Elizabeth Warren, a Democrat, represents Massachusetts in the U.S. Senate. Carroll Fife is the director of the Oakland office of the Alliance of Californians for Community Empowerment.
Families see a looming catastrophe. But private equity firms just see dollar signs.
The Wall Street Journal recently reported that investors are “preparing for what they believe could be a once-in-a generation opportunity to buy distressed real-estate assets at bargain prices.” This profiteering is far from “once-in-a-generation” though: It’s straight out of private equity’s playbook during the 2008 financial crisis. We all know what happened then: Homeowners targeted by predatory mortgages lost their homes to foreclosure, and private equity swept in to buy those homes at depressed prices. Communities of color were hit fastest and hardest. Just a handful of years after Black homeownership hit its highest point, the devastating waves of foreclosures wiped out nearly all of the growth in Black homeownership since the Fair Housing Act repealed Jim Crow redlining in 1968.
Following the 2008 crash, corporations that grabbed up properties on the cheap converted those homes into rentals, and turned into the worst kind of slumlords — jacking up rents, neglecting maintenance requests and health and safety concerns, and eagerly assessing fines, fees and eviction notices. Other corporate-owned homes were left vacant in a hoarding of housing stock.
We cannot stand by while this history repeats itself. If we fail to prevent another private equity real estate grab, we risk allowing another massive upheaval in the housing market that could wreak more havoc on low-income Americans, especially Black and brown families still recovering from losing their homes a decade ago. Against a decades-long backdrop of racist federal policies that have impeded Black homeownership, lawmakers’ refusal to proactively address this problem would be an indefensible oversight that would again give Wall Street carte blanche to use a national crisis to enact a massive, generational transfer of wealth from vulnerable Americans to corporations.
What should lawmakers do? First, pass strong federal legislation to guard against the coming wave of evictions and foreclosures, including emergency rental assistance. Sen. Warren and Reps. Jesús “Chuy” García (D-Ill.) and Barbara Lee (D-Calif.) recently introduced the Protecting Renters from Evictions and Fees Act to establish a federal eviction moratorium for all renters through March 2021. The bill also makes sure renters don’t get hit with fees or penalties if they need a few extra months to pay rent. Private equity companies are among the landlords evicting tenants during this crisis in violation of the limited moratorium in the Cares Act.
Second, to prevent predatory companies from further destabilizing neighborhoods and profiting off the displacement of families, Congress needs to pass legislation creating new restrictions on the sale of delinquent mortgages. Sen. Warren’s American Housing and Economic Mobility Act would stop the pipeline of these mortgages being sold to private equity firms, and make sure that communities and homeowners are put ahead of private investors. States should also implement protections: In California, state Sen. Nancy Skinner’s S.B. 1079 would bar the bulk sale of auctioned foreclosed properties, give occupants and nonprofits the right of first refusal to buy foreclosed homes, and raise penalties for vacant properties.
The cost of inaction couldn’t be clearer. In Oakland, for example, the average home sells for more than $760,000 and the median monthly rent is $3,000, both out of reach for too many families. Advocates estimate that as many as 20,000 residents of Oakland could be evicted during this crisis. Yet even as families sleep in cars and on the streets, hundreds of properties in West Oakland that are owned by a private investment firm sit vacant. The home that three homeless women and their children occupied as part of an action by the collective Moms 4 Housing, for example, had been unoccupied because a private equity company swooped in, bought up neighborhood homes, then left them abandoned.
Wall Street has already shown us what it will do if left unchecked: Financial speculators will have free rein to continue exploiting the basic human need for safe and secure shelter — a need that is even greater during a pandemic. Such a move against struggling families would further entrench already terrible wealth disparities, making the promise of affordable housing an ever-dwindling possibility for hard-working families. The good news is that we know how to keep this from happening. Now we just have to have the courage to do it.
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