Inflation in home prices and healthcare is perhaps the biggest reason that swing voters are shifting to the Democrat side in elections. With the midterms less than ten months away, Republicans need to take initiative against a culprit: private equity.
Last week Trump announced his brilliant plan to ban private equity firms from buying single-family homes, which has put their prices out of reach for young adults. Gen Z is the pivotal voting bloc that decides elections now, and if they cannot afford a home then they are more likely to vote against Republicans.
“People live in homes, not corporations,” Trump observed. “For a very long time, buying and owning a home was considered the pinnacle of the American Dream,” but the buying up of these homes by private equity speculators has made homes unaffordable for Gen Z.
Wealthy private equity managers typically enjoy a tax rate lower than what Gen Z pays, which is the opposite of how tax rates should be structured to encourage work by young adults. Private equity managers are allowed to take much of their compensation under the lower capital gains rate, rather than the higher income tax rate that everyone has to pay on their earnings from manual labor or learned professional work.
Depreciation deductions, which are also unavailable to most family homeowners, give private equity a further incentive to invade residential real estate while outbidding Gen Z for homes. Last year private equity obtained additional tax perks from Congress, such as the ability to deduct as an expense from taxes 100 percent of the value of certain property in the first year of its acquisition, known as bonus depreciation.
While nationwide institutional investors reportedly own only 3 percent of homes, this is a misleading statistic that includes millions of homes far away from jobs for young workers. In areas highly sought by Gen Z like Atlanta, Charlotte, Dallas, Houston, Jacksonville, and Tampa mega-investors reportedly control up to 27 percent of single-family home rentals.
Private equity firms are sharks at extracting profits for themselves, and they jack up rental and purchase prices for these homes while Gen Z is unable to compete financially. Often private equity firms swoop in and pay cash to outbid a young couple struggling with debt.
Private equity controls trillions of dollars managed without transparency to the public, while exploiting tax loopholes unavailable to most Americans. Private equity managers do things like buy a hospital to strip it of its assets, and then sell the underlying property off to build luxury apartments, as happened in Philadelphia.
Trump’s announcement caused the stock value of Blackstone, a trillion-dollar asset management company, to drop by an astounding 9.3 percent, then regaining some of its losses before losing 6 percent on the day. This demonstrates the significance of how private equity firms have been profiting, while driving up the prices of single-family homes, to the detriment of Gen Z.
The unaffordability of homes for young adults is more than an economic crisis that is deciding elections in favor of Democrats like the New York City Mayor Zohran Mamdani, who won 75 percent of the Gen Z vote. Home unaffordability also causes Gen Z to delay or not have children, which worsens the crisis of our already-declining birth rate.
Teddy Roosevelt rejuvenated a declining Republican Party at the turn of the last century when he took on powerful monopolies perceived as exploiting the public. TR, whom Trump has praised for doing “great things,” became a champion of the common man much as Trump has been.
In his first term, Trump spoke against the tax advantages enjoyed by private equity, and sought to close those loopholes. At the time private equity had its own senators, including Mitt Romney and Pat Toomey from that sector, but they are gone now after voting to convict Trump on the second impeachment which the American public rejected by re-electing him.
Private equity has been driving up the cost of healthcare, too, as it buys up practices and then cuts services, raises prices, and tries to monopolize specialties. From 2013 to 2022, 82 private equity firms acquired 423 oncology practices, which are necessary to treat cancer.
One study found that practices acquired by private equity firms charged 5.3 percent more for office visits than the practices that continued under physician ownership. There was a shocking 50 percent increase in spending on radiation therapy after private equity invaded this field.
The number of physician practices owned by private equity has increased from 816 in 2012 to more than 6,000 today, while private equity owns nearly 488 hospitals. One study in November 2022 by the MIT Sloan School of Management discovered that the negotiated prices between hospitals and insurance companies jumped 32 percent higher after private equity purchased the hospitals.
John and Andy Schlafly are sons of Phyllis Schlafly (1924-2016) and lead the continuing Phyllis Schlafly Eagles organizations with writing and policy work.