How Wall Street Is Killing the American Dream

Single-family home ownership is under assault by ultra-wealthy investment firms

"The American dream is about ensuring that all children, no matter how poor their parents may be, have an opportunity to be mobile by climbing the economic ladder, and moving into a higher income group," sociologist and Stanford professor David Grusky said. (mdmilliman/iStock)

Commentary

The biggest single aspect of the American Dream is owning a home. Not only is a single-family residence (SFR) the single biggest investment most Americans will make in their lifetimes, but home ownership also is a way for people to move within the American economy. Lower-priced starter homes help people get on the real estate ladder and move up into larger homes, if they desire, as their incomes, wealth, and savings increase.

In short, homeownership has been the key to people entering the middle class.

But that’s proving more difficult these days.

There are the usual suspects for skyrocketing home prices, such as inflation and rising interest rates. Of course, there are often buyers that are competing for the same house. But for 1 in 4 buyers of SFRs in 2022, none of those factors matter.

Wall Street Wants Your Home

That’s because 1 in 4 buyers of SFRs are Wall Street investment firms such as BlackRock. Unlike you and me, Wall Street investment firms have access to massive amounts of cash, pay lower prices for the houses because they buy large numbers of SFRs at one time, and benefit from much lower interest rates than the typical American looking to provide a family home.

They also have the power to drive up home prices.

That wasn’t always the case. It wasn’t until about 2010 or so, when housing prices were crashing, that financial institutions started buying houses in mass quantities at bulk pricing. Blackstone (and its subsidiary, Invitation Homes) isn’t the only institutional buyer and owner of thousands of SFRs in America, but it’s the largest. Last year, in total, about 25 percent of SFRs were bought by Wall Street investment firms and other institutional buyers.

From the early 2010s onward, other institutional investors, such as Tricon Residential, Progress Residential, and American Homes 4 Rent, have acquired thousands of houses for each of their investment portfolios. Some of them are specifically intended as rental-only communities. This takes large numbers of residences out of the market, creating more scarcity and leading to higher prices.

That’s potentially tens of thousands of homes under corporate ownership, with much of them in southern states that are seeing heavy inflows of new buyers from northern states and California.

A Disturbing Trend

A simple question needs to be asked: “Is the emerging trend of corporate ownership of SFRs good for America?”

A few key statistics can help provide context for that question.

For instance, as of 2022, 65.8 percent of Americans are homeowners. That’s a high percentage on a historical basis, and corporate and institutional apologists will argue that Wall Street ownership of houses is small compared to that.

But it’s more than just the percentage of institutional ownership that matters. It’s where corporate ownership is taking place and its pace of growth.

That’s certainly the case in the Sun Belt, where prices and rents for detached homes are the fastest rising in the United States. Homebuyers are competing, however, with Wall Street buyers, according to the National Association of Realtors.

Rise of the Corporate Landlord

Taking ownership of tranches of SFRs at a time gives Wall Street behemoths such as Blackstone monopolistic power over rents and prices. The result is rising rents, which has already become a major problem for renters in Blackstone-owned apartments in California and elsewhere, where rents have doubled in less than two years.

Why wouldn’t they do the same with SFRs?

Furthermore, according to analysts, even though today corporate ownership of SFRs in America is roughly 5 percent, that number is steadily rising. If the trend continues, as a study by MetLife Investment Management indicates, institutional owners will hold a large share, upward of 40 percent of rental homes by 2030.

The reality is that in some market sectors, they already do.

For example, some institutions are buying homes directly from the builder in volume. That means individual buyers don’t get the opportunity to buy. Worse, corporate owners, by owning entire subdivisions of homes, can set the rental price. Nationally, more than 30 percent of SFR inventory is already renter-occupied.

What’s more, the trend of institutional home buying is likely to accelerate this year and beyond.

No Legal Protection for Home Individual Buyers—Yet

What should be done about this disturbing trend to strip homeownership away from the average American? It’s hardly fair. Wall Street groups have profited from higher-than-average rent increases in their target markets while leveraging government-backed financing and tax credits.

Legislation has been written in states such as Texas, California, and others to address this growing problem, but so far, none of them have become law.

This isn’t a screed against capitalism anymore than protecting children from working in the mines or abolishing railroad monopolies were. There’s an implicit, if not explicit, social contract that obligates us—and our representatives—to protect the very fabric of our society, the American way of life, from the excesses of powerful and unaccountable corporations, of which Blackstone and other corporate landlords fit that profile.

The reality is that every healthy idea or relationship can be twisted or expanded until it’s no longer healthy for a large number of individuals or society. Shutting out the average Joe and Jill from homeownership is plainly unhealthy for society and un-American.

It’s time to put a stop to this dismal trend of turning average Americans into renter serfs to Wall Street financial behemoths. It’s time to make homeownership in America great again.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.