Certainly prior to the financial crisis presidents, George W. Bush for one, have attempted to make homeownership a reality for Americans. Bush used tax credits and down payment assistance programs as vehicles for more people to enter the real estate market as homeowners. And Bush was successful in doing so. In 2004 69% of the American public owned homes, up from 64% during the mid 1990’s. Then, in 2006, 2007, 2008, the housing bubble popped and the financial crisis rampaged.
President Obama focused on saving the big banks when he came into office in 2008 rather than on those who seemingly over night became former homeowners. Homeownership rates in the country fell to mid 1960’s levels while Wall Street REITs, hedge funds and/or private equity firms bought up all those houses.
Noah Smith, in an opinion piece for the wall Street Journal, offered a bit of background on Wall Street’s involvement with the real estate market. Despite getting nailed when the housing bubble burst, Wall Street investors have determined they can make more money on the houses they’ve bought “on the cheap” during the housing/financial crisis by renting them out instead of simply buying and selling those houses for profit as they had done in the past.
Smith, through his own and other people’s research, has determined that the buy-to-rent business model is” now a permanent and growing feature” of the housing market. Smith cites research by Amherst Capital Management LLC, also a player in the buy-to-rent business model, that indicates cities and neighborhoods (Sun Belt cities such as Atlanta and Charlotte that do not have strong renter protections) where Wall Street owns large parts of the market endure increasingly higher rents and compromised housing quality.
Smith also believes that Wall Street ownership of real estate impacts the American Dream of homeownership. He argues that young potential buyers simply can’t compete with Wall Street corporations regarding financing options. He argues that young potential buyers have no leverage against corporate landlords who drive up home values by driving up rents. The results? Smith argues that young potential buyers miss out on home price appreciation and wealth building opportunities provided by homeownership.
Compare, as has Smith in this article, wealth distribution in this country in 1968 to wealth distribution today. In 1968, according to the Federal Reserve Bank of Minnesota, the bottom 50% of Americans had a wealth point score of 105; 4 the middle 40% had a wealth point share off 101.0; and the top 15% of the population had a wealth point score of 104.0.
Today, that wealth distribution looks like this: the bottom 50% of Americans has a wealth point share of 100 (a level seen in 1971); the middle 40% of the population has a wealth point share of 210 points; and the top 15% has a wealth point share of nearly 300 points.
Smith asks that President Bush’s “ownership society” be given a second chance now. He asks, “the dream of homeownership not be shortchanged by big corporate players.” And he asks that young potential buyers be given “a second chance by taxing corporate landlords” and/or “helping those with modest means to buy homes.”
