Investors are monopolizing affordable housing: Here’s how we can stop them 

In cities across the country, institutional investors are purchasing the most affordable homes and leasing them at increasingly high rents. As investors buy up affordable homes, they crowd out would-be homeowners — individuals and families who now struggle to find affordable homes to purchase amid a housing supply crisis and rising interest rates. 

In many markets, institutional buyers target Black or minority areas, in part because these areas tend to have lower purchase prices and relatively high rents. The resulting transfer of ownership from minority communities to corporate landlords destabilizes communities and increases the nation’s racial wealth gap.

This is a nationwide problem, occurring in coastal cities and heartland states alike. In Newark, N.J. researchers discovered a dramatic escalation of corporate entities buying homes in the city’s predominantly Black neighborhoods. In Cincinnati, Ohio, the city’s public redevelopment authority bought nearly 200 homes from a distressed institutional investor and will convert the homes into affordable homeownership opportunities. An extensive review conducted by The Atlanta Journal-Constitution clearly demonstrates how investors are creating barriers to homeownership. That study found a direct correlation between investor activity, rising rents and a decrease in owner-occupant home purchases — particularly in Black and Latino neighborhoods. 

While much has been written about the problem, few solutions are proposed. As president of the National Community Stabilization Trust (NCST), I can tell you that there are readily available fixes to restore balance to our housing market and increase access to affordable homeownership. Now is the time to expand these efforts. 

First, we have to support nonprofit and mission-driven organizations by giving them an edge in acquiring vacant, distressed single-family homes and preparing them for sale to qualified individual buyers. When investors buy homes, they often pay cash and use auction websites that are difficult for family homebuyers to use. NCST works to give nonprofits a “first look” at homes and then tracks transactions to ensure that homes stay in the hands of owner-occupants. NCST is also working to bring individual buyers into this process, unlocking a previously unavailable inventory of homes for families looking to buy an affordable place to live. This process increases the supply of affordable homes for purchase and ensures that homes stay in the hands of owner-occupiers in the community.  

Second, we must improve federal policy. Recently, the Neighborhood Homes Investment Act (NHIA) was reintroduced in Congress. The legislation has bipartisan support and would create a tax credit to incentivize the rehabilitation of property where the costs of the renovation exceed the value of the renovated home. The NHIA addresses this “valuation gap” and would accelerate the rehabilitation of older housing stock around the country. It is also targeted to the most distressed census tracts, meaning the benefits would flow to neighborhoods facing the largest amount of blight and distress as opposed to gentrifying areas where there is already a market incentive to renovate housing. 

If passed, the NHIA would create 500,000 homes over the next 10 years, and the credits would be claimed solely for homes developed or rehabilitated in eligible low-income communities. This is especially important given that many of these neighborhoods are comprised of a majority Black population. The lack of capital for reinvestment in low- and moderate-income neighborhoods has exacerbated racial inequities, particularly the disparity between Black family wealth and the family wealth of every other ethnic and racial group in America. 

Homeownership remains a potent vehicle to deliver economic security for all Americans and to close the racial wealth gap by bringing Black and Latino families into what has been the most effective mechanism for creating wealth and middle-class stability. We must act now to bring about much-needed policy reform and expand the supply of affordable homes for purchase by empowering individual homebuyers and community-based nonprofits to become directly involved in this process.

Christopher Tyson is the president of the National Community Stabilization Trust (NCST), a nonprofit that works to increase homeownership by expanding the supply of affordable, single-family homes, and in turn, stabilize neighborhoods, grow community wealth and close the racial wealth gap.