October 24, 2024
Apartment building, downtown Detroit. Photo: Jeffrey St. Clair.
The housing affordability crisis – and how to solve it – has become a major focus during election season, for good reason. Millions of American families struggle to afford and keep a roof over their heads, find themselves unsheltered, or have become frustrated in the hope of owning their own home.
The over-focus on expanding housing supply through for-profit development misses a key contributor to the housing crisis: the concentration of wealth and power. The challenges of the U.S. housing crisis go beyond supply or fixing local land use regulations. The billionaire class and billionaire-backed private equity investors have become a driving force in the U.S. housing crisis.
A new report, Billionaire Blowback on Housing: How concentrated wealth disrupts housing markets and worsens the housing affordability crisis, coauthored by the Institute for Policy Studies and Popular Democracy, examines the myriad ways that billionaire investors are harming local housing markets and diminishing the supply of affordable housing.
With roughly 800 billionaires in the U.S. with combined wealth of $6.2 trillion (and 2,781 billionaires globally with over $14.2 trillion), ultra-wealthy investors tend to diversify their holdings across multiple kinds of assets. A huge amount of this billionaire wealth is invested in property, land and housing. Billions and possibly trillions of dollars are sucked into predatory investment practices and luxury housing schemes — where global billionaire investors park vast quantities of wealth in U.S markets.
This is not your grandparent’s gentrification, but rather a hyper-gentrification fueled by concentrated wealth driving up land and housing costs, expanding short-term rentals, and treating housing like a commodity to speculate on or a place to park wealth. The billionaires are displacing the millionaires, and the millionaires are disrupting the housing market for everyone else.
Our report found that billionaire-backed private equity firms have wormed their way into different segments of the housing market to extract ever-increasing rents and value from multi-family rental, single-family homes, and mobile home park communities. For instance, Blackstone has become the largest corporate landlord in the world, with a vast and diversified real estate portfolio. It owns more than 300,000 residential units across the U.S., has $1 trillion in global assets, and nearly doubled its profits in 2021.
Global billionaires have purchased billions in U.S. real estate to diversify their asset holdings, driving the creation of luxury housing that functions as “safety deposit boxes in the sky.” Estimates of hidden wealth are as high as $36 trillion globally, with billions parked in U.S. land and housing markets.
Wealthy investors are acquiring property and holding units vacant, so that in many communities the number of vacant units greatly exceeds the number of unhoused people. Nationwide there are 16 million vacant homes: that is, 28 vacant homes for every unhoused person. These investors are also buying up a large segment of the short-term rental market, preventing local residents from living in these homes, in order to cash in on tourism. These are not small owners with one unit, but corporate owners with multiple properties.
The focus on expanding housing supply by giving incentives to for-profit development has failed to add to the stock of permanently affordable housing. For five decades, U.S. taxpayers have subsidized private for-profit investors and developers to build tens of thousands of temporarily affordable units of housing. Federal programs give for-profit investors wasteful tax breaks, but only require the units to remain affordable for 30 years or less, so many have been converted to market-rate housing.
Policy makers should expand the social housing sector of community-controlled or publicly owned housing that is outside the speculative market, such as quality public housing and other forms of nonprofit-owned housing like community land trusts or resident cooperatives. New investment in social housing should come from taxing billionaires, levying mansion taxes, and regulating harmful practices.
Instead of waiting for action from the federal government, local communities can protect residents in existing affordable housing and generate revenue for affordable housing.
Policymakers should require ownership transparency, so community members know who is buying up neighborhoods. They should institute limitations on corporate ownership of housing and pass ordinances giving tenants the right to “first option to buy” apartments and mobile home parks when they come up for sale; and public funding as well as support structures to make these buy-outs possible.
Levying taxes on luxury real estate transactions (known as “mansion taxes”), on speculation, on vacancy, and on the rich, can generate funds that should be dedicated to expanding the supply of nonprofit and social housing.
Chuck Collins directs the Program on Inequality and the Common Good at the Institute for Policy Studies, where he also co-edits Inequality.org.