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The Great Recession sparked a massive transfer of wealth in California and the rest of the nation. It happened on courthouse steps around the country when an estimated 5 million U.S. families lost their homes due to foreclosure. Many of those foreclosed homes were sold in bulk at auctions, and for the first time, large numbers of single-family homes were snatched up by Wall Street firms.
This corporate scheme led to Wall Street establishing a new and wildly profitable asset class, “single-family home rentals.” Today, big corporations own an estimated $60 billion worth of single-family housing in the United States.
The corporate takeover of housing was, and continues to be, devastating for low- and moderate-income families. Many who lost their homes have never fully recovered, and home ownership, which had long been the primary path for most Americans to build wealth and retirement security, has plummeted. In California, for example, between 2006 and 2012 the number of owner-occupied homes nosedived by more than 320,000, while the number of renter-occupied single-family homes soared by more than 720,000.
For Black Americans, the crisis was particularly destructive. Black homeowners disproportionately lost homes and watched the wealth equity they had built evaporate. Today, the 30-percentage-point gap between Black and white homeownership is larger than it was before the passage of the 1968 Fair Housing Act, which outlawed race-based discrimination in housing.
At one point, a single corporation, Blackstone Group, owned more than 13,000 California homes. Blackstone, through its subsidiary, Invitation Homes, was especially active in the Sacramento region. By 2017, Invitation Homes had become the largest owner of single-family homes in Sacramento County. Invitation’s dominance allowed it to impact the region’s rent prices and leasing practices, as it forced more responsibilities, from mold remediation to landscaping and pest control, onto renters.
In 2019, Blackstone Group cashed out of the rental-home market, pocketing about $7 billion in profits. Nonetheless, many other large corporations continue to own single-family homes throughout California and the nation.
In some California communities, corporations left the homes they owned vacant and in disrepair. The recent takeover of a vacant, corporately owned home in West Oakland by Moms 4 Housing, a group of homeless mothers, brought nationwide attention to this problem.
Now, with the Covid-19-induced recession, corporations are poised to make another killing. Each day, increasing numbers of vulnerable households are falling behind on their mortgage payments, raising the specter of another foreclosure crisis – and another Wall Street bonanza.
Which is why I’m carrying Senate Bill 1079, Homes for Homeowners, Not Corporations. SB 1079 is designed to help California avoid another corporate takeover of single-family homes. The bill would bar a common practice that corporations have employed to buy lots of foreclosed houses at once: bundling. Under SB 1079, each home would have to be sold separately so that people who want to buy an individual house and live in it would have a better chance of doing so.
In addition, after a home goes through a foreclosure auction, tenants or families who intend to live in the house would have an opportunity to match or exceed the highest auction bid before the home is sold. If tenants and families are not able to match the highest bid, then cities, counties, nonprofits and land trusts would have a chance to exceed the bid price to buy the home.
SB 1079, which has a hearing in the Assembly on Aug. 12, would also incentivize corporations to rent or sell vacant homes purchased in foreclosure by allowing cities and counties to levy fines of up to $2,000 a day on blighted, vacant properties.
According to the Census, there are more than 1.2 million vacant homes in California. That’s unconscionable. There is no excuse for a home to be vacant when so many of our neighbors are homeless – or are at risk of becoming homeless because of the pandemic.
There’s also no excuse for allowing another corporate takeover of California’s homes when we’re in a housing affordability crisis.
This commentary originally appeared in CalMatters.org, a nonprofit, nonpartisan media venture explaining California policies and politics.
