Investors Create a New Threat to Housing Security Through Mass Acquisition

By Dennis Archambault

Home ownership is an important step out of the cycle of poverty. Typically, working families save enough to make a down payment on a “starter” house. They would have a low, similar monthly mortgage, and with adequate employment  and health, they may ultimately own their home and live a more stable life. In recent years a major development has occurred in the supply and accessibility of those starter homes: large corporate interests are acquiring houses and renting them at high rates. Detroit is tied with Orlando, Florida, for sixth in predatory investment practices, according to a Washington Post article.

Signs seemingly handwritten by small time buyers, “We pay cash for houses,” and “I want to buy your house,” appeal to the older owner or someone interested in quickly selling their house without going through necessary improvements. In some cases, investors “flip” the houses for a substantial profit — “buy low, sell high” — or rent at a high level, exploiting the hot rental market. That, coupled with the dwindling supply of small housing due to blight and the lack of small home new construction, has created supply and demand in the favor of the investors.

A small house in Hazel Park, according to the Washington Post article, is now renting for $3,000. This ring suburb may be a likely draw for Detroiters looking for a suburban school district and safer neighborhoods. When renters are saddled with that kind of monthly rent, they can never save the money they need to establish a down payment — or take care of the many other aspects of creating an economically and socially healthy home environment.

Housing security has several steps, from safe supportive habitats to affordable rentals to home ownership. The latter is increasingly becoming out of reach for working families.

For a deeper dive into this issue, check out this article published in the Journal of Urban History.

Dennis Archambault is vice president of Public Affairs for Authority Health