PRIVATE EQUITY PARTNERS TARGET $5 BILLION IN RENTAL HOUSES

Toronto-based Tricon Residential Inc., which owns apartment buildings and about 25,000 rental houses across North America, has partnered with Pacific Life Insurance, the Teacher Retirement System of Texas, and an unnamed foreign investor to buy even more houses.
The three will contribute as much as $1.55 billion to the new effort, which will combine with Tricon’s capital to give the group about $5 billion in purchasing power to buy as many as 18,000 homes off the real estate market and offer them for rent.
“We get 6,000 calls a week for a home and we’ve got only 200 available,” Tricon CEO Gary Berman told The Wall Street Journal.
“We want to take advantage of that demand,” he said.
Tricon and its partners expect to buy about 6,000 houses a year for each of the next three years. Tricon will continue building rental housing developments on its own and buying houses direct from builders, some before they’re even built, and will have about 50,000 houses in its portfolio by 2025, the WSJ estimated.
As home prices have skyrocketed through the last several months, reaching a median of $363,000 in June, according to the National Association of Realtors, rental rates have kept pace.
Stringent mortgage lending requirements have frozen tens of thousands of households out of home ownership, but those families still want the space that suburbs and exurbs afford, especially for those newly liberated to work from home.
Tricon, as well as rental giants American Homes 4 Rent and Invitation Homes all report record occupancy rates, the WSJ said.
However, American and Invitation cater to households with six-figure incomes.
In contrast, Tricon looks for tenants making $60,000 to $100,000 a year. The company believes that those renters will need longer to save enough to be able to buy a home, which turns them into long-term tenants and reduces turnover.
Private equity firms began buying rental homes in batches in 2008, during the Great Recession, and have kept adding to their inventories since then.
As demand for suburban rentals soared during the 2020 crisis, rental firms amassed billions in capital from investment funds looking for returns both safer and stronger than those offered by volatile equity markets.
The firms raked in those investments and kept on buying. (See “Blackstone Extends Reach into Housing Market,” Trends Journal, 21 June 2021.)
Now, in Houston, Miami, Phoenix, and other prime markets, one in every five houses is being bought by a person or entity that will not live on the property, the WSJ reported.
TRENDPOST: Fewer people qualify to buy a home now because lending requirements have tightened (“Mortgage Market Poised to Slow,” Trends Journal, 18 May 2021). At the same time, private equity firms are richer than ever (“Blackrock Posts 49-Percent Earnings Rise in First Quarter,” Trends Journal, 20 April 2021) and are directing more and more cash into the rental housing industry.
As we have reported, equity firms are snapping up the most desirable houses in the most competitive markets. This will keep tens of thousands of houses off the market for years to come that otherwise would be available to individuals and families as wealth-building investments in the American Dream.
Rental housing is a new avenue for the Bigs to leverage their wealth and to make more money at the expense of the peasants of Slavelandia who barely make living wages working for multinationals that monopolize much of the economy. Clearly, as the facts prove, with the Bigs in charge, the small business opportunities that were once the foundation for people to build the American Dream have dramatically evaporated.