Home ownership is key to generational wealth, but Real Estate Investment Trusts profiting in Middle Tennessee’s low-income neighborhoods raise barriers to owning. (Photo: Getty Images)
A big economic division between renters and homeowners is apparent when looking at net worth: For homeowners, the median net worth of $231,400 is about 44 times the median net worth of renters, which is $5,200.
Dr. Ken Chilton of Tennessee State University has studied the impact of Real Estate Investment Trusts on the housing market and how they are likely to rob families of the generational wealth created by home ownership. He coined the phrase “equity mining”. For every family that rents from a REIT, $226,200 of family wealth is shifted to investors away from families. This creates a permanent underclass of poor who can become dependent upon the state to help them survive.
Across the United States, the decline of affordable housing has transformed the lives of the poor. Many poor families who are renting today receive no housing assistance and reside in the private rental market, where over half spend at least 50% of their income on housing costs and a quarter spend over 70% on them.
Increasing rent burden among low-income families directly contributes to their economic hardship and is a source of residential insecurity and homelessness. But sociologists have yet to identify the basic sources of the affordable housing crisis or to fully articulate the inner workings of rental markets. Conspicuously absent from most accounts of neighborhood dynamics or inequality are landlords and increasingly corporate interests via REITs, who play a vitally important role in the lives of low-income families.
In Rutherford County, nearly 10% of all residential units are owned by REITs.
Tenant exploitation (overcharging renters relative to the market value of their home) and landlord profit margins vary. However, their impact on the housing market is very real. Because the acquisition of property by REITs in low-income neighborhoods is relatively affordable, the renters in those neighborhoods easily become “exploited consumers.”
Landlords operating in those neighborhoods also enjoy higher profits, owing to significantly lower mortgage and tax burdens but not significantly lower rents. This demonstrates how the market strategies and profit motivation of REITs contribute to high rent burdens in low-income neighborhoods.
The drive to maximize profits also contributes to a lack of inventory for families who may wish to own their home rather than rent. The lack of inventory causes a scarcity which drives up prices making it problematic to enter the home buying market.
We are witnessing a type of “social engineering”. Many politicians may view this as an opportunity to continue to remain in power. Regardless of their words and how much they lament the situations we must judge our elected leaders by their deeds or lack thereof to address this growing issue. Homeownership leads to prosperity and creates the generational wealth necessary for future generations to realize the American dream.
by Rob Mitchell, Tennessee Lookout
August 22, 2022
by Rob Mitchell, Tennessee Lookout
August 22, 2022
A big economic division between renters and homeowners is apparent when looking at net worth: For homeowners, the median net worth of $231,400 is about 44 times the median net worth of renters, which is $5,200.
Dr. Ken Chilton of Tennessee State University has studied the impact of Real Estate Investment Trusts on the housing market and how they are likely to rob families of the generational wealth created by home ownership. He coined the phrase “equity mining”. For every family that rents from a REIT, $226,200 of family wealth is shifted to investors away from families. This creates a permanent underclass of poor who can become dependent upon the state to help them survive.
Across the United States, the decline of affordable housing has transformed the lives of the poor. Many poor families who are renting today receive no housing assistance and reside in the private rental market, where over half spend at least 50% of their income on housing costs and a quarter spend over 70% on them.
Increasing rent burden among low-income families directly contributes to their economic hardship and is a source of residential insecurity and homelessness. But sociologists have yet to identify the basic sources of the affordable housing crisis or to fully articulate the inner workings of rental markets. Conspicuously absent from most accounts of neighborhood dynamics or inequality are landlords and increasingly corporate interests via REITs, who play a vitally important role in the lives of low-income families.
In Rutherford County, nearly 10% of all residential units are owned by REITs.
Tenant exploitation (overcharging renters relative to the market value of their home) and landlord profit margins vary. However, their impact on the housing market is very real. Because the acquisition of property by REITs in low-income neighborhoods is relatively affordable, the renters in those neighborhoods easily become “exploited consumers.”
Landlords operating in those neighborhoods also enjoy higher profits, owing to significantly lower mortgage and tax burdens but not significantly lower rents. This demonstrates how the market strategies and profit motivation of REITs contribute to high rent burdens in low-income neighborhoods.
The drive to maximize profits also contributes to a lack of inventory for families who may wish to own their home rather than rent. The lack of inventory causes a scarcity which drives up prices making it problematic to enter the home buying market.
We are witnessing a type of “social engineering”. Many politicians may view this as an opportunity to continue to remain in power. Regardless of their words and how much they lament the situations we must judge our elected leaders by their deeds or lack thereof to address this growing issue. Homeownership leads to prosperity and creates the generational wealth necessary for future generations to realize the American dream.
Tennessee Lookout is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Tennessee Lookout maintains editorial independence. Contact Editor Holly McCall for questions: in**@te**************.com. Follow Tennessee Lookout on Facebook and Twitter.
Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.
Assessor for Rutherford County Middle Tennessee Assessor of the Year Five Time President of the Middle Tennessee Association of Assessing Officers Rob Mitchell serves as property assessor for Rutherford County. He’s won the John C. Donehoo Award from the International Association of Assessing Officers, the Excellence in Operations Award and the Three Star Office Certification Award.
DEMOCRACY TOOLKIT
© Tennessee Lookout, 2022
Now more than ever, tough and fair journalism is important. The Tennessee Lookout is your watchdog, telling the stories of politics and policy that affect the people of the Volunteer State.
Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site.
About Author
