If Kathy Hochul can tackle corporate power in housing, so can your state

Hochul, by no means a populist, supports limiting Wall Street home ownership and eliminating algorithmic rent-fixing.

By Pat Garofalo, Director of State and Local Policy at the American Economic Liberties Project

In her State of the State address last month, New York Gov. Kathy Hochul announced her support for two key interventions into housing markets: Limiting the ability of private equity firms and other institutional investors to purchase single-family homes, and eliminating the use of third-party algorithms to set rental housing prices.

“Shadowy private equity giants are buying up the housing supply in communities across New York, leaving everyday homebuyers with fewer and fewer affordable options,” Hochul said . “I'm proposing new laws and policy changes to put the American dream of owning a home within reach for more New Yorkers than ever before.”

This is a bit of a surprise. During her time in office, Hochul, with the exception of admirable work reining in the power of Big Tech alongside Attorney General Tisch James and the legislature, has been no friend to efforts aimed at reducing the power of dominant corporations or powerful financiers. In 2022, she kiboshed a proposed ban on non-compete agreements in the state, reportedly because of Wall Street’s opposition, and 2023, gutted a right-to-repair law, limiting its scope at the behest of Silicon Valley and the electronics industry. She’s also continually pushed to expand large, egregious corporate tax subsidies.

It’s very significant, given that history, that Hochul has come out so forcefully in favor of pushing back on big money’s move into single-family homes, as well as banning third-party algorithmic rent-setting tools. New York would be the first state to take such steps if these two measures are signed into law, instantly making Hochul a national leader in the battle to reduce the power of large corporations and corporate landlords to hike housing prices.

For years now, economic tracking has shown that institutional investors such as hedge funds and private equity firms are buying up single-family homes to either flip or convert into rental housing. The Wall Street Journal claimed investors bought more than 25 percent of the available homes across the country in 2022, and a recent study found that private equity firms were responsible for 44 percent of single-family home flips in 2023. The Federal Trade Commission estimates that more than 30 corporations currently own more than 1,000 homes each.

In New York, medium or large investors purchased nearly 5 percent of the available homes between 2018 and 2022. According to several roundups of the available research, these purchases raise home prices and rents in the areas where they’re concentrated. Rental properties owned by institutional investors and big management corporations are also associated with inescapable junk fees and other unfair tactics, pushing up their effect on rental prices even further.

Similarly, the ability of large corporate landlords to use third-party algorithms – of which RealPage is the most prominent purveyor – to coordinate on rent prices, pushes up rental costs, as alleged in federal, state, and private lawsuits across the country. One economic analysis found RealPage alone is allegedly responsible for double-digit rent hikes within specific metro areas. A Biden administration study pegged the economic bottom line effect of algorithmic price fixing at $3.8 billion in 2023, or about $70 per month for the average renter.

Already, San Francisco and Philadelphia have passed local statutes to limit the use of price-fixing algorithms, and 17 state legislatures including Minnesota and Colorado are considering bills similar to those Hochul called for. But New York has the opportunity to be the first to accomplish both if it moves quickly.

Why did Hochul come around so emphatically on these measures? I’m not in her head or her inner circle, of course, but it would appear to be the simultaneous rise of two political factors: First, the very real possibility of a strong primary challenger from within the Democratic Party, potentially from her own lieutenant governor, that can focus on her ties to big money and rising costs. Second, New York’s rightward swing during the last general election, and Hochul’s own relatively close election win in 2022, signaling a severe distaste with the status quo in the state.

Pivoting to affordability and challenging entrenched economic interests can help Hochul on both flanks, shoring up traditionally liberal support while also potentially stopping the bleeding amongst those New Yorkers who are concerned about the nation’s affordability crisis and drifting away from the Democrats as a result. A poll released last week found four out of ten New York City residents saying paying the bill for the roof over their heads is their biggest economic challenge, with almost 80 percent agreeing that the cost housing has worsened over the past several years.

Whatever the reason, Hochul should be commended for suggesting such aggressive steps, and New Yorkers should press their legislators to send bills to her desk as soon as possible. Other state governors – of both parties – should follow her lead.