Behind the bright lights of the Las Vegas Strip, there’s a growing crisis the locals are all too familiar with. In the outskirts of the city, lower and middle-class Nevadans are finding it increasingly challenging to afford a home.
Displacement is the norm in these neighborhoods. North Las Vegas residents regularly confront exorbitant rents, soaring housing costs, tenant exploitation and, eventually, eviction notices. To purchase a home requires outbidding anonymous cash buyers who pay far above the asking price. One resident of Kings Crossing in Las Vegas says, “everything is becoming so unobtainable.” Lower and middle-class Nevadans of all stripes simply cannot afford to remain in their own neighborhoods.
After the Great Recession of 2008, and again after the COVID-19 pandemic, private equity firms and their subsidiaries flooded Southern Nevada’s struggling single-family housing market. They outbid individual homebuyers by paying cash for homes far above the asking price and leasing to residents at nearly unattainable rents. According to the real estate website Redfin, about 75 percent of investor home sales were cash purchases. Since the housing market has traditionally proven to be a stable investment, private equity firms wielded their vast cash flow to target low-cost residential areas, buy up homes and turn a profit on residents who have few other options.
Real estate data underscores this troubling trend. Institutional investors’ market share in residential real estate is up 8 percentage points in just three years. In Las Vegas, corporate investors now own about 15 percent of single-family homes. In North Las Vegas, that number is upwards of 25 percent.
In other neighborhoods in Southern Nevada, it’s 30 percent. Companies intentionally hoard Clark County residential real estate, using their market power to profit from Nevadans. Home prices continue to soar to record levels, and rent for single-family homes in Las Vegas is upwards of 30 percent above pre-pandemic levels.
To make matters worse, private equity-backed investors target minority communities. These firms buy homes in predominantly Black and Latino neighborhoods, as well as “starter home areas” where young Nevadans would otherwise have bought their first home. Research from the Brookings Institution indicates that private equity firms exacerbate the racial wealth gap in the U.S. by driving Black and Latino homebuyers from the market. In a country where homeownership vastly increases your chances of entering the middle class, private equity’s home-hoarding immensely reduces social mobility.
Research from Rutgers University also reveals that private equity landlords in Nevada have a history of wrongdoings against tenants. They are more likely to delay maintenance and security deposit returns, and much more likely to quickly begin eviction action. It’s virtually impossible to contact private equity landlords, as most of their tenant communication takes place over automated phone calls. Stories that could break one’s heart continue to come out about forced evictions in the greater Las Vegas area.
When it comes to advancing the public interest, private equity firms have a mixed record. Private equity firms now constitute 6.5 percent of U.S. gross domestic product. Indeed, their investments can have positive effects on the economy. Private equity portfolios can help drive solutions to climate change. By acquiring mid-tier companies, private equity firms can consolidate resources to drive innovation.
However, some firms appear intent on gutting companies for their parts, no matter the consequences to the public, including massive job losses. For example, the private equity firm Paine Schwartz recently took over Prima Wawona, a once-thriving farm that was one of the largest stone fruit producers in the United States. After less than three years under Paine Schwartz leadership, Prima Wawona declared bankruptcy and plans to lay off nearly 6,000 employees.
In the retail space, private equity firms are responsible for more than 600,000 lost jobs in the past decade. In one case, a private equity firm imposed debt burdens on Toys “R” Us which ultimately led to its bankruptcy and the loss of about 33,000 jobs. Private equity firms often pursue profits at the expense of the public interest, as is the case in Nevada’s residential real estate market.
By 2030, institutional investors may own close to 40 percent of all single-family rental homes in the U.S. We need broad federal legislation to address the issue and hold private equity firms accountable for their actions that lead to widespread job losses. Let’s hope that our representatives continue fighting to keep private equity investors in check in Nevada and throughout the country.
Trish Nash is the managing broker for Douglas Elliman Real Estate. She also serves on the advisory board of Touro University and was the former chair of the board of the Henderson Chamber of Commerce.
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