Zombie foreclosures. They sound like the dullest disaster movie ever — but, in fact, represent the grim reality for a rising number of Americans. The theory is simple. First, giant real estate funds buy up properties, deliberately allowing them to deteriorate. That takes homes off the market, and drives up prices, especially when demand is so high and supply so persistently low.
The upshot? A bonanza for investors, with firms like Blackstone betting literally billions of dollars on buying up American homes, before renting them out to desperate tenants. And if 28% of US single family homes were sold to investors in Q1 2022, an 8% jump on the previous year, the trend is increasingly popular on the far side of the Atlantic too. Not content with dolling out mortgages, Lloyds Bank apparently has plans to become Britain’s biggest landlord.
Yet as large corporations gobble up a diminishing supply of houses, they pose an enormous threat to would-be homeowners, particularly those Millennials too young to have cashed in the boom of earlier decades. Combined with frequent complaints that these mega-landlords don’t maintain their new purchases — and signs that they’re keen to scoop up even more real estate — much of the Western world edges closer to genuine disaster territory, even if the antagonists are more feudal vampires than undead shamblers.
Housing now dominates political discourse right across the developed world. Among Americans, it now ranks second only to inflation as a leading economic worry. In my native California, almost 70% of residents are concerned about housing costs; in Britain, housing has risen to become one of the top issues for voters — well ahead of defence, security, poverty and crime. That’s hardly surprising: especially under the country’s inflexible NIMBY regime, projections suggest that nearly five million UK households will live in unaffordable accommodation by 2030.
And if the Anglosphere is especially bad in this respect, it’s hardly unique. Studies have found similar problems stalk the European and East Asian markets too, as prices rise far faster than household incomes or inflation. And if the OECD warns that living standards are bound to “stagnate or decline” in consequence, this is far more than a series of individual catastrophes for the families involved. Rather, the West’s housing crisis, so exacerbated by outfits like Blackstone, has terrifying implications for the maintenance of middle-class democracy.
Small landowners have been the bulwark of democracy for millennia. This was true in the early origins of Athens and Rome, and in the rise of the Dutch Republic during the 17th century, perhaps the first genuinely middle-class society in history. If, however, the rise of property ownership undermined the aristocracy and hastened the end of feudalism, the most dramatic changes came after the Second World War.
Servicemen returning home wanted something better than the dank Victorian apartments they’d inhabited before. Their dreams were embraced, and indeed realised, by a series of progressive governments, often on the Left but sometimes Christian Democratic. There are plenty of examples here: Harry Truman’s GI Bill and Clement Attlee’s welfare state are probably the two most famous, but Australia and Canada pursued similar policies too.
And if President Roosevelt was surely right when he proclaimed that a “nation of homeowners” is unconquerable, the postwar embrace of quality, affordable houses for all provided “the secret sauce” that made liberal capitalism palatable to working people. Throughout the Fifties and Sixties, that was self-evident for those thousands of working-class families that fled the slums of Brooklyn or Wapping, embracing instead a front lawn and back garden in Long Island or its Essex equivalent. “Was there ever such a stealthy social revolution as the rise of this semi-detached suburbia?” wondered the filmmaker John Boorman, recalling his childhood in a South London suburb.
“Was there ever such a stealthy social revolution as the rise of this semi-detached suburbia?”
Now, though, many Western countries are transforming into “rentership” societies — where citizens have plenty of income to enjoy video games or tend to houseplants, but can never accumulate their own brick-and-mortar assets. The broader effect may ultimately resemble a modern form of feudalism, where institutional ownership concentrates control over housing.
If these problems transcend demographics, young people are particularly threatened here. When I ask my students if they feel confident about buying a home here in Southern California, they rarely answer affirmatively. In a recent Harvard poll of 18- to 29-year-olds, housing ranked as the third most important issue overall, just behind inflation and health care. No wonder: nationally, homeownership for people under 35 has fallen steadily since the Great Recession, and is now half that of over 45s. And, to be clear, this is not due to changing priorities, as two-thirds of millennials still yearn to escape to the suburbs.
All this has a predictable number of knock-on effects: starting with wealth accumulation. With property now so expensive, a situation hardly helped by Blackstone and the rest, American home owners have a median net worth over 40 times that of renters. It’s not hard, here, to see the political implications of this economic divide, with renters tending to favour Leftist policies such as rent control and housing subsidies. To put it differently, a class of permanent renters seems tailor-made for fomenting class warfare against an ever-shrinking number of owners.
Indeed, this is precisely the factor that’s pushed an obscure socialist named Zohran Mamdani to the verge of becoming the mayor of America’s largest and most important city. Mamdani’s “cost of living” campaign — based on rent control, free buses, childcare and city-owned supermarkets — seems to some Leftist pundits as a potential path back to power. And why not? As one recent poll found, a majority of people under 40 embrace socialist principles, even as 70% of adults no longer believe the American Dream is even attainable.
This politics of bitterness is arguably exacerbated elsewhere too. The only way many can now buy homes is by relying on the classic feudal formula — “the funnel of privilege”. In the US, after all, Millennials are three times as likely as boomers to count on inheritance for their retirement. In high-price markets like Los Angeles, close to 40% of loans rely on family money for qualification, up from 25% in 2011. For the losers of this economic lottery, resentment is bound to follow.
Of course, it’d be wrong to blame all this on Wall Street or the City. Many forces contribute to higher home prices. That includes immigration — especially the kind of open-door policy faced by Britain in recent years — as well as land-use policies that restrict development. Yet adding big capital to the mix deepens the assault on middle-income aspirations, especially when investors are especially eager to snatch up single-family homes. That, it goes without saying, does much to harden even moderate hearts to free-market ideas, especially when balancing housing with other priorities means that even something as basic as childbearing is now thrown by the wayside.
Nor does the situation look likely to improve in the medium term. As the industry journal Private Equity Real Estate estimates, investors could control as much as 40% of US housing stock by 2030, with similar trends visible in Australia and elsewhere. So pervasive is the trend, in fact, that some lawmakers, including in California, Washington and Georgia, have sought to limit purchases by large real estate outfits. Yet as the radical social theorist Barrington Moore wisely noted half a century ago, “no bourgeois, no democracy”. And if such tweaks are enough to save either remains decidedly unclear, as the stumbling masses look to take revenge.
