As housing prices soar, lawmakers debate the rights of private equity
By Tom Baxter
Sandy Springs Mayor Rusty Paul told a story last week which helps to explain why home prices are through the roof across Metro Atlanta and much of the rest of the state.
Sandy Springs has a shortage of middle-class housing which families can afford to buy, so the city worked for two years to bring some single-family housing in neighborhoods where there are a lot of apartments, Paul told legislators at a meeting of the House Judiciary Committee.
“Sixty-seven townhomes were going in. We had 67 Georgia families ready to be able to buy their first house, and halfway through the construction process a big hedge fund from out of state came in and bought all 67 of them. And now they’re all rentals,” he said.
He wasn’t against corporate ownership of rental property, which could be a helpful tool in meeting his city’s housing needs, Paul said, but local officials shouldn’t have their hands tied in their effort to cope with their problems.
“The challenge we have is when these big investors come in, they’re crowding out those 67 people who worked and scrimped and saved to get the down payment to buy those houses and — swoop — it disappeared,” he said.
Paul and College Park Mayor Bianca Motley Broom were among the speakers voicing their opposition to House Bill 1093 by Rep. Dale Washburn. Along with a companion bill, Senate Bill 494 by Sen. Steve Gooch, this legislation would prohibit local governments from any kind of regulation of so-called “build-to-lease” dwellings: single-family homes which have been built specifically to be rented or leased, not to be purchased by their occupants.
The “build to lease” trend, Washburn told the committee, is “simply a reflection of our changing culture.” Millennials, he said, are more reluctant to make long-term commitments, and find it attractive to live in subdivisions where they don’t have to worry about upkeep, taxes and other aspects of traditional homeownership.
Supporters of the bill argued that restrictions on this practice amount to discrimination against those who choose to rent or lease, and when pushed to the extreme constitutes a new form of redlining. They repeatedly characterized this as an issue that is about the rights of the renters, not the prerogatives of the builders and owners.
So far only a few counties and cities have taken any steps toward restrictions of this type, none specifically banning the practice. The action most discussed at the hearing is an ordinance passed in Cherokee County which would allow subdivisions to be zoned as either build-to-lease or build-to-buy. That distinction unfairly limits the options of builders, supporters of HB 1093 argued.
None of the ordinances being contemplated restricts owners of a home from renting it, but Washburn and other supporters of the bill implied in their testimony that ordinances passed or in the works in Cherokee, Carroll and Forsyth counties and the cities of Holly Springs and Harlem could eventually lead to that.
The concentration of increasingly scarce housing stock into the hands of big investors is a global trend, but Atlanta leads the nation in this practice. Last year, private equity accounted for 23 percent of all single-family home sales in the United States. In Metro Atlanta, that figure was 43 percent.
As private equity floods into the housing market, home prices are going up, which is a big reason why the median price of a home in Atlanta has gone up 23.5 percent in a year, and rental prices have shot up accordingly.
People who lease homes have the costs of property taxes passed on in their monthly payments, but they don’t get a homestead tax exemption. Nor do they have the opportunity to build up equity that can be passed on to their children, a point which both mayors emphasized.
“The opportunity for inter-generational wealth does not exist in this type of model where a corporate citizen comes in and buys a huge swath of land,” Broom said.
Seventy-five percent of the residents of College Park live in rental units, Broom said. “We have a strong interest in promoting homeownership in the city of College Park. We want people to be invested in our community in a way that isn’t happening right now,” she said.
On the other side of the metro area, the percentage of renters in Sandy Springs is 65 percent.
“We don’t have a shortage of rental,” Paul said. “What we have is a shortage of middle-class housing that families can afford to buy.”