In today’s housing market—nearly everywhere across the country—it is hard to find rental or for-sale housing that is affordable to working families. The price of homes has jumped by more than 20 percent since 2021, and rents have soared in many areas as well. When combined with fast-rising interest rates, and on top of the nation’s existing shortage of affordable homes, the market has pushed decent housing beyond the means of millions of people—especially those earning low-to-moderate incomes and households of color.

But that’s not the whole story. So, let’s be clear about the rest of it: it is absolutely predatory.

Private equity firms and foreign investors have been taking thousands of what might otherwise be affordable for-sale homes off the market, converting them to higher cost rental units, and walking away if and when those portfolios become too costly to operate.

They are taking much the same approach to affordable rental properties, especially naturally occurring affordable housing (NOAH) with no federal requirements for affordability. Investors buy distressed properties, jack up rents to generate quick profits, push out tenants who can’t afford the hikes, ignore maintenance issues, and hide behind limited liability corporations (LLCs) when the code violations pile up.

In other words, rather than investing to develop and preserve quality housing and strong communities, they are destabilizing both for-sale and rental markets, exacerbating race and class inequities, and damaging the long-term prospects of cities and towns across the country.

Speculation isn’t new, of course (read more in Gambling with Homes or Investing in Communities, a LISC research report on New York’s experience). Black and Brown communities, in particular, have long been the target of predatory investors. But the danger as of late has been escalating. Last year, investors purchased 24 percent of all for-sale residential properties—a massive jump from the 15-16 percent that had been the norm for the prior decade. Think about the impact of absentee owners at that scale and the loss of quality housing that it signals.

As a country, without question, we need to build more affordable housing. But our communities also need strong housing preservation strategies in place to respond to predatory threats. In Cincinnati, for example, the port authority stepped up at the end of last year to acquire 194 units of distressed single-family housing from a failing out-of-town landlord—a firm that had swept in following the last foreclosure crisis to purchase the properties at a steep discount.

Thankfully, the city recognized the risk, and the port authority had the financial capacity to act quickly. It reached out to community groups and to LISC to figure out how to stabilize the properties (some vacant, many occupied by renters), as well as to plan pathways to homeownership in the future. Importantly, the transaction connected directly to the city’s long-term public-private strategy to preserve and develop quality affordable housing.

Unfortunately, by the time local officials recognize what’s happening, it may be too late to intervene in the way that Cincinnati did, even if resources are available. That’s why preservation strategies should not only focus on protecting assets for new buyers, but also on helping existing families stay in their homes. Home repair financing programs, for example, can help owners fix a leaky basement or replace a failing roof, so they are less likely to feel like they have to sell, and speculators are less likely to gain a foothold.

Read the full article about dark money by Denise Scott at LISC.