Private equity (PE) firms have scooped up residential homes in a real estate market that has shut out a lot of buyers because interest rates are now over 7%.
Unlike the resources of most American families in the market today, PE firms have shown that cash remains king by grabbing homes in depressed markets and those showing a decline in value. Their more recent target, however, is drawing national scrutiny, with some saying the PE investment opportunities in home healthcare, including nursing homes, are a potential problem for the healthcare industry in general.
In 2021, according to Kaiser Group Holdings Inc.’s (OTCMKTS: KGHI) healthcare arm, PE firms spent $206 billion on healthcare, including eye care clinics, dental management companies, doctors' offices and hospices. But the entry into nursing homes has drawn the most attention.
In February, President Joe Biden said the practice of Wall Street firms buying up nursing homes would end on his watch. According to a report in Skilled Nursing Homes, studies have linked private equity involvement to a decline in the quality of care in long-term care settings, though admits that further research is needed to understand the broader implications for the sector. A Kaiser Health News (KHN) investigation found that organizations owned or managed by PE firms have paid more than $500 million in fines since 2014 to settle at least 34 lawsuits under the False Claims Act.
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