Dear Friend, 

This week, Economic Liberties released a major report on the housing crisis, “Capital Crunch: How the Fall of Local Finance and the Rise of Shareholder Primacy Warped Single-Family Homebuilding in America—And What to Do About It.” 

Financial Times columnist Rana Foroohar featured it in her prominent and well-read weekly column, with the headline, “What happens when housing supply is driven by markets not Main Street.”

And just before the report’s release, MS Now host Ali Velshi interviewed Economic Liberties Director of Research Matt Stoller. In a powerful opening monologue, Velshi called out investors and private equity for making housing too expensive for people. “Housing in America is no longer designed for people. It’s designed for investment portfolios.”

Capital Crunch documents how Wall Street is the real culprit behind America’s housing shortage. As local financing for homebuilders dried up in response to everything from policymakers’ actions in the wake of the great inflation of the 1970s to the Great Recession of the aughts, the American homebuilding market has become increasingly dominated by a handful of giant, multi-national companies – companies that are more responsive to the demands for shareholder return than the needs of the homebuying public.

Wall Street is the ultimate NIMBY, demanding a focus on maximizing price over volume. Public homebuilders achieve this in part through “land banking,” wielding their capital advantages to control large shares of land. This strategy favors well-capitalized builders and institutional buyers — think publicly traded companies, think oligarchic private equity — over mom-and-pops.

The paper concludes with an extensive menu of policy recommendations for Congress, federal agencies, and state and local governments. These include:

• Expanding lending to local homebuilders
• Adopting a land-value tax to discourage land hoarding
• Banning corporate ownership of single-family homes and mandating divestiture 
• Enabling more scrutiny of homebuilding M&A to stop concentration trends
• Reforming excessive regulatory barriers to entry
• Investigating supplier price discrimination favoring large homebuilders

While much of the recent housing debate has focused on abundance ideas like zoning and permitting reform, these alone will not address the problem. The analysis and recommendations in this paper confront the underlying market power that enables large builders to restrict supply even when regulatory barriers are removed. In the coming weeks, we look forward to engaging with policymakers and partners to help identify and advance bold solutions for housing affordability.

Read the Financial Times column. Watch Ali Velshi’s monologue and his interview with Matt Stoller. And, make sure to read our report.

Warmly, 

Nidhi Hegde

Executive Director

American Economic Liberties Project
2001 Pennsylvania Ave NW
Suite 540
Washington, DC 20006
United States

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