In The Wake Of The Great Recession, Wall Street Has Purchased Hundreds Of Thousands Of Single-Family Homes.

MetLife Investment Management estimates that institutional investors will control 40% of U.S. single-family rental homes by 2030. It is also believed that Wall Street needs to step back from the market, according to a group of Washington, DC, lawmakers.

‍

“The point we are trying to make here is that we don't want private equity companies buying single-family homes in California's 17th Congressional District,” said Rep. Ro Khanna, a Democrat who represents that district. A leading author of the Stop Wall Street Landlords Act of 2022, Khanna is one of the main sponsors of the bill. “It's outrageous that Wall Street is buying up single-family homes using your tax dollars,” he told Trade Algo.

‍

As a result of the fallout from the 2008 financial crisis, the single-family rental industry was given government support at the beginning of its existence. According to Steven Xiao, an assistant professor of finance and managerial economics at the University of Texas at Dallas, "the fact that these foreclosed properties were being offered at such a low price attracted these institutions to create a portfolio out of them."

‍

Thousands of homes have been bought by Tricon Residential, Progress Residential, American Homes 4 Rent, and Invitation Homes since the early 2010s. A number of built-for-rent communities have also contributed to the increase in housing supply in some cases.

‍

It has been reported that some of these companies have been financed by private equity firms such as Blackstone and investment managers such as Pretium Partners.

‍

“There is almost a captive market here,” according to Jordan Ash, director of Labor-Jobs and Housing at the Private Equity Stakeholder Project. "They have been quite explicit about the fact that people will be shut out of the homebuyer's market and they will become perpetual renters as a result."

‍

The National Association of Realtors (NAR) has sent out these calls as a result of fierce housing inflation that has hit several Sun Belt states, including Texas, Florida, and Georgia.

‍

There is evidence that the prices in the Sun Belt markets have outpaced national rent inflation figures, according to research conducted by Zumper for Trade Algo. There was a significant increase in the rent for a two-bedroom detached home between January 2020 and January 2023 in Tampa, Florida, 43% in Phoenix, and 35% near Atlanta. Across the country, the increase was 24%.

‍

According to the industry's advocates, they do not control enough market share to be able to dictate prices in any market that they enter. The national single-family rental market in early 2022 will be dominated by about 5% of large institutions, according to analysts.

‍

MetLife Investment Management forecasts that institutions will hold about 7.6 million homes by 2030, or more than 40% of all single-family rentals.

‍

It is likely that some companies will withdraw from the real estate market in the short term as concerns about a correction mount. Blackstone's chief operating officer, Jon Gray, told Trade Algo in a December 2022 interview: "You will see some selling from us in the near future," he added.