According to MetLife Investment Management, by 2030, institutional investors could control 40% of single-family rental homes in the US. And a group of lawmakers in Washington, D.C., thinks Wall Street should step back from the market.
“What we’re saying is that private equity is not buying single-family homes,” said Rep. Ro Hanna, a Democrat who represents California’s 17th congressional district. Khanna is the lead author Stop the Wall Street Landlord Act of 2022. “What’s outrageous is that your tax dollars are helping Wall Street buy up single-family homes,” he told CNBC.
The single-family rental industry began with government support after the 2008 financial crisis. “It was that rare opportunity that attracted institutions to build a portfolio out of these foreclosed properties,” said Stephen Xiao, associate professor of finance and managerial economics at the University of Texas at Dallas.
Tricon Residential, Progress Residential, American Homes 4 Rent and Invitation Homes have each purchased thousands of homes since the early 2010s. They also added to the housing supply in some cases with built for community 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 untapped market,” said Jordan Ash, director of jobs and housing at the Private Equity Stakeholder Project. “They’ve been very clear that people are being locked out of the home buying market and are going to be perpetual renters.”
The calls came after strong housing inflation hit many Sun Belt states, including Texas, Florida and Georgia. according to the National Association of Realtors.
According to research compiled by Zumper for CNBC, prices in their Sun Belt markets have outpaced national rates of rent inflation. Between January 2020 and January 2023, rents for a two-bed detached home increased by about 44% in Tampa, Florida, 43% in Phoenix, and 35% near Atlanta. This compares to a 24% increase across the country.
Industry defenders argue that they do not control enough market share to dictate prices in any market. At the beginning of 2022, large institutions owned approximately 5% of the nation’s 14 million single-family rental units, according to analysts.
According to MetLife Investment Management’s 2022 forecast, these institutions could house about 7.6 million homes by 2030, or more than 40% of all single-family rental units in the market.
However, in the short term, some companies may withdraw from the real estate market as correction problems intensify. “You’re going to see us make some sales,” said John Gray, Blackstone’s chief operating officer, in CNBC interview in December 2022.
Follow up video above to learn about the growth and future of corporate landlords in the United States.