A new report by the affordable housing nonprofit group California Reinvestment Coalition says the practice of investors buying and renting foreclosed homes hurts neighborhoods throughout California.
The report, based on a survey of 80 community-based nonprofits, says that long-term tenants are being displaced, first-time homebuyers are losing to all-cash offers by investors, and communities are being destabilized.
Kevin Stein, associate director of the California Reinvestment Coalition, and author of the report, said that the whole thing is a vicious cycle.
“The irony in Wall Street profiting from a foreclosure crisis they helped create is not lost on anybody. Even worse, main street banks like JP Morgan Chase, Wells Fargo, and Citigroup, who are subject to the Community Reinvestment Act, are enabling these harmful practices by financing these investors and by securitizing their portfolios,” Stein said. “The Federal Reserve and the OCC should give these banks negative CRA credit for contributing to the displacement of long-term residents, pushing out first-time homebuyers, and reducing the supply of affordable housing in California.”
Some findings from the report include:
80% of respondents felt that institutional investors have a “negative” impact on clients and neighborhoods;
77% of respondents said that qualified homebuyers were “always” or “often” losing out to cash investors when trying to purchase a home; and
- 50% of nonprofit housing developers report being outbid by cash and institutional investors.
“The recently released report by the California Reinvestment Coalition furthers shows the need for hearings on the role large institutional investors play in the rental market,” said U.S. Rep Mark Takano, D-Calif., a long-time critic of housing policy. “With more than 80% of respondents saying the investors have a negative impact on their neighborhoods, and 65% of local real estate professionals saying they have hurt their business, it is clear that companies like Blackstone and Colony Capital are changing our communities. Once again, I call on the House Financial Services Committee to hold hearings into this matter so that my colleagues can learn about the REO to rental market.”
The full report can be read here.