After the foreclosure crisis, global equity firms (the dark side) snapped up thousands of single-family homes to rent out. This massive shift in the market has not been good for aspiring homeowners, tenants, or neighborhoods.
Leasing Lifestyle: In 2011 single-family home prices hit a two-decade low, and mortgage rates were as low as they had ever been. Imagine if we had taken that opportunity to get as many families as possible into homeownership, enabling them to take advantage of unprecedented affordability and to start building wealth as the economy emerged from the Great Recession.
Just think: The U.S. Department of Housing and Urban Development (HUD) could have used the vast numbers of properties it owned as a result of the foreclosure crisis (also called “real estate owned” or REO properties) to create an at-scale affordable homeownership or lease-purchase program. Similarly, the Federal Housing Finance Agency (FHFA), as conservator of mortgage giants Fannie Mae and Freddie Mac, could have created a program to sell REO assets to low- and moderate-income owner-occupants only, or, if the homes were not in move-in condition, sell them to local, mission-focused developers who could rehabilitate them for local buyers.
But that’s not what happened. Instead, these assets were sold—often at fire-sale prices—to the wealthiest financiers in the country. Consequently, millions of foreclosed homes, including hundreds of thousands of those owned by HUD, or Fannie and Freddie—both backed by the taxpayers—became part of one of the biggest wealth transfers from the middle class to the rich in our nation’s history. One industry commentator described this period as “arguably the biggest land grab since the Manifest Destiny.”
Dark Side: How Did We Get Here?
During the crisis, America’s homeowners lost $7 trillion of home equity, and millions—perhaps as many as 10 million—lost their homes entirely. But homeowners didn’t get back all that equity when the market recovered. Instead, a significant portion of the gains went straight to the private-equity funds and other corporate investors who bought low and sold high or are still holding properties as single-family rentals.
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Unfortunately, this isn’t in a galaxy far, far away…