Unfair Park from p3 buying and its effects on the market. The 2008 recession and its mass foreclo- sures put a huge number of homes on the market that many individuals couldn’t af- ford. That’s when corporations began gob- bling up single-family homes across the country, a report by the subcommittee ex- plained. No single investor owned more than 1,000 homes in 2011. That has changed dras- tically over the last decade, with investors making more than half of 2021 home pur- chases in Tarrant County. In Dallas County, institutional investors accounted for 43% of 2021 home purchases. Democrats and Republicans on the sub- committee seemed divided on the topic. U.S. Rep. Tom Emmer, a Minnesota Re- publican and a ranking member of the sub- committee, pointed out during a June hearing that while investors may be increas- ingly buying up these properties, they still account for only a small portion of the coun- try’s single-family rentals. According to the real estate consulting firm RCLCO, 2% of the 15 million single-family rental homes across the U.S. are owned by investors. Emmer said investors are actually bene- fiting people by providing homes for rent that they otherwise wouldn’t be able to af- ford because of poor housing policy deci- sions and rising inflation, both of which he blames Democrats for. “While many Americans can’t afford a full tank of gas or to buy meat at the grocery store, our subcommittee is focusing on institutional homeownership in the home rental market,” Emmer said. “We cannot demonize institu- tions for facilitating this supply of quality housing that otherwise would be out of the realm of possibility for many Americans due to the economic consequences of inflation.” On the opposite side of the political spec- trum, Chairwoman Maxine Waters, a Dem- ocrat from California, said these investors are going into communities and buying up homes that would be available to individuals had financial institutions given them the loans they needed to become homeowners. The problem has worsened throughout the pandemic. “Institutional landlords have seized the COVID-19 pandemic as an opportunity to ex- pand their reach even further into our homes,” Sofia Lopez, a deputy campaign director at the Action Center on Race and the Economy, told the committee. “Private equity’s business model hinges on boosting revenue, cutting costs, and maximizing efficiencies. … This is a recipe for disaster. In housing, it translates into exorbitant rent increases.” Institutional investors are also some of the quickest to evict, the committee’s ex- perts testified, and they often target moder- ate income Black and Hispanic neighborhoods. Missouri Rep. Emanuel Cleaver calls this “coup capitalism.” “When I talk about ‘coup capitalism,’ it’s 44 a coup d’etat because there’s an overthrow of the homeownership in the urban core and there’s a regime change that comes in,” Cleaver said. In Kansas City, Missouri, he explained, the west side is historically His- panic and the east side is historically Black. These are the areas investors have targeted. “I began to call it ‘coup capitalism’ because the people have been overthrown. They’re leaving,” he said. “The west side is probably already lost.” You can see this on the ground in Dallas’ Elm Thicket-Northpark, a historically Black neighborhood where investors are buying up properties and driving up costs. Just east of Love Field, this neighborhood used to consist primarily of working class Black families living in single-family homes. Over the years, the Hispanic population has grown. The number of investor owned properties there has increased too. Many of those homes have been bought and refurbished to the point of being unafford- able for lower-income renters. Others have been torn down and replaced by duplexes. Those duplexes tower over the original single family homes that remain. Some residents in them say they feel suffocated and like it’s only a matter of time before they’re priced out of the neighborhood. Others say they’re happy with what the new development has done and will do for property values. Investors also buying up apartment buildings like the one Hector Hernandez was staying in. Jenny Schuetz, a senior fellow at Brook- ings Metro, told the congressional subcom- mittee in June, “We’ve been talking today about the single-family rental market, but we also know that institutional investors are buying multifamily rental buildings that are older, often doing a rehab, and then raising the rents on them.” But, Veena Jetti, a local real estate inves- tor, said there are good and bad apples in the industry. The good ones can have positive effects on communities. She said the multimillion dollar firms buying cheaper homes and pricing out the middle class from homeownership are the bad apples. “Now, they can’t increase their net worth through their primary home any- more,” Jetti said of the homeowners cut out of the market. Her company doesn’t do that though, she said. Companies like hers can create higher density housing and bring affordability to areas that aren’t affordable, Jetti said. “The revenue and the benefits of having investors that truly care about the communities can be a positive thing,” she said. It’s her hope that the properties she’s in- The Oakridge Apartments are raising rents. Jacob Vaughn vested in can be tenants’ “last stop before homeownership,” something she recognizes is becoming less prevalent. Jetti comes from a real estate family, and she has about a decade of experience in the industry. Jetti founded her own real estate investment firm called Vive Funds. The company’s been focusing on Class B value, multi-family real estate. In the run up to the pandemic, prices were rising in the real estate market. Jetti thought it would start to level out, but that never happened. Then, the pandemic broke out, wreaking havoc on the economy and causing people to miss work and paychecks and eventually get evicted, even though there was a morato- rium on evictions at the time. Higher income tenants might be able to get by missing two or three paychecks, Jetti said, but that’s not the case for people mak- ing less. “It became tougher to manage assets with lower-income tenant bases because what would happen is they would miss two weeks of work because they were in the quarantine protocol,” she said. “Lower in- come tenants, they just don’t have as much of a cushion for emergencies like this.” So, Jetti’s company started looking at more stable assets with solid tenant bases. From an investment perspective, what really matters is your risk tolerance, she said. Going into a lower-income tenant base, there will be tougher management prob- lems, she said. “The other side of that coin is by taking on more risk, you need to have more potential reward,” Jetti said. “Our in- vestors don’t have the appetite for that kind of risk.” Others do. “You’ll find investors on all ar- eas of the spectrum,” she said. They don’t mind maximum risk as long as it means maximum returns. Others want minimal risk for modest returns. “What we’ve seen in DFW specifically is a massive increase in demand not just for single family homes but also for multi-fam- ily assets,” Jetti said. “COVID ramped up the market and made it incredibly competitive.” But, she thinks things will start to cool off. They already have compared to a few months ago, she said. “The market goes in cycles. We have our bull runs and we have our bear runs,” she said. “It was a buyers market on steroids,” Jetti said. “It was unlike anything I had ever seen before.” All of this, some say, is just a symptom of the underlying problem, which is that hous- ing demand over the last decade has far ex- ceeded production. Phil Crone, executive director of the Dal- las Builders Association, said some positive change is happening that he’s cautiously op- timistic about. “The last couple [years] dur- ing the pandemic period were crazy. Just, nonsustainable in terms of the amount of demand versus our ability to supply it,” Crone said. With the market slowing down, builders may be able to start catching up.” Historically low mortgage rates and a shift to remote work during the pandemic sent a shockwave throughout the housing market. Some reports estimate U.S. home prices rose some 42% as a result. Between the start of the pandemic and the end of 2021, Texas home prices rose by 28%. But, the market has started to cool off. From April to June, home sales in Texas dropped more than 5% compared with last year, ac- cording to Texas Real Estate Research Cen- ter at Texas A&M University. “My hope is with the change that we’re going through, that it’s going to be a much welcome return to normalcy,” Crone said. There are more homes under construction now than ever before, over 33,000 across DFW. However, the light he sees at the end of this tunnel isn’t the brightest. “I think a lot of builders are worried if the contracts [on the houses] are going to hold up and if those are going to get through to closing,” Crone said. “But, it is, finally … starting to create a little bit of beneficial im- pact to the record low inventory that we’ve had for new housing.” Despite this, Crone said builders are wondering, “Are people still going to be able to afford the home that they thought they were going to be able to afford with the in- terest rates rising and being as changeable as they have been over the last few months?” Crone said he doesn’t think it’s time for builders to worry. “For the last 10 years or more, we’ve not been able to produce enough housing to meet the demand of this market and we’re still quite a bit short,” Crone said. “We haven’t been able to keep up, and now that we’re having a little bit of time to catch up just a little bit, that’s not a time to worry. That’s a time to welcome the return to normalcy that, maybe, we’re seeing here, barring any massive spike in interest rates, which is still of course a possibility.” Even without higher interest rates and with all the new construction, Crone said bringing new houses on the market is no easy task. For starters, Dallas’ permitting process became painfully slow during the pandemic, making it take even longer to get required building permits. The delays can also make the builds more expensive. Dallas has started to pick up the pace in issuing new permits, but Crone said the industry is running out of skilled workers, and some building materials are becoming increas- ingly hard to come by and pay for. “We’ve had in our industry a labor shortage that significantly predates, >> p6 MONTH XX–MONTH XX, 2014 OCTOBER 6–12, 2022 DALLAS OBSERVER DALLAS OBSERVER | CLASSIFIED | MUSIC | DISH | MOVIES | CULTURE | NIGHT+DAY | FEATURE | SCHUTZE | UNFAIR PARK | CONTENTS | CLASSIFIED | MUSIC | DISH | CULTURE | UNFAIR PARK | CONTENTS dallasobserver.com dallasobserver.com
