Although President Joe Biden hardly touched on housing during his State of the Union address Tuesday night, experts told Atlanta Civic Circle that doesn’t indicate a lack of federal-level enthusiasm for confronting the nationwide housing crisis.
But it’s still unclear how the White House intends to temper Wall Street’s chokehold on metropolitan housing markets.
As hedge funds and private equity buy more and more homes in Atlanta—accounting for roughly a third of purchases in recent years—Mayor Andre Dickens is seeking intervention from the Biden administration.
“I’ve made it known to the administration that somewhere around 30% of home purchases in Atlanta were done by outside investors that had no desire to actually be a resident or live in Atlanta, so people that have good intentions of living in Atlanta are competing with hedge funds,” he said during a Feb. 1 press conference. “They are competing with private equity and big banks.”
The White House last month published a blueprint for a federal tenants bill of rights—a guideline for renter protections that calls for measures to prevent the exploitation and eviction of the nation’s lower-income residents.
But local housing experts say the Biden administration’s proposed tenant protections must go further to curb the predatory practices of Wall Street investors who drive up home prices with cash bids, neglect properties bought as investments and sit on them until they appreciate, or convert homes to luxury rentals, depriving lower-income communities of color of much-needed affordable housing.
“These are the drivers of corporate investments in housing, and they don’t care how high rent is,” Georgia State University sociology professor Deirdre Oakley told Atlanta Civic Circle.
These investors make home-buying challenging for people of color because they make cash offers and easily outbid lower-income Atlantans, said Ashley Bell, the CEO of Ready Life, a startup focused on helping Black people buy homes, in an email. “The pathway to homeownership is not created equal, and affordable housing is often not available.”
“We need a shared horizon of goals with federal, state, and local coordination for funding, housing safety enforcement, accountability, and meaningful protections for families and children,” to get to a future where “children in Georgia would live in stable, safe, and healthy homes,” said Michael Waller, who heads the Georgia Appleseed Center for Law and Justice, in an email.
Waller advocated for “meaningful accountability provisions in federal, state, and local lending schemes for landlords,” to hold institutional “slumlords” accountable for allowing properties to fall into disrepair.
The Atlanta City Council has considered fining landlords up to $1,000 a day for code violations around blight, but Georgia law only allows municipalities to impose fines of $1,000 per code violation, which for many large investors is just a cost of doing business.
What’s more, many institutional investors are masked by limited liability companies, so curbing predatory pricing practices or neglect at the municipal level is nigh impossible without federal help, local leaders say.
Real estate is attractive to big-time investors because it’s “the perfect place to park cash and know that you’re going to get a return on investment,” said Tawkiyah Jordan, Habitat for Humanity International’s senior director of housing and community strategy.
At Habitat for Humanity, she said, hedge funds’ activity has made it more difficult to buy land to create affordable housing. “It makes everything more expensive, and in some cases, in some cities, there’s no new land for new building unless it’s publicly owned or from a generous donor.”
“The squeeze on affordable housing is becoming tighter and tighter,” she said.
Jordan said it’s time for Atlanta, like other large cities, to consider some restrictions on corporate investors to protect local housing markets. “Our housing market is, by design, pretty open. There are not a lot of regulations restricting who, where, and how you can purchase property,” she explained.
In Newark, New Jersey, for instance, city leaders are considering making it illegal to solicit home purchase offers without residents’ permission—such as through the mail, knocking on doors, or cold-calling. They’re also proposing legislation to make it harder for institutional investors to hide behind shell companies.
To keep rental properties affordable, New Orleans has passed several ordinances since 2017 to limit institutional investment in the single-family rental market—part of an effort to restrict how many vacation rentals an entity can manage.
Atlanta City Council enacted its own legislation in 2021 to crack down on short-term vacation rentals by requiring a city permit, but it has again delayed enforcing the ordinance until March 6.
There have been a few efforts in Congress. For instance, U.S. Sen. Jeff Merkely (D-Oregon) late last year introduced a bill to cap the number of single-family homes a corporate entity can buy at 100. The bill proposed fining firms that skirt the regulation and putting the proceeds into a down-payment assistance fund for individual homebuyers. However, the legislation was unsuccessful.
It is up to Congress to enact many of the measures proposed in the Biden administration’s tenant bill of rights, but continued partisan gridlock—at the federal level and in the Georgia legislature—means, for now, Atlanta is on its own to address Wall Street’s vice grip on the housing market.