A new book on venture capital and private equity explores how those two forces have helped push homeownership further out of reach for millions of Americans. And the author believes that amid the deregulation and job cuts of the second Trump administration—staffing at the Department of Housing and Urban Development may be cut in half—consumers are even more likely to get a bad deal.
“They’re playing with fire,” says civic technologist Catherine Bracy. “It’s catastrophic on a scale that I don’t have words for. What that means for the rental and mortgage market . . . it could put 2008 to shame.”
In Bracy’s new book, World Eaters, she traces how venture capital and private equity came to be, how they impact the health of our economy and the labor market, and how they exacerbate inequity and the housing crisis. She chose that title because she believes the approach of venture capital—a sort of casino mentality, where big bets are encouraged despite the risks—is subsuming the economy, “eating industries and infecting the mindset of how people think about what the economy should be.”
Bracy, who cofounded the nonprofit advocacy group TechEquity in 2016, has long pushed for more consumer protections and better transparency around tech business models. World Eaters traces how post-Great Recession opportunities allowed tech and VC money to get into the single-family rental home market and begin building out new housing products, including fractionalized ownership and rent-to-own pathways. These models have had mixed results. Fractionalized ownership firms like Landa have gotten into legal trouble, while Divvy, the massive rent-to-own company was subject to significant consumer complaints; it has been sold, with much of its staff laid off earlier this year.
Bracy has a warning about how technology may further impact the housing market during the Trump administration.
“Housing is the cornerstone of a normal person’s economic well being, so when you start to undermine consumer protections, when you start to . . . allow corporations to do whatever they want to do, that’s only going to be worse for consumers,” she said.
How Property Tech Can Pressure Aspiring Homeowners
Bracy argues that in many cases, property tech, or proptech, firms have presented themselves as companies seeking to help consumers who don’t traditionally qualify for homeownership.
But Bracy argues, there’s a reason these customers were deemed too risky for traditional financial products, and perhaps they shouldn’t be placed in a position where they’re trying out untested or unregulated ideas.
She believes the housing market is entering an even more unregulated phase that will allow a larger variety of tech firms to push new products and services; many consumer regulators with AI and tech experience have been let go from the federal government, and new federal guidance seeks to encourage alternative financing arrangements.
“Even with the assumption that the government was there to provide consumer protections or civil rights protections [before this administration], there was still a feeling it was ripe for mass exploitation,” she said. “Now there’s none of that, and there will be more desperate people, so you’re increasing the market size.”
Venture capital in real estate startups was basically nonexistent in 2008, Bracy notes, but by 2017, the market globally had grown to $9 billion, demonstrating the impact that these funding models and firms had on the market. She argues that while a number of issues, like zoning and construction costs, contribute to high housing costs, the VC models that have made single-family rental housing a large and growing asset class are exacerbating the problem.
Bracy’s coverage of the housing market in World Eaters pays particular attention to a new generation of firms utilizing cryptocurrency and blockchain, such as LoftyAI. (Lofty didn’t respond to attempts to reach it for an interview.) Many focus on the idea of fractionalized ownership, and utilizing this technology to split the cost of ownership among many and make it easier to be a real estate investor, theoretically democratizing access. But Bracy argues that consumers often don’t understand the risks of their investments, and unwieldy ownership and operations mean the tenants living in these investments can suffer from nonresponsive landlords.
She’s particularly alarmed at the legal grey area these firms reside in—there’s no real precedent in real estate securities law. That’s compounded by the fact that Trump has repeatedly professed his support for crypto, including a recent plan to create a national crypto reserve.
“I would watch the crypto in the housing space,” Bracy said. “These models are terrifying, and they’re only going to get easier to build, scale, and replicate.”
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