A rentership society would be disastrous for the middle class and antithetical to the promise of this country, writes Ben Frogel.
The cuckoo bird does not make its own nest. Instead, it lays its eggs in the nest of another bird and pushes the other bird’s eggs to their demise, leaving the unlucky bird to labor for the profit of the cuckoo species. With this kind of trickery, it is no wonder why some investment firms have earned the moniker of “cuckoo funds” for their practice of buying large swaths of houses and locking would-be first-time homeowners out of the market. The nickname comes by way of Ireland, where these funds snapped up 95 percent of new homes on the market in 2020. The same phenomenon is playing out in the United States, posing a significant challenge for those seeking to purchase a house.
Ryan Dezember of the Wall Street Journal, played the canary in the coal mine when he wrote a viral piece entitled “If You Sell a House These Days, the Buyer Might Be a Pension Fund.” Dezember details a rise in purchases of single-family homes by institutional investors who waste no time turning what once were vehicles of middle-class prosperity into rental units. He elaborates further in a piece in American Affairs, telling the story of one Middle Tennessee family looking to purchase its first house. The family puts up a bid of $203,000 for a home, only for real estate investment trust American Homes 4 Rent to snap up the property. While the mega-landlord’s offer is for the same amount of money, it can pay in all cash, a luxury that gives investment funds a leg up on almost every first-time homebuyer in the United States. The head of American Homes 4 Rent tells his investors that the middle-class family is a tenant that he can easily snare with sudden rent increases and other problems between renter and landlord. After all, he mentions, children hate to move.
If the family from American Affairs can’t seem to find a seller willing to take their money over Wall Street’s, then why not follow where the market leads and rent? A future where homeownership is reserved for the wealthy is antithetical to the promise of America. Homeownership is the primary, critical tool of the lower and middle classes for accruing wealth and ensuring higher living standards for the next generation. Working and middle class households rely on homeownership twice as much as upper-class ones, deriving about 45 percent of their net worth from their house. Furthermore, many immigrants still come to the United States to own a solid piece of a community as they seek to secure a better life for their children.