Business Insider on Wall Street Firms Snapping Up Every Single Home They Can Find
July 1, 2021
Business Insider recently reported how Wall Street firms have been buying up thousands of homes — to rent them out to the same population they’re outbidding.
Business Insider, June 16, 2021: Wall Street firms like BlackRock are snapping up every single American home they can find.
Fox News anchor Tucker Carlson dedicated a Friday-night segment to naming and shaming BlackRock, saying it had a role in robbing everyday Americans from the dream of homeownership. Blackstone, the largest and most prolific Wall Street player in single family rental homes, led by the Trump ally and major fundraiser Stephen Schwarzman, “created an institutional strategy out of the wreckage of the financial collapse of 2008, gobbling up foreclosed homes at auctions and renting them out for a profit.’
It is Blackstone, not BlackRock, that led the way for institutional investors to enter the single-family-rental market. In the aftermath of the 2008 downturn, investment firms moved in, acquiring single-family homes on the cheap to rent them out and reap a profit. Blackstone, the giant private-equity and alternative-asset investment firm, led the charge. It founded Invitation Homes as its single-family-rental arm in 2012 to purchase suburban houses and amassed a portfolio in just a few years that numbered in the tens of thousands.
Blackstone exited its investment in Invitation Homes in 2019, but began investing again last year with its acquisition of a stake in Tricon Residential. Earlier this month, Blackstone acquired rental home company Home Partners of America in a $6 billion deal.
Because there aren’t enough homes to purchase, companies have pursued other paths to acquire single-family rentals in which they don’t compete as directly with regular homebuyers.
The institutional single-family-rental market may have been born on the courthouse steps, with firms buying up foreclosures and other on-the-market homes, but companies have diversified their paths to acquire properties as the rest of the nation has experienced a major home-inventory shortage.
In some markets, including hot residential areas like Phoenix, Atlanta, and South Florida, Home rental companies have been particularly voracious and have had an outsized presence. Several brokers told Insider they routinely saw major SFR investors outcompete average homebuyers to purchase homes in those areas.
Rental home companies are in the middle of a period of historic growth, giving them greater influence over the housing market. Investors — a group that includes single family rental buyers — spent a record $77 billion on home purchases in the six-month period spanning the fourth quarter of 2020 and the first quarter of 2021, according to a recent report by the brokerage firm Redfin.
The activity means that investors will have more influence on the nation’s housing market than ever before, which could compound the lack of supply on the market and the pressure on prices.
Investment firms are really beating out average homebuyers. Average bidders often rely on mortgage financing to close on a home purchase, but banks have been leery to increase the size of the loans they extend to keep pace with prices in a fast-rising market, which places a growing burden on homebuyers to make up the difference with cash.
Major SFR companies have turned that situation to their advantage by offering to pay all cash up front and forgoing other contingencies that can put them ahead of regular bidders, such as due-diligence periods that are normally granted for home inspection before the property goes into contract.
Researchers found that corporate owners of single-family rental properties were 8% more likely to file for an eviction than smaller landlords. The neighborhoods with the highest eviction rates had large Black and Hispanic populations. They also found that some of the largest landlords filed evictions on as much as one-third of their properties a year, well above the average eviction rate for Atlanta.
More recently, the major institutional single-family owners have filed thousands of evictions during the pandemic, even though there is a federal moratorium on evictions, the watchdog group Private Equity Stakeholder Project said, citing eviction cases in multiple counties. Two large operators, Progress Residential and Front Yard Residential, which are both owned by the private-equity firm Pretium Partners, were found to have filed for many more evictions in counties that were majority Black than in those that were predominantly white.
In March, the Federal Trade Commission and Consumer Financial Protection Bureau said they would investigate whether “major multistate landlords are forcing people out of their homes despite the government prohibitions or before tenants are aware of their rights.”
Photo: Christopher Todd Communities