By December, the Census Bureau predicts that 3.8 million people will likely be evicted from their homes. Rents have increased 23% since July 2020, though last month the corporate media is bragging that they “fell” by 0.1%. Out of control inflation effectively amounts to an additional rent increase, and the billionaire class is eagerly trying to trigger another recession.
Last fall, voters in the Twin Cities showed overwhelming support for rent control. In Minneapolis, voters passed a process to develop a strong rent control policy, though Mayor Frey ensured renters could not directly craft a proposal. In neighboring St. Paul, voters actually passed what amounted to the strongest rent control in the country, capping rent increases at 3%, and excluded developer-friendly loopholes like “vacancy decontrol” and exemptions.
Within days after the election, Democratic Party politicians were already working with corporate landlords and big developers to gut these two proposals. In Minneapolis, City Council unanimously set up a “work group” which allowed big developers to directly shape the future policy. In St. Paul, the City Council did a similar thing, except to retroactively “review” (read as “water down”) the policy that passed by popular vote. Socialist Alternative MN played a leading role in fighting for strong rent control alongside renters, unions, faith groups, working class homeowners in a coalition called Minneapolis United for Rent Control.
After months of backroom dealmaking, the exclusively Democratic Party-run St. Paul City Council has announced an amended policy that amounts to an utter betrayal of last fall’s vote, which was driven by renters and working-class people. The amended proposal includes full “vacancy decontrol”, which incentivizes evictions by allowing landlords to raise the rents as much as they want in between tenants. It also includes a 20-year exemption for new construction, which incentivizes gentrification.
As a first step, all elected officials who claim to represent renters should vote “no” against this corporate rent control policy and rigged process, and host mass meetings of renters and working class homeowners to discuss how to rebuild a grassroots movement to win strong rent control.
However, this sell-out betrayal should be a warning: as millions already face eviction, the Democratic Party is already doubling down on “trickle down” housing economics. With the looming threat of a recession on the horizon, it’s essential that renters and working-class homeowners build independent movements, rooted in grassroots organizing and direct action, to fight foreclosures and evictions.
Wall Street Speculation Fuels A New Housing Crisis
Politicians on both sides of the aisle spent trillions to stave off economic collapse during the pandemic. Even though only a fraction of this spending ended up in the hands of working-class people, it had a huge impact. However, the lion’s share of the pandemic bailouts went to enriching CEOs, inflating stock prices, and directly to Wall Street. Trillions of dollars of stimulus ended up in a housing price bubble.
Wall Street speculators and working-class people looking to buy a home competed for the same zero-interest loans being offered by the Fed. In 2020, the Federal Reserve owned $1.4 trillion in mortgage back securities, and was hoping to reduce that amount. By 2022, the Fed owned $2.7 trillion. This home-buying frenzy squeezed renters, bringing rental vacancy rates to historically low levels.
Total spending on housing – rent payments, mortgages, repairs, new constructions, etc – amounts to 18% of GDP in the United States, and most analysts now clearly state the housing market is in a recession. Today, home values in 97% of U.S. cities are overvalued. Now that interest rates have increased, mortgages have gotten more expensive, leading to a slowdown in home buying.
New home sales last month were down 30 percent from the previous year. The chief economist at Fitch Ratings said “no one’s really sure how bad it will get”, but JP Morgan, Goldman Sachs and Moody’s Analytics all predict 10% declines in home-related spending. For comparison, the 2007 financial meltdown brought 26% declines in home-related spending.
However, declining home prices do not automatically help renters, because the people who own homes at inflated prices can’t afford to sell. This phenomenon is called “house rich, cash poor”, and a recent poll found 59% of new homeowners feel this way. This means less spending in other sections of the economy.
If a new recession brings mass layoffs or if wages stay stagnant, these homeowners could feel compelled to refinance their valuable mortgages to get access to desperately needed cash. The LA Times reports that 90% of the subprime loans in the leadup to the 2007 financial collapse originated this way.
The Crisis Facing Renters
This home buying, frenzy followed by stagnation in the housing market, spells disaster for renters. On average, there are 14 renters competing for every apartment in 2022. There are now well-documented cases of “bidding wars” in major cities, where renters offer to pay above the asking prices of the apartment.
A huge factor to this is an underlying lack of housing supply. There is a 7 million unit shortage of apartments priced for working-class people. Builder confidence is at the lowest level since the 2008 meltdown. Only one million units of public housing exist in America after decades of chronic underfunding and neglect by both Republicans and Democrats, even though in cities like Vienna, public housing is still highly desired.
The apartment vacancy rate nationally is the lowest in decades. In New York City, it is below 5% (1% in Manhattan). In the Bay Area and Los Angeles, it’s around 3.5%. It’s not just limited to urban centers. The vacancy rate in Orange County and the Inland Empire is around 2.5% currently.
The average renter now needs to make $24.90 an hour in order to spend less than a third of their income on rent, yet because of Democratic Party inaction, a third of all workers still make less than $15. Out of control inflation eating away into the value of every paycheck amounts to an effective rent increase, even if your landlord didn’t increase the rent by a penny.
Millions of people are threatened with evictions because of rising rents. Formal eviction through the courts are returning to pre-pandemic levels. Many renters are getting priced out in between leases. New leases are an average additional $300 or more per month compared to $160 per month for renewing an existing lease. In cities where there was a 1% rent increase over the previous three months, there was a 2% increase in the eviction rate.
Many corporate landlords were already illegally evicting people during the pandemic, which is why building a movement to actually resist evictions is so essential. One congressional investigation looked into the abusive practices of four corporate landlords, who each own tens of thousands of rental homes. They carried out 14,744 illegal evictions between March 15, 2020, and July 29, 2021 while collecting $2 million in forgiven Paycheck Protection Program funds.
Property managers were told to intimidate and lie to tenants about their rights. Property managers carried out this directive with evident glee, with one writing to an executive and a regional manager that he “love[d] getting to say that this means the eviction may happen sooner than expected and seeing the look on their faces 😀.”
Stop the St. Paul Sellout: Build an Effective Resistance to Wall Street’s Next Housing Crisis
The Democratic Party presided over the last foreclosure and eviction crisis, and they did nothing. Now as a new crisis emerges, they are once again refusing to take meaningful action, and in cities like Minneapolis and St. Paul, they are fighting tooth and nail to block any grassroots attempts to protect renters.
First and foremost, we need to be clear to renters about what is going on. In St. Paul, the Councilmember closest to unions and renters rights groups, Mitra Jalali, has introduced amendments in opposition to the sell-out deal. However, her amendments, like reducing the new construction exemption from 20 years to 15 years, do not fundamentally challenge the pro-corporate character of the proposed policy. She should clearly call for a “no” vote, and begin mobilizing renters to fully oppose the rotten deal.
In Minneapolis, there are three DSA members elected onto City Council, and two additional City Councilmembers who support passing a strong rent control policy that caps rents at 3%, and excludes policies like “vacancy decontrol” and exemptions for new construction. They need to clearly oppose the St. Paul sellout, reverse their previous support for a similar “work group” in Minneapolis, and start mobilizing Minneapolis renters to support renters in St. Paul.
Socialist Alternative Seattle City Councilmember Kshama Sawant is an example of how elected officials can overcome entrenched, corporate opposition in an elected government. Often starting as the sole vote in favor of an issue, Kshama has won victory after victory for working-class people by running independent of the Democratic Party, and basing her strength on the power of social justice movements.
Unions, social justice organizations, and working-class homeowners need to unite with renters to form grassroots anti-eviction committees in every building. These committees should be based on the power of mass organizing and direct action, even to the point of physically resisting evictions if necessary. An effective anti-eviction movement will primarily confront Democratic Party politicians, which is why political independence is essential. Socialist Alternative has direct experience with this during the last recession.
Finally, we need to bring down rents and mortgage payments, and we can do this by building millions of high quality, permanently affordable, environmentally friendly homes that are socially owned and paid for by taxing corporations and billionaires. We need to bail out working-class homeowners whose mortgages are worth more than the value of their homes because of speculation. We need democratic control of housing finance to truly guarantee housing for human need, not Wall Street greed.