WEBVTT - Trump’s Latest Target: Corporate Landlords

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Buying a home in America is getting harder and harder,

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<v Speaker 2>and President Donald Trump has been throwing a lot of

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<v Speaker 2>ideas at the wall to address the country's persistent housing

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<v Speaker 2>affordability crisis.

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<v Speaker 3>The President says he's directing the federal government to buy

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<v Speaker 3>two hundred billion dollars in mortgage bonds working on a

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<v Speaker 3>fifty year mortgage for home buyers, calling it a complete

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<v Speaker 3>game changer.

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<v Speaker 1>Trump is also considered declaring a national housing emergency due

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<v Speaker 1>to high prices and low availability.

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<v Speaker 2>But his latest idea came as a bit of a surprise,

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<v Speaker 2>taking on corporate landlords. Just last week, Trump posted on

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<v Speaker 2>truth Social that he would be quote taking steps to

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<v Speaker 2>ban institutional investors from buying more single family homes, in

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<v Speaker 2>other words, getting Wall Street out of the housing market.

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<v Speaker 1>Lawmakers advocates on both the left and right have identified

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<v Speaker 1>this new phenomenon as a culprit in the greater housing

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<v Speaker 1>affordability problem.

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<v Speaker 2>Kristen Capps covers housing for Bloomberg City Lab.

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<v Speaker 1>However, it's not something that President Trump or the White

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<v Speaker 1>House has talked about very much in this term, and

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<v Speaker 1>in fact, this same week, the Trump administration also approved

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<v Speaker 1>a big merger of two large real estate companies.

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<v Speaker 2>Trump is famously a real estate guy, and some of

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<v Speaker 2>his biggest donors are in the very sector that his

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<v Speaker 2>proposal would target. But as housing costs become a major

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<v Speaker 2>political issue, his administration has been looking for ways to

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<v Speaker 2>bring them down, and banning big investors from the housing

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<v Speaker 2>market is a policy idea that's actually circulated for a

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<v Speaker 2>while among both Republicans and Democrats. Here's Patrick Clark, who

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<v Speaker 2>covers real estate for Bloomberg.

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<v Speaker 3>In talking to people over the last week, there's definitely

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<v Speaker 3>a sense that one the administration wanted to do something

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<v Speaker 3>meaningful on housing affordability, and going after these companies is

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<v Speaker 3>something that plays well.

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<v Speaker 2>But Trump hasn't revealed much about how a policy like

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<v Speaker 2>this would actually work.

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<v Speaker 3>Trump said he's going to announce more details at Davos,

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<v Speaker 3>you know, the place that everyone goes to talk about

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<v Speaker 3>housing affordability and inequality.

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<v Speaker 2>And whether cracking down on corporate landlords will make a

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<v Speaker 2>meaningful difference is another question.

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<v Speaker 1>The number of homes that large landlords buy at any

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<v Speaker 1>given year is very, very small, and I think it's

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<v Speaker 1>difficult to really attach the greater affordability problem to you

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<v Speaker 1>know those companies who do emerge as boogeymen on both

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<v Speaker 1>the left and right.

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<v Speaker 2>Solder and this is the big take from Bloomberg News

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<v Speaker 2>today on the show, How Wall Street bought up a

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<v Speaker 2>slice of the US housing market, why Trump wants to

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<v Speaker 2>stop it, and what impact that policy could have. The

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<v Speaker 2>subprime mortgage crisis of the late two thousands led to

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<v Speaker 2>a wave of foreclosures across the US. Millions of Americans

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<v Speaker 2>lost their homes, and in the wreckage of that Great

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<v Speaker 2>Recession period, private equity companies and Wall Street investors saw

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<v Speaker 2>an opportunity.

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<v Speaker 3>Homes were very cheap, and number of Wall Street firms

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<v Speaker 3>stepped in, sometimes buying homes with cash on the courthouse steps,

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<v Speaker 3>and were able to start amassing pretty large portfolios.

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<v Speaker 2>Starting in twenty twelve, investors were scooping up thousands of

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<v Speaker 2>homes a month at steep discounts. By the start of

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<v Speaker 2>twenty thirteen, investment firm Blackstone had spent over two and

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<v Speaker 2>a half billion dollars buying up homes to manage his rentals.

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<v Speaker 3>It's all PTSD from the Great Financial Crisis and the

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<v Speaker 3>foreclosure crisis, or at least a lot of it is

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<v Speaker 3>that was really a terrible time in the economy and

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<v Speaker 3>many people, you know, in different walks of life were

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<v Speaker 3>affected by it, and there was a sense that these

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<v Speaker 3>were the guys who came in and bought at a

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<v Speaker 3>discount and made money out of that turmoil.

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<v Speaker 2>And after years of Wall Street firms buying homes, another

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<v Speaker 2>inflection point came in twenty twenty post.

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<v Speaker 3>COVID when interest rates were cheap, when you know, Sun

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<v Speaker 3>Belt migration was the theme that everyone wanted to bet on,

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<v Speaker 3>you know, a lot, a lot more money.

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<v Speaker 2>Came into this investment firms had a leg up in

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<v Speaker 2>the post pandemic housing market when home prices and rents

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<v Speaker 2>were bouncing back up but interest rates were low, they

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<v Speaker 2>could outbid the competition with all cash offers. Since then,

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<v Speaker 2>institutional investors have continued to buy multi family properties and

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<v Speaker 2>single family homes and rent them out to families across

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<v Speaker 2>the US. It can be a lucrative business.

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<v Speaker 3>The US housing market is this is a huge market, right,

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<v Speaker 3>There's trillions of dollars worth of homes, so it's a

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<v Speaker 3>big market you can invest in like you can tailor

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<v Speaker 3>portfolios in the way that you won't because it's so big,

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<v Speaker 3>and because there's different types of assets, so there's opportunities

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<v Speaker 3>to diversify and sort of hedge risk. You know, if

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<v Speaker 3>the economy in one city is you know, is hurting

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<v Speaker 3>and you're not collecting as much rent, you know there

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<v Speaker 3>in Birmingham, Alabama or something, but Indianapolis is thriving, you know.

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<v Speaker 3>So there's there's those kinds of opportunities, and it's a

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<v Speaker 3>very liquid market. And if at some point you decide

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<v Speaker 3>you want to sell homes, you feel very comfortable that

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<v Speaker 3>there's a buyer, like probably more so than any other

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<v Speaker 3>kind of real estate you can invest in.

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<v Speaker 2>One twenty twenty four working paper from the Federal Reserve

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<v Speaker 2>Bank of Philadelphia found that large financial firms went from

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<v Speaker 2>owning almost no single family rental properties in twenty ten

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<v Speaker 2>to almost four hundred thousand by twenty twenty one, but

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<v Speaker 2>when interests went up in the middle of twenty twenty two,

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<v Speaker 2>the industry's buying slowed. Last year, Blackstone's Tricon bought about

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<v Speaker 2>fourteen hundred homes, and Predium bought less than six hundred,

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<v Speaker 2>according to the Real Estate Investment data firm SFR Analytics,

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<v Speaker 2>And when you think about the fifteen million single family

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<v Speaker 2>rental homes in the market. The share that's actually owned

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<v Speaker 2>by these big players is pretty marginal.

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<v Speaker 3>Overall, it's somewhere between five hundred and six hundred thousand homes.

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<v Speaker 3>Those are estimates, but it's three or four percent of

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<v Speaker 3>the total rental homes in the US. You know, the

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<v Speaker 3>total single family housing stock owner occupied or renter occupied

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<v Speaker 3>is it's less than one percent of that. And these

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<v Speaker 3>are the numbers of industries I always liked to put

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<v Speaker 3>out there and to say, listen, we're not why are

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<v Speaker 3>you guys targeting as we're a very small part of

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<v Speaker 3>the housing market.

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<v Speaker 2>In a statement to Bloomberg, Blackstone said its ownership of

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<v Speaker 2>single family homes in the US represents zero point five

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<v Speaker 2>percent of the overall firm and that it's been a

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<v Speaker 2>net seller of homes over the last decade, with the

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<v Speaker 2>company's holdings down more than a fifth. But housing reporter

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<v Speaker 2>Kristen Capps notes that in some parts of the country,

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<v Speaker 2>institutional investors own a larger concentration of rental properties, and

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<v Speaker 2>Atlanta is the starkest example of Wall streets hold on housing.

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<v Speaker 1>Atlanta was hit harder than most metros during the Great

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<v Speaker 1>Financial Crisis, but it's also grown more than many metros

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<v Speaker 1>since then, so that's provided both the opportunity and incentive

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<v Speaker 1>for institutional buyers to invest. And now in Metro Atlanta,

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<v Speaker 1>more than thirty percent of the area's single family rental

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<v Speaker 1>properties are owned by large corporations. Charlotte and Jacksonville come

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<v Speaker 1>close as areas with maybe twenty five percent ownership share

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<v Speaker 1>by large corporations.

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<v Speaker 2>In those areas especially, it can be hard for regular

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<v Speaker 2>home buyers to compete with institutional buyers, who usually have

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<v Speaker 2>more cash and sometimes use sophisticated algorithms to generate offers

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<v Speaker 2>for homes.

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<v Speaker 1>One reason that home buyers complain about institutional buyers is

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<v Speaker 1>that algorithmic buying really locks out potential home buyers for

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<v Speaker 1>institutional investors. As soon as something hits the multiple listing

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<v Speaker 1>service database for new homes that lines up with their

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<v Speaker 1>area of specialization, these corporations can submit and all cash

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<v Speaker 1>offer with no contingencies, no inspections over asking price. You know,

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<v Speaker 1>there's no household that can or would buy a home

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<v Speaker 1>in that way.

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<v Speaker 2>Here's Bloomberg's Patrick Clark.

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<v Speaker 3>Again, you find yourself biting against a company that can

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<v Speaker 3>move more quickly, and that making buying decisions like in

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<v Speaker 3>a way that has no relation to the way you're

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<v Speaker 3>thinking about it. You know, what is this home going

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<v Speaker 3>to yield on a yearly basis? And that's why that's

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<v Speaker 3>why people don't like them, That's why they've become popular

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<v Speaker 3>or can targets.

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<v Speaker 2>Patrick says, some firms argue that by turning these homes

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<v Speaker 2>into rental properties, they're playing an important role in the

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<v Speaker 2>housing ecosystem.

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<v Speaker 3>Some of their arguments are fair, right, It's like they

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<v Speaker 3>at least particularly initially, but even you know, even still,

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<v Speaker 3>if they buy an existing home, it's very often a

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<v Speaker 3>home that needs some repair. They'll invest, you know, thousands

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<v Speaker 3>or tens of thousands of dollars into fixing up the

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<v Speaker 3>home and making it nicer. And you know what they

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<v Speaker 3>would say is that they are then by doing that,

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<v Speaker 3>giving you know, a family that can't afford to buy,

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<v Speaker 3>access to a higher quality home in a better neighborhood

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<v Speaker 3>with a better school district.

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<v Speaker 2>The research on how corporate landlords impact rental prices is mixed.

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<v Speaker 2>Research from places like the Federal Reserve Bank of Philadelphia

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<v Speaker 2>have shown that larger landlords do drive higher rents, though

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<v Speaker 2>there's disagreement about how significant those effects are on the market.

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<v Speaker 2>Another working paper from Quney Baruch suggests that by increasing

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<v Speaker 2>rental supply, larger landlords can put downward pressure on rents,

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<v Speaker 2>but investment firms entering real estate markets have other effects too.

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<v Speaker 2>Research compiled in a report by the Lincoln Institute of

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<v Speaker 2>Land Policy in the Center for Geospatial Solutions from studies

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<v Speaker 2>in Boston, Atlanta, and Kansas City found that corporate landlords

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<v Speaker 2>were more likely to submit eviction filings than smaller landlords.

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<v Speaker 2>In Memphis and Indianapolis. Analyzes show some corporate landlords had

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<v Speaker 2>higher rates of code violations.

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<v Speaker 1>It's not necessarily the case that large landlords are worse

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<v Speaker 1>than small landlords, but in the areas where they have

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<v Speaker 1>been most active, there are fewer tenant protections in local

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<v Speaker 1>or state law that afford tenants certain rights, certain ability

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<v Speaker 1>to challenge landlord practices, and tenants in those places say

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<v Speaker 1>that corporate landlords take advantage of these laws to raise rents,

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<v Speaker 1>to provide substandard housing, and to affect many households across

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<v Speaker 1>the metro areas.

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<v Speaker 2>Trump's proposal to cut those landlords out is hitting at

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<v Speaker 2>a really pivotal time. Housing feels increasingly out of reach

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<v Speaker 2>for renters and buyers alike, and some Americans want someone

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<v Speaker 2>to blame.

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<v Speaker 3>Affordability is the political issue of our of the moment. Right.

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<v Speaker 3>It feels unfair if you want to buy a house

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<v Speaker 3>and you lose to a company. And it's just been

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<v Speaker 3>red meat politically for years.

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<v Speaker 2>So could Trump be teeing himself up for a political

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<v Speaker 2>win ahead of midterm elections this year? And would a

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<v Speaker 2>band provide meaningful change to the housing affordability picture that's

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<v Speaker 2>coming up? Targeting private equity for its role in America's

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<v Speaker 2>housing crisis has been, as Bloomberg's Patrick Clark called it,

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<v Speaker 2>political red meat for a while now. It's an idea

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<v Speaker 2>that politicians on both sides of the aisle have gotten behind.

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<v Speaker 4>Private equity firms and other Wall Street investors were busy

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<v Speaker 4>scooping up homes and communities across the country, even in

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<v Speaker 4>the middle of an historic housing shortage.

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<v Speaker 2>Democratic Senator Elizabeth Warren has been trying to regulate corporate

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<v Speaker 2>landlords for years, says Bloomberg's Christen caps.

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<v Speaker 1>It's also something that former Vice President Kamal Harris advanced

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<v Speaker 1>on the campaign trail.

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<v Speaker 3>We will make.

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<v Speaker 5>Sure those homes actually go to working and middle class Americans,

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<v Speaker 5>not just investors.

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<v Speaker 2>Current Vice President JD. Vance has weighed into here. He

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<v Speaker 2>is on Columbus, Ohio's ABC six in twenty twenty three.

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<v Speaker 1>They have access to lower interest rates, they have access

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<v Speaker 1>to cheaper money, and they completely crowd out the availability

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<v Speaker 1>of home for people who want to, you know, just

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<v Speaker 1>buy it by a piece.

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<v Speaker 4>Of their community.

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<v Speaker 2>But it wasn't a given that Trump would take this

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<v Speaker 2>on politically. It's worth noting Trump's donor base includes Steven Schwartzman,

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<v Speaker 2>the CEO of Blackstone. He's given generously to Trump's re

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<v Speaker 2>election campaign and his pack, and after Trump's truth social post,

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<v Speaker 2>Blackstone's shares fell by as much as nine point three

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<v Speaker 2>percent before pairing some losses.

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<v Speaker 3>I think the selloff in Blackstone shares doesn't make much sense.

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<v Speaker 3>As Blackstone said on the day, you know, single family

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<v Speaker 3>rentals are a very small piece of Blackstone business in

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<v Speaker 3>Blackstone has probably more important matters in front of the

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<v Speaker 3>federal government.

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<v Speaker 2>And Patrick says many of the people he's spoken to

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<v Speaker 2>in the single family rental industry have brushed off Trump's

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<v Speaker 2>proposal as all talk.

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<v Speaker 3>Say, this is just Trump being Trump. Half the stuff

0:13:52.600 --> 0:13:56.000
<v Speaker 3>he says, doesn't go anywhere. People have been talking about

0:13:56.000 --> 0:13:58.360
<v Speaker 3>this forever and it's always just grant standing and we

0:13:58.360 --> 0:14:01.080
<v Speaker 3>don't have anything to worry about. There are so few details,

0:14:01.400 --> 0:14:02.480
<v Speaker 3>you know, that the President has.

0:14:02.400 --> 0:14:06.160
<v Speaker 1>Provided all about what it could potentially look like, what

0:14:06.320 --> 0:14:08.840
<v Speaker 1>it would mean for there to be, you know, a

0:14:08.880 --> 0:14:11.920
<v Speaker 1>ban is that a ban on purchasing? Is that a

0:14:11.920 --> 0:14:14.760
<v Speaker 1>ban on ownership? Is that legal? I don't think that

0:14:14.800 --> 0:14:16.400
<v Speaker 1>these questions have been fully played out.

0:14:16.679 --> 0:14:18.840
<v Speaker 3>There's at least five or six states that have proposed

0:14:18.840 --> 0:14:22.000
<v Speaker 3>some version of this in the past, and they go

0:14:22.080 --> 0:14:25.080
<v Speaker 3>at it a little differently. Sometimes they'll set a limit,

0:14:25.200 --> 0:14:27.080
<v Speaker 3>you know, if you own more than a thousand homes

0:14:27.160 --> 0:14:29.320
<v Speaker 3>or more than two thousand homes, you can't buy anymore.

0:14:30.200 --> 0:14:31.920
<v Speaker 3>I think there have been some bills that have approached

0:14:31.920 --> 0:14:35.160
<v Speaker 3>the tax status of owners and in fact, Treasury Secretary

0:14:35.240 --> 0:14:39.080
<v Speaker 3>Scott Besson said recently at the Economic Club of Minnesota

0:14:39.200 --> 0:14:41.120
<v Speaker 3>that they're studying this. The thing that he said that

0:14:41.120 --> 0:14:44.280
<v Speaker 3>people in the industry liked is that this is not

0:14:44.360 --> 0:14:47.080
<v Speaker 3>a divestiture. They're not going to make companies sell homes

0:14:47.080 --> 0:14:47.920
<v Speaker 3>they already.

0:14:47.560 --> 0:14:50.480
<v Speaker 1>Own bygones or bygones. We're not going to have a

0:14:50.600 --> 0:14:52.400
<v Speaker 1>force sale here.

0:14:52.840 --> 0:14:57.240
<v Speaker 2>Besson's remarks also raise questions about which institutional investors this

0:14:57.360 --> 0:15:00.040
<v Speaker 2>ban might apply to. Would it be targeted at the

0:15:00.120 --> 0:15:03.720
<v Speaker 2>large firms who own thousands of homes or even smaller

0:15:03.720 --> 0:15:05.720
<v Speaker 2>investors who own more like twelve.

0:15:06.000 --> 0:15:10.960
<v Speaker 1>So we will decide what the correct level is. Is

0:15:11.000 --> 0:15:14.000
<v Speaker 1>it a dozen homes? Is two dozen? What makes you

0:15:14.040 --> 0:15:14.880
<v Speaker 1>an aggregator?

0:15:15.320 --> 0:15:18.080
<v Speaker 2>With the policy idea now on the table and Trump

0:15:18.160 --> 0:15:21.200
<v Speaker 2>teasing more information to come at the World Economic Forum

0:15:21.200 --> 0:15:24.840
<v Speaker 2>meeting in Davos next week, some major players are taking

0:15:24.880 --> 0:15:26.960
<v Speaker 2>potential regulation seriously.

0:15:27.360 --> 0:15:31.160
<v Speaker 3>The industry is in bargaining mode. They're talking amongst themselves

0:15:31.520 --> 0:15:34.760
<v Speaker 3>and trying to come up with things that they can

0:15:34.800 --> 0:15:39.400
<v Speaker 3>offer the administration and a potential deal. And they're hopeful

0:15:39.560 --> 0:15:42.800
<v Speaker 3>that this is a transactional administration and there's something that

0:15:42.880 --> 0:15:43.640
<v Speaker 3>can get done.

0:15:43.920 --> 0:15:47.600
<v Speaker 2>Because if legislation to ban institutional investors from the housing

0:15:47.640 --> 0:15:51.160
<v Speaker 2>market makes its way through Washington, Patrick says it could

0:15:51.200 --> 0:15:54.360
<v Speaker 2>have real bipartisan support and momentum behind it.

0:15:55.000 --> 0:15:58.280
<v Speaker 3>I think it's very likely that someone will introduce a bill.

0:15:58.400 --> 0:16:00.840
<v Speaker 3>I think there's a pretty decent chair as it will pass,

0:16:01.440 --> 0:16:06.120
<v Speaker 3>and I think that'll leave the landlords in the position

0:16:06.640 --> 0:16:09.960
<v Speaker 3>of challenging the constitutionality.

0:16:08.960 --> 0:16:09.360
<v Speaker 1>Of a band.

0:16:09.840 --> 0:16:13.920
<v Speaker 2>But the other big question is whether tackling this issue

0:16:14.080 --> 0:16:16.880
<v Speaker 2>will actually make it easier for people to buy and

0:16:16.920 --> 0:16:17.680
<v Speaker 2>rent homes.

0:16:18.240 --> 0:16:21.960
<v Speaker 3>I would say, in terms of sort of more mainline research,

0:16:22.000 --> 0:16:24.520
<v Speaker 3>as I take it in, this is pretty low priority.

0:16:25.160 --> 0:16:27.680
<v Speaker 1>There's not many macro economics who are going to point

0:16:28.080 --> 0:16:33.680
<v Speaker 1>to institutional buyers as a major factor in America's problems

0:16:33.720 --> 0:16:38.480
<v Speaker 1>with housing affordability. Those you know, major factors continue to

0:16:38.560 --> 0:16:42.760
<v Speaker 1>be a lack of supply, a lack of good options

0:16:42.920 --> 0:16:47.080
<v Speaker 1>in particular geographies. You know, when it comes to home ownership,

0:16:47.200 --> 0:16:50.800
<v Speaker 1>high interest rates are still, you know, the principal problem

0:16:51.040 --> 0:16:53.920
<v Speaker 1>that buyers are struggling with.

0:16:55.080 --> 0:16:58.320
<v Speaker 2>Congress has proposed ways to address some of these other factors,

0:16:58.360 --> 0:17:02.160
<v Speaker 2>like housing supply legislation, like its Road to Housing Act,

0:17:02.480 --> 0:17:05.600
<v Speaker 2>which passed the Senate last year with bipartisan support, but

0:17:05.720 --> 0:17:08.200
<v Speaker 2>was stripped from the Defense spending bill that Trump signed

0:17:08.240 --> 0:17:12.600
<v Speaker 2>in December. Now, lawmakers and the House Financial Services Committee

0:17:12.720 --> 0:17:16.240
<v Speaker 2>are trying to push forward another bipartisan housing package.

0:17:16.480 --> 0:17:19.280
<v Speaker 1>What Senator Elizabeth Warren told me is that the Trump

0:17:19.320 --> 0:17:22.359
<v Speaker 1>administration has taken no moves to try to move the

0:17:22.400 --> 0:17:26.200
<v Speaker 1>needle on the housing bill, the major housing bill that's

0:17:26.240 --> 0:17:30.200
<v Speaker 1>been before Congress, and she said that she does not

0:17:30.480 --> 0:17:35.840
<v Speaker 1>think that you astray somewhat isolated post on social media

0:17:36.800 --> 0:17:40.840
<v Speaker 1>really moves the ball or indicates that the Trump administration

0:17:41.119 --> 0:17:44.680
<v Speaker 1>is focused on this issue.

0:17:46.440 --> 0:17:49.800
<v Speaker 2>For now, Wall Street investors may just need to wait

0:17:49.840 --> 0:17:52.040
<v Speaker 2>and see what Trump says next.

0:17:52.400 --> 0:17:54.720
<v Speaker 3>It's historically been an industry that likes to keep its

0:17:54.720 --> 0:17:58.520
<v Speaker 3>head down and try to avoid attention. I think what's

0:17:58.520 --> 0:18:01.119
<v Speaker 3>happening now is forcing it at least some of the

0:18:01.119 --> 0:18:03.919
<v Speaker 3>companies to step out and try to argue for themselves.

0:18:04.160 --> 0:18:06.840
<v Speaker 3>And being such a small share of the housing market

0:18:06.880 --> 0:18:09.600
<v Speaker 3>cuts both ways for these companies. On the one hand,

0:18:09.760 --> 0:18:12.120
<v Speaker 3>they've often said, why are you guys worried about us?

0:18:12.400 --> 0:18:16.680
<v Speaker 3>We're tiny? But as a potential band gained some momentum,

0:18:16.760 --> 0:18:19.840
<v Speaker 3>or if it gains momentum, you can kind of turn

0:18:19.880 --> 0:18:22.320
<v Speaker 3>that idea around. And on some level, I think there

0:18:22.320 --> 0:18:24.800
<v Speaker 3>are lawmakers who will say, why should I pick a

0:18:24.800 --> 0:18:30.800
<v Speaker 3>fight with the president? You're tiny.

0:18:35.400 --> 0:18:38.359
<v Speaker 2>This is the Big Take from Bloomberg News. I'm Sarah Holder.

0:18:38.720 --> 0:18:41.360
<v Speaker 2>To get more from the Big Take and unlimited access

0:18:41.400 --> 0:18:45.200
<v Speaker 2>to all of Bloomberg dot com, subscribe today at Bloomberg

0:18:45.280 --> 0:18:49.320
<v Speaker 2>dot com slash Podcast offer, thanks for listening. We'll be

0:18:49.359 --> 0:18:49.879
<v Speaker 2>back tomorrow