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For years, private equity firms have been buying single-family houses to rent out at premium prices, a trend that accelerated during the COVID War as the firms broadened their portfolios to include apartment buildings and even student housing.
As home prices have skyrocketed, investment companies have swooped in, offering cash on the spot to sellers and often buying houses out from under families that already had made an offer.
They then rent the houses at top prices, making it harder for renters to save enough cash to make a down payment on homes of their own—if they can find any for sale in their price range.
We have documented the companies’ tactics and expanding reach in articles including:
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- “Real Estate Investors Choosing Single-Family Rental Homes” (13 Oct 2020)
- “Invitation Homes to Buy $1 Billion Worth of Houses This Year” (1 Jun 2021)
- Rents for Single-Family Homes Reach 15-Year High (1 Jun 2021)
- “Blackstone Extends Reach Into Housing Market” (29 Jun 2021)
- “Private Equity Partners Target $5 Billion in Rental Houses” (27 Jul 2021)
- “Residential Rental Rates Skyrocketing” (10 Aug 2021)
- “Rents Soar as Investors Buy Properties and Raise Rates” (14 Sep 2021)
- “Investors Now Targeting Off-Campus Student Housing” (14 Sep 2021)
- “Rents Soaring. What’s Next?” (21 Sep 2021)
- “Single-Family Rental Homes: Investments Galore” (16 Nov 2021)
- “Home Sales Up as Money Gang Gobbles Up Houses” (23 Nov 2021)
- “Rents on the Rise” (11 Jan 2022)
At late May’s three-day conference sponsored by the National Rental Home Council, Donald Povieng of Empire Communities said his company’s plan to build 500 or 600 rental homes in a suburb of Austin, Tex., a suburb north of Austin could grow to 1,000.
CEO David Singelyn of American Homes 4 Rent cited “insatiable demand” for his company’s 58,000 rental houses.
However, Wall Street’s increasing presence in the housing market is drawing the eye of regulators, a change that the industry dreads, Business Insider reported.
Regulation “is the greatest threat to what we do,” Jay Byce, co-founder of ResiBuilt Homes in Atlanta, told the gathering.
Housing activists and legislators have accused the firms of crowding out individuals and families from the market and rent-gouging.
In response, private equity landlords point out that they provide a service that many families are eager for until those renters can buy their own places.
In February, the U.S. Senate convened a hearing on investor-landlords’ impact on the U.S. homes market.
“Private-equity firms, corporate landlords, investors saw a captive market,” Senator Sherrod Brown (D-Oh) said in the hearing. “They bought up properties. They raised rents. They cut services.”
“They priced out family homebuyers,” he added. “All too often, they force renters out of their homes.”
At the May landlords’ conference, protestors from the Center for Popular Democracy stormed the conference hall stage, held it briefly, and demanded better living conditions at mobile home parks and limits on rent increases.
This helped convince attendees that their industry needed not a policy shift but an image makeover.
“We, as an industry, need to do a better job of educating the public at large,” CEO Richard Ross of Quinn Residences, said after the interruption.
“I’m talking about city councilmen, mayors, people that live in our communities and run our communities,” he added. “We’re not the problem. We’re the solution. We, as an industry, need to do a better job of communicating that message.”
The National Rental Home Council is looking for a public relations firm to craft a messaging strategy, executive director David Howard said to BI.
About 60 percent of U.S. apartments are owned by real-estate investment trusts, corporations, and investor partnerships; roughly 24 percent are owned by individual investors, according to the National Multifamily Housing Council.
Eventually, partnerships will own a majority of single-family homes, consultant John Burns of John Burns Real Estate Consulting, told BI.
“There’s no doubt about it,” Burns said.
In an interview with Insider in February, Gary Berman, the CEO of Tricon, expressed a similar view.
“We’re still in the really early days of where single-family rental is going,” CEO Gary Berman of Tricon, which owns about 31,000 rental homes, said in a BI interview.
“It’s going to be a much bigger industry in 10 years, much more institutionalized,” he predicted.
TRENDPOST: Is the U.S. destined to become a nation of renters?
The price of single-family homes will fall as interest rates rise, but they will not crater. The reason: for years following the home market crash that sparked the Great Recession, the U.S. housing market has built too few homes.
Now that demand has surged during the COVID War, “it will take years to build our way out of the supply-and-demand imbalance, Robert Frick, an economist at the Navy Federal Credit Union, said in a Wall Street Journal interview that we quoted in “Housing Market: Sales Up, Fewer Homes for Sale” (22 Feb 2022).
Another limiting factor: there is not much open land left to build 1960s-style housing tracts on any more, as we reported in “Middle-Income Buyers Too Poor to Buy Homes” (15 Feb 2022) and “Pace of April Existing Home Sales Slowest in Two Years” (24 May 2022).
As a result, the housing squeeze will continue for years, leaving only the wealthy and deep-pocketed investors to own property, as it was during the days of tenant farmers and lords of the manor.
The working class and continually shrinking middle class will find it more difficult, or will be denied outright, the chance to fulfill the American dream of home ownership.