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Apartment buildings are the best-performing real estate investment this year, as we reported in “Commercial Real Estate Investments Hit Record Level. Read Between the Lines” (1 Feb 2021), and investors are panning for gold in the hottest U.S. real estate patch—the Sunbelt.
Landlords are following migration patterns, as aging Baby Boomers go south and businesses and workers are lured by the region’s low taxes, business-friendly laws, and light regulatory hand.
About a quarter of the $335.3 billion invested in U.S. multifamily housing last year went to just four Sunbelt locales: Atlanta, Dallas, Houston, and Phoenix, The Wall Street Journal reported, with foreign money backing the purchase of thousands of flats across the region.
In some other southern markets, investment in apartments doubled in 2021 from 2020, according to a report by CBRE, a real estate consulting firm.
Emblematic of the trend, Blackstone Group—one of the world’s largest commercial property owners—is paying $5.8 billion in cash to buy Preferred Apartment Communities, which owns 40 apartment complexes with 12,000 units in Florida, Georgia, North Carolina, and Tennessee, among other states.
The company also owns 54 shopping centers, but 70 percent of the deal’s value is based on its apartment holdings.
Blackstone is making the purchase through its Blackstone Real Estate Income Trust, which has raised $50 billion since 2016, most of it from private investors.
Pennsylvania’s Morgan Properties teamed with Saudi-backed Olayan Group to create a $17.5-billion catalog of flats, including 2,000 middle-income units in Tampa, Fla., where rents are soaring as much as 30 percent annually, the WSJ reported.
The American division of Germany’s Union Investment Real Estate bought upscale rental units in Fort Lauderdale, Fla., last year and is jacking rents by 13 percent when lease renewals come due.
Demand for apartment blocks to buy far outstrips the number available for sale, the WSJ said.
Some buyers, such as RXR Properties in New York, are skirting the problem by buying the buildings before their construction is completed.
Read more about the crisis in apartments’ availability and skyrocketing rents in:
- “Apartment Building Boom Targets Affluent Tenants” (21 Jan 2020)
- “Apartment Rents Climbing” (20 Jul 2021)
- “Blackstone Pays $5.1 Billion to Buy Rent-Controlled Apartments” (20 Jul 2021)
- “Can’t Pay the Rent? It’s Getting Higher” (21 Nov 2021)
- Rents on the Rise (11 Jan 2022)
…and other articles listed in this issue’s article “Housing Market: Sales Up From December, Fewer Homes for Sale.”
TREND FORECAST: As we have pointed out repeatedly, private equity’s heavy hand in the housing market will continue to price home ownership beyond the reach of average American income earners as well as what used to be called “middle income” earners.
Private equity firms are buying thousands of houses and tens of thousands of apartments solely because they can, and now do, charge premium rents, as we reported in “Apartment Rents Rising, Bigs Buying Them Up” (16 Nov 2021).
Paying those premium rents makes it less and less likely that young families or anyone with a modest or moderate income will become a homeowner unless they inherit property from a relative.
TREND FORECAST: Private equity’s presence as America’s landlord will deprive hundreds of thousands of U.S. families and individuals of the chance to stake their claim on the American dream: owning a home.
The implications go beyond having to ask permission to paint a room or waiting for the landlord to approve a plumbing expense.
It means that those hundreds of thousands of families will not be able to use their real estate to build equity, which has long been the chief means of savings and wealth creation for America’s middle class.
Private equity firms are creating generations of cash-poor renters, not homeowners.