Home Markets How Wall Street bought single-family homes and put them up for rent

How Wall Street bought single-family homes and put them up for rent

by SuperiorInvest

According to MetLife Investment Management, institutional investors may control 40% of US single-family homes by 2030. And a group of Washington DC lawmakers believe Wall Street needs to get out of the market.

“We’re saying don’t buy single-family homes with private equity,” said Rep. Ro Khanna, a Democrat who represents California’s 17th congressional district. Khanna is the lead author Stop Wall Street Landlords Act of 2022. “It’s outrageous that your tax dollars are helping Wall Street buy single-family homes,” he said in an interview with CNBC.

The single-family rental industry started with government support in the wake of the 2008 financial crisis. “It was this rare opportunity that attracted institutions to build portfolios out of these foreclosed properties,” said Steven Xiao, assistant professor of finance and managerial economics at the University of Texas at Dallas.

Since early 2010, Tricon Residential, Progress Residential, American Homes 4 Rent, Invitation Homes have purchased thousands of homes. In some cases, they also added housing to the offer communities built for rent.

Some of these companies are funded by private equity firms such as Blackstone and investment managers such as Pretium Partners.

“It’s almost an involuntary market,” said Jordan Ash, director of Labor-Jobs and Housing at the Private Equity Stakeholder Project. “They’ve been very explicit about how people are being priced out of the home buying market and becoming perpetual renters.”

The challenges come after soaring housing inflation has hit many Sun Belt states, including Texas, Florida and Georgia, according to the National Association of Realtors.

Prices in their Sun Belt markets beat national rent inflation data, according to research compiled by Zumper for CNBC. Between January 2020 and January 2023, rents for a two-bed family home increased 44% in Tampa, Florida, 43% in Phoenix, and 35% near Atlanta. This compares to a national increase of 24%.

Industry advocates argue that they do not control enough market share to dictate prices in any market. Large institutions owned roughly 5% of the 14 million single-family rentals nationally at the beginning of 2022, according to analysts.

Institutions may own approximately 7.6 million homes by 2030, or more than 40% of all single-family rentals in the market, according to MetLife Investment Management’s 2022 forecast.

However, in the short term, some companies may retreat from the real estate market as corrections multiply. “You’re going to see some of us get sold,” said Jon Gray, Blackstone’s chief operating officer December 2022 interview with CNBC.

Follow up video above to learn about the rise and future of corporate landlords in the United States.

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