than ever, we need all possible solutions on the table, and we need to move away from the predatory private equity model.”

None of the ideas presented here are extreme or even new. They all have working models to copy, either in the US or in other countries. It is clear that workers, whose trillions in capital fund the nation’s pension systems, are not well served by much of today’s investment menu. But there are practical and plausible alternatives. Pension system managers and trustees can and should take action to use—and embrace—-them.

This report explores ways that pension funds can invest in affordable housing and direct worker savings away from the particularly extractive parts of the financial sector, notably private equity. Speculative firms like private equity and hedge funds often tout their ability to deliver returns that enable pension funds to pay beneficiaries but this promise is often unrealized, and there are many possible, existing alternatives.

• Large cities have issued taxable municipal bonds for housing that have yields and security suitable for purchase by pension funds.
• Pension funds in the United States and elsewhere have made direct investments in affordable housing.
• The AFL-CIO Housing Investment Trust has invested pension funds in affordable housing for almost 50 years.
• Other large pension funds have in-house managers to make private investments in a constructive and sustainable way.
• The main Wisconsin public employee fund has an in-house private credit operation to make direct loans to corporations that meet state policy goals, like creating good jobs.

The report also proposes the establishment of a co-operative asset manager to serve a collection of pension funds in a sustainable manner. This entity would set the right example of standards, accountability, and be in full alignment with their needs for long-term stable risk-adjusted returns. Such an asset manager could also be a source of large-scale, collective investment in affordable housing.

This report was authored by researchers from Americans for Financial Reform Education Fund; the Center for Labor and a Just Economy at Harvard Law; the Harvard Kennedy School; KarmaKapital; Roosevelt Institute; and University of Massachusetts Amherst, and released by Americans for Financial Reform Education Fund and the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University.

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