Press Release Inequality Private Equity

Meet the REITs: The Tax-Supported Driver of Higher Costs in Nursing Homes, Hospitals, Hotels

August 01, 2022

Contact: KL Conner, 202-281-4159Mail_Outline

Washington DC — One overlooked factor driving up the costs of nursing homes, hospitals, and hotels is Real Estate Investment Trusts (REITs). But REITs are about to step into the limelight in a new study published today by the Institute for New Economic Thinking (INET) and the Center for Economic and Policy Research (CEPR).

The Role of Public REITs in Financialization and Industry Restructuring, by Cornell University’s Rosemary Batt and CEPR’s Co-Director Eileen Appelbaum, shows how REITs aggressively buy up property assets and manage them to extract wealth at taxpayers’ expense. Their growth has a powerful impact on the US economy and productive enterprises, especially in markets where REITs have a major presence: nursing homes, hospitals, and hotels.

REITs were given tax-exempt status to facilitate retail investing in the real estate market: buy real estate through market transactions, and collect the rent. Batt and Appelbaum reveal how REITs use that tax exempt status to undercut commercial real estate transactions, buy up local property, and consolidate the property and their corporate tenants—including private equity-owned hospitals and nursing homes—into national or global corporations. 

In short, REITs produce extraordinary profits with little or no transparency. They are important financial actors, controlling over $3.5 trillion in gross assets and over 500,000 properties in the US, yet remain under the regulatory radar. REITs directly or indirectly shape their tenants’ decisions or business strategies, and in turn, outcomes for consumers, patients, and employees.

“While these strategies may be technically legal, they undercut the original intent of the laws,” said co-author Appelbaum. “Taxpayers deserve a clear assessment of how much they are subsidizing yet another asset class that may be contributing to greater inequality in the US economy.”

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