Pittsburgh-area congressman wants change as Wall Street snatches homes away from first-time buyers

MUNHALL, Pa. (KDKA) -- For the past few years, Wall Street has been buying up Main Street. Hedge funds and private equity firms are snatching up single-family houses by the thousands and turning them into rental units, driving up home prices and freezing out young, first-time home buyers -- all for the benefit of their investors. 

"This is a whole new model. They own property literally around the country and around the world. You've taken single-family houses, turned it into a rental market, turned it into a way to achieve what in economics is called an economy of scale, pulling money out of each one because of the volume that they own," said Sabina Deitrick of Pitt's Center for Social and Urban Research. 

On Monday, KDKA-TV reported that hedge funds like Magnetar -- a multi-billion dollar private equity firm based in Evanston, Illinois -- are buying up houses here. Magnetar owns a real estate company called Segavepo -- one of four companies that have bought more than 1,000 houses in Allegheny County. Segavepo has purchased 244 houses in the county, renting them out to tenants who have complained to KDKA-TV of shoddy repairs and poor maintenance. 

On top of that, Segavepo has been chronically late on its taxes. The county and local municipalities and school districts have filed more than 130 judgments against the company for non-payment of their property taxes and towns like Munhall are taking stronger actions. 

"Since they've now been delinquent long enough, we're going to prevent any further occupancy permits from being issued," said Munhall Borough Manager Seth Abrams. 

A spokesperson for Magnetar would not comment on KDKA-TV's report, but some in Congress have also seen and heard enough. 

"They're not neighborhood landlords. These are Wall Street landlords. They're not part of our community," said U.S. Rep. Chris Deluzio, D-Aspinwall. He says it's time to rein in these institutional buyers and is working to put an end to their buying spree of single-family homes. 

"We've heard and you've done some good reporting here on some of the complaints of bad services from these Wall Street landlords -- whether it's slow to make repairs, bad conditions, all while jacking up rent. Taking these homes that could be an entry-level home for a family, taking them off the market, turning them into rentals that they're operating as Wall Street entities to jack up whatever profits they can," Deluzio said. 

Deluzio says he's working on legislation to heavily tax these hedge funds making wholesale purchases of single-family homes and limiting their ability to turn them into investment products. He and others want to return those homes to the local buyers and a local families.