Five million homes and counting have been lost to foreclosure since 2008 as a result of predatory lending practices and poor financial regulation. Two million more homes are teetering on the edge of the same fate.
Surprisingly, however, the housing market has picked up in recent months. Contributing to that is a trend of private equity firms and hedge funds buying up tens of thousands of vacant houses to sell as single-family rental homes. Wall Street has also created a new security by bundling the rent payments of the tenants in those properties. (Fault Lines' look at investment firms’ new housing bet, “Wall Street Landlords,” premieres on Al Jazeera America on Saturday, November 8, at 7 pm ET/4 PT.)
With the $7 million in wealth lost in the previous housing crisis still a reasonably fresh wound to the U.S.’s fragile economy, what does this new investment mean for homeowners, local markets and the country as a whole? Fault Lines convened a panel of experts to get their takes on Wall Street’s latest foray into housing—and to find out if any of them see trouble ahead. (Note: We also reached out to representatives at real estate investment firms, but did not receive any responses to our questions.)
Here’s what they had to say:
How would you grade the federal government's response to the subprime mortgage crisis?
The homes being bought up by investment groups like Blackstone were at one-time available to be purchased outright. What's the impact to neighborhoods and communities of large numbers of homes changing from occupant-owned to rental?
The first rental backed security was introduced by Blackstone in October, 2013. Nine more deals have come to market since then, valued at over $5 billion. Do rental-backed securities pose the same risks as mortgage-backed securities to the greater economy?
In cities like Riverside, California, 1 in 3 renters spend more 50 percent of their income on rent. Is that a consequence of homes converting from owner-occupied to rental? Is the foreclosure crisis in danger of turning into a renter’s crisis?