To its fiercest critics, “populism” is a politics of mindless resentment: The populist’s animating ambition is not to help people in general — or the downtrodden in particular — so much as to hurt some vilified elite. If afflicting the comfortable also requires discomforting the afflicted, so be it.
Personally, I think this is wildly unfair. But some of the Senate’s populists would seem to disagree with me. Or at least, they have penned a housing policy that validates the most uncharitable caricatures of their ideological tradition.
Last week, Congress’s upper chamber passed the ROAD to Housing Act — a bill that would, among other things, erode regulatory obstacles to homebuilding and encourage investment in affordable housing. The bill’s Democratic co-sponsor, Elizabeth Warren, deserves credit for advancing these worthy causes.
And yet, this legislation also includes a provision that would actually reduce the supply of housing, increase residential segregation, and mandate mass displacement — all to prevent “private equity” from building too many houses.
Put differently, the policy would make housing in the United States less affordable for working-class Americans -- and less profitable for large corporations.
Alas, populist Democrats acted as though this were an appealing trade-off: Warren and her allies did not merely tolerate the regressive statute, but enthusiastically endorsed it.
The panic over Wall Street investment in houses, briefly explained
The provision in question would all-but prohibit new institutional investment in single-family homes, including “build-to-rent” properties that would not exist in the absence of such investment.
To appreciate why this policy is so misguided, we first need to zoom out — and review the broader controversy over Wall Street investment in single-family housing.
Large financial firms have long owned and rented out apartments. But they didn’t enter the single-family market in a big way until after the 2008 housing crisis. Since then, the share of American houses held by mega-landlords has steadily risen.
This development triggered a populist backlash. In recent years, prominent Democrats like Warren — and Republicans like JD Vance — have accused Wall Street of pricing ordinary Americans out of the single-family housing market by outbidding them with superior cash offers.
Such allegations are wildly overstated. As of 2022, institutional investors owned only 0.55 percent of single-family homes in the United States. And they have never accounted for more than 4 percent of annual home sales in America (and that includes sales of multifamily homes, which large investors are more likely to purchase).
Even in cities like Atlanta, where corporate investment in single-family homes is exceptionally high, no one investor owns more than 5 percent of all single-family rentals (let alone, single-family homes in general).
Put simply then, corporate investment in single-family homes cannot possibly be a leading driver of high housing prices, because there isn’t very much of it.
Corporations buying up houses is good for renters
Nevertheless, it is true that, when institutional investors buy existing houses, they reduce the supply of homes available to prospective buyers. And that can increase home prices at the margin.
This is not necessarily a bad thing, from the standpoint of housing affordability.
Corporations do not buy houses to burn them down, but rather, to rent them out. Thus, whenever institutional investment subtracts a home from the buyers’ market, it generally adds one to the rental market. Partly for this reason, corporate investment in single-family homes tends to reduce rents.
In this way, institutional investment in existing homes presents a trade-off: It makes rental housing marginally more affordable, while pushing home prices marginally higher. If one’s primary concern is minimizing the number of Americans who cannot afford housing, this is a decent swap: Americans who can’t qualify for a mortgage are more likely to be cost-burdened than prospective homebuyers.
The progressive case for corporate investment in housing
From a progressive vantage point, corporations buying up houses has one other positive side effect: It reduces socioeconomic segregation.
Many of America’s middle-class suburbs are zoned exclusively for single-family homes. In the past, this has effectively barred working-class households with poor credit or modest incomes from living in such places.
As Wall Street began buying and renting out houses, however, affluent suburbs became more accessible to less-privileged families. A recent paper from Federal Reserve economist Konhee Chang found that institutional investment in suburbs in the South reduced segregation by allowing lower-income renters to move to neighborhoods where they couldn’t afford to buy.
This is likely part of why corporate investment in single-family homes has proven so controversial. On the face of it, it’s hard to see why it would be fine for large investors to own and rent out apartments — but an outrage for them to own and rent out houses. One of the few distinctions between these two practices, however, is that the latter often brings renters into an area where they were previously absent.
And many suburban homeowners view working-class neighbors as a nuisance. In Chang’s study, when institutional landlords made an area more accessible to low-income renters, nearby homeowners became more likely to move away.
Even in sympathetic coverage of the anti-institutional investment backlash, resentment of integration often bubbles up. In a 2023 report about a “leafy” Charlotte, North Carolina, neighborhood where Wall Street had purchased many houses, the New York Times noted, “On a neighborhood Facebook group, renters are blamed for trash and furniture left on the curb, loud music and domestic disputes. Members fret that home values might fall.”
While class integration may generate such tensions, it can also make a big difference in the lives of disadvantaged kids. According to research from Harvard University’s Raj Chetty, children who move from high-poverty areas to affluent ones become more likely to attend college and earn middle-class incomes as adults.
Thus, the Senate’s revolt against Wall Street investors may unintentionally help upper middle-class homeowners hoard resources and opportunity, under the cover of anti-corporate populism.
The folly of deterring corporate investment in new housing
In saying all this, I don’t mean to portray America’s mega-landlords as saintly or altruistic. To the contrary, like every other type of landlord, institutional investors sometimes rip off or shortchange their tenants. Invitation Homes, America’s biggest owner of single-family rental housing, recently reached a $47.2 million settlement with the Federal Trade Commission after deceiving tenants with undisclosed fees.
The best way to protect tenants from exploitation is therefore to vigorously regulate all landlords’ conduct.
Still, there is little evidence that large landlords are substantially more likely to mistreat tenants than smaller ones are. The best way to protect tenants from exploitation is therefore to vigorously regulate all landlords’ conduct — not to ban institutional investors from the single-family market, thereby shrinking the supply of rental housing.
For these reasons, I don’t think progressives should discourage corporate investment in existing houses, at least, without first taking other measures to expand the housing stock. Doing so is likely to hurt working-class people at the margin.
This said, there are genuine trade-offs on that front. And the impulse to protect prospective homebuyers from corporate competition is understandable.
But the Senate bill doesn’t just bar large investors from buying existing properties — it also all but bans them from financing the construction of new rental houses.
Under the bill, if institutional investors bankroll a “build-to-rent” single-family housing development, they must sell all of its homes to individual buyers within seven years of construction. This will make almost all such developments financially nonviable: If investors can only collect rents on a housing project for seven years — and must then immediately sell, even if the market is bad — then they would probably be better off putting their capital into something else.
Already, data centers offer much higher returns than housing does. Warren’s policy would effectively encourage Wall Street to divert funding away from new homes towards more profitable — but less socially indispensable — ventures.
The impact on housing supply would likely be modest, but significant. Over the past five years, build-to-rent construction has added about 250,000 homes to America’s housing stock, according to the economist Jay Parsons.
If the Senate bill becomes law, some build-to-rent projects may still pencil out. Yet in those instances, the implications of Warren’s policy are arguably even more regressive: After seven years, her law would effectively require large landlords to oust all of their development’s tenants, so that wealthier families can purchase their homes.
The worst kind of populism
In sum: Populist Democrats have rallied behind a policy that 1) reduces the overall supply of housing, 2) distributes the remaining stock less equitably (by privileging the interests of middle-class homebuyers over those of working-class renters), and 3) reinforces residential segregation.
Shortly before the Senate passed the ROAD to Housing Act, Sen. Brian Schatz of Hawaii highlighted these problems in a floor speech. He suggested that the de facto, build-to-rent ban must have been a drafting error, given its irrationality.
Warren responded to his critique by declaring, “The policy is to block private equity from taking over the single family home. … There are some folks in private equity who don’t like that but it’s a very deliberate choice.”
Nearly every syllable of this statement was demagogic.
“Private equity” is not about to “take over” the single-family house. As already noted, large investors own only about half-a-percent of all such homes in America. And letting them build new rental houses will not make home ownership less attainable for ordinary Americans. The person criticizing Warren’s proposal, meanwhile, was not a private equity CEO but a progressive Democratic senator.
What’s more, Warren’s provision does not even target “private equity” specifically. Many of America’s institutional landlords are publicly traded companies — meaning that they are owned, in some small part, by unionized workers (through their pension plans) and middle-class families (through their 401(k)s).
Warren’s defense of her policy therefore boils down to conspiratorial lies about an ill-defined corporate boogeyman.
Wall Street conservatives may suggest that this is simply what all populism amounts to. But progressive populists should take pains to avoid doing the same.
