A Word on the Wealth Gap: Where Scripture Directs Us on Housing Policy

Chris Butler

Posted on

May 1, 2023

There was a widespread outcry from the people and their wives against their Jewish countrymen. 2 Some were saying, “We, our sons, and our daughters are numerous. Let us get grain so that we can eat and live.” 3 Others were saying, “We are mortgaging our fields, vineyards, and homes to get grain during the famine.” 4 Still others were saying, “We have borrowed money to pay the king’s tax on our fields and vineyards. 5 We and our children are just like our countrymen and their children, yet we are subjecting our sons and daughters to slavery. Some of our daughters are already enslaved, but we are powerless because our fields and vineyards belong to others.” 

Nehemiah 5:1-5, Christian Standard Bible

There was famine in the region around Jerusalem circa 450 B.C., and the people of God were living in the immediate aftermath of its destruction. Nehemiah chapter five records the agony and protest that rose up among one group of regular, working-class Hebrews against their wealthy kinsmen. The famine, for which neither working-class nor wealthy citizens could be blamed, had created an opening for the more liquid members of the community to take control of the most democratized asset in the nation of Israel: their land. God had equitably distributed land to the tribes and households of Israel in the establishment of the chosen people in the promised land. Each family had its inheritance to pass down through the generations. By dispossessing their brethren of their land, the wealthy set was condemning the children of their poorer kin to slavery and rendering the heads of those households “powerless.”

This striking account of economic exploitation – wealthy citizens taking advantage of their poor brethren during a time of economic hardship – in many painful ways mirrors the current crisis that looms over the U.S. housing market. The threat of generational exploitation becomes more imminent every day. To be sure, as explained in the Sept. 1, 2021, Brookings Institution report “Homeownership, racial segregation, and policy solutions to racial wealth equity,” by Rashawn Ray, Andre M. Perry, David Harshbarger, Samantha Elizondo, and Alexandra Gibbons:

Lower Black homeownership and the racial wealth gap are byproducts of systemic racism, including the legacies of slavery, Jim Crow segregation, redlining, and other anti-Black policies that targeted Black people and predominately Black neighborhoods. Residential segregation facilitates the extraction of wealth and other vital resources that fuel economic and social mobility. The loss of wealth in Black communities hastens a downward socioeconomic spiral.

It is crucial that the church and all people of good will rise up to advocate for the cause of the poor and disenfranchised. We must demand that our elected leaders address the issue with swift and just policy.

Many of us are used to thinking of economic exploitation as the wealthy profiting unjustly from the economic activities of the poor. But economic exploitation also describes when the rich knowingly and willingly profit from the distress of the poor. Such is the situation as permanent capital has aggressively leveraged the economic turmoil caused by decades of pro-corporate economic policy from and accelerated by the Covid-19 pandemic to buy up large swaths of single family homes.

Over the past decade, institutional investors have been increasingly buying single-family homes as rentals, with a significant uptick in the last five years. This trend began after the 2008 financial crisis when large firms like Blackstone Group and American Homes 4 Rent started purchasing foreclosed homes to convert into rental properties.

But things picked up as the impacts of the pandemic began to be felt throughout the American economy. In 2021, permanent capital represented nearly one in seven home purchases in the 40 largest US metropolitan areas, the most in at least two decades, according to Redfin. In the first quarter of 2022, investors comprised between one-quarter and one-third of home sales in Atlanta, Jacksonville, Charlotte, Phoenix, and Miami. Meanwhile, as The Washington Post reported on Feb. 9, 2023:

Rising interest rates, soaring home prices and decreasing inventory aren’t the only things making it difficult to buy a home these days.

Last year, nearly a third of U.S. homes were purchased with cash, according to data provided by the realty company Redfin. That’s an 8 percent increase from 2021, continuing a trend that started during the pandemic. The share of homes bought with cash is now at levels not seen since 2014, when the housing market was on the rebound after the foreclosure crisis and the Great Recession.

The rise of all-cash buys comes at a time when the average home buyer is increasingly likely to be White, wealthy and older and the proportion of first-time buyers is at its lowest in more than 40 years.

For years it has grown increasingly difficult for regular families to compete with permanent capital in the housing market. But recent policy decisions at the Federal Reserve threaten to make the situation completely unrecoverable. After a year of steadily increasing interest rates (the Fed hiked the rates seven times in 2022), inflation has not been significantly impacted. That means that we can expect the Fed to continue raising rates (or at least resist taking them back down anytime soon). Higher standard interest rates will almost certainly cause layoffs, increase rents, and result in impossibly high mortgage interest rates for families looking to purchase a home.

The Federal Reserve’s policies could cool markets a bit, decreasing overall home prices.  But those homes will still not be accessible to working families due to high interest rates. Permanent capital, however, does not need to finance the purchase of a starter home. The industry can be expected to be even more aggressive in acquiring residential housing stock as prices drop and families remain locked out of the market.

High inflation, combined with high unemployment and limited access to mortgage lending, creates the worst possible scenario for working families. With fewer opportunities for stable employment and more people facing financial struggles, the gap between the rich and the poor is set to widen. Economic exploitation, in this case, becomes even more pronounced, as the wealthy can leverage their resources more aggressively to take advantage of the vulnerable.

The ramifications of these policies are far-reaching.

A family home is the most democratized asset in the United States. And for many everyday citizens, home ownership is virtually the only hope they have to build family, community, and generational wealth. The inability to purchase a home will not only have immediate consequences; it will impact the financial stability of future generations.

In a world where permanent capital controls a significant portion of the housing market, the possibility of creating a permanent rental class becomes very real. Corporations won’t have kids and need to sell a starter home to move into something bigger. Venture Capital groups will never need to downsize after the children are all grown up and the nest is empty. The situation can become frozen. This means that an ever-growing number of people will be forced to rent homes for their entire lives, further widening the wealth gap and ensuring that generational wealth remains inaccessible to growing numbers of families.

Just as it was in ancient Israel, it may be in the not-too-distant American future: After selling our land to exploiters, they will be free to continue taking advantage of families by increasing rents while decreasing quality and service, since there will be no other options available. The power dynamic will shift heavily in favor of the wealthy, and this could lead to a dangerous, generational cycle of exploitation and decline in social mobility. The outcry from the people of Nehemiah’s day echoes loudly in our own time, “we are subjecting our sons and daughters to slavery…but we are powerless because our [housing] belongs to others”.

The first five verses of Nehemiah chapter 5 are quoted above. But, having considered the injustice being done in the housing market, a responsible observer might relate more closely with verse 6:

“And I became very angry when I heard their outcry and these words.”

Nehemiah serves as a model for those of us in the church. We must, as he did, “rebuke” the exploiters among us. We must advocate strongly for the needs of the poor and demand an end to economically exploitative practices. And we cannot wait until this injustice has had its full effect. It will surely prove significantly more challenging for us to demand the return of lands from permanent capital than it was for Nehemiah to demand the return of land from fellow Jews. Advocacy now can prevent a reality-altering crisis that looms just over the horizon, threatening the economic viability of generations to come.

Chris Butler

Chris Butler is the senior leader of the Chicago Embassy Church Network and has been involved in several efforts to improve educational equity in Chicago. He serves as the founder and executive director of Parent Power Chicago as well as the founder of the Chicago Peace Campaign, which organizes churches and other faith-based institutions to build peacemaking networks in local communities. He and his wife, Aziza, are joyful parents of four children.