February 28, 2024

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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

Institutional investors may control 40% of single-family rental homes in the United States by 2030, according to MetLife Investment Management. And a group of lawmakers in Washington, D.C. believes that Wall Street needs to step back from the market.

“What we’re saying is we don’t have private equity buying single-family homes,” said Rep. Ro Khanna, a Democrat representing California’s 17th congressional district. Khanna is the lead author of the book Stop the Wall Street Owners Act of 2022. “What’s infuriating is that your tax money helps Wall Street buy single-family homes,” he said in an interview with CNBC.

The single-family rental industry got its start with government support in the fallout after the 2008 financial crisis. “It was the rare opportunity that attracted institutions to build a portfolio of these foreclosed properties,” said Stephen 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, and Invitation Homes have purchased thousands of homes. They have also added to the housing supply in some cases with 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 a captive market,” said Jordan Ash, director of work, jobs and housing at the Private Equity Project. “They’ve been very vocal about how they’re going to keep people out of the home buying market and are going to be permanent renters.”

The calls come after violent housing inflation hit several Sun Belt states, including Texas, Florida and Georgia, According to the National Association of Realtors.

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Prices in Sun Belt markets have surpassed national figures for rent inflation, according to research compiled by Zumper for CNBC. Between January 2020 and January 2023, rents for two-bed detached homes increased about 44% in Tampa, Florida, 43% in Phoenix, and 35% near Atlanta. This compares to a 24% increase nationwide.

Defenders of the industry argue that it does not control enough market share to dictate prices in any market. Large organizations owned approximately 5% of the 14 million single-family rentals nationwide in early 2022, According to analysts.

By 2030, institutions may own about 7.6 million homes, or more than 40% of all single-family rentals on the market, according to a 2022 forecast by MetLife Investment Management.

However, in the short term, some companies may back out of the real estate market as fears of a correction mount. “You’ll see some selling on our part,” John Gray, Blackstone’s chief operating officer, said in an interview with CNBC in December 2022.

Watch the video Above to learn about the rise and future of US real estate owners.