Corporations Want You to Rent, Not Own. Can Lawmakers Stop Them?

If you rent a house when you would rather own, pin some of the blame on corporate landlords.

The 10 biggest institutional investors owned more than 430,000 single-family rental homes at the end of 2023, and they continue to acquire houses to rent out to middle-class families. Corporate landlords seek to dominate the neighborhoods they target, simultaneously reducing the inventory of houses to buy while expanding the stock of houses to rent.

Members of Congress have introduced bills to force the largest institutional investors to dramatically cut their holdings.

Renting costs less than buying

The United States suffers from a housing shortage of between 1.5 million and 5.5 million units, depending on whom you ask. Institutional investors benefit from the shortage because it pushes prices higher, making homeownership unaffordable for many. The median home resale price rose to a record $419,300 in May, according to the National Association of Realtors. Mortgage rates have remained above 6.5% since May 2023.

Consequently, it costs more to buy a starter home than to rent in the 50 largest metro areas, according to a report in March. According to Zillow, the median rent for a three-bedroom house was $2,200 in June. That’s $32 less than the principal-and-interest payment on a median-price house at the average mortgage rate in May — after making a 20% down payment. But who has $83,860 for a 20% down payment on a $419,300 house? The combination of high prices and interest rates forces many would-be homeowners to rent.

‘Significant market power’

Renters occupy about 15.9 million single-family homes, according to the Census Bureau. Corporate landlords own about 3% of them. That doesn’t seem like much, but corporate-owned rental houses are concentrated in a few metro areas, mostly in Florida, Georgia, the Carolinas, Texas, Arizona and California. In metro Atlanta, just three companies owned 19,000 houses at the beginning of 2022, for an 11% market share, according to research by Georgia State University geographer Taylor Shelton.

“These companies own tens of thousands of properties in a relatively select set of neighborhoods, which allows them to exercise really significant market power over tenants and renters because they have such a large concentration of holdings in those neighborhoods,” Shelton said in a news release.

Shelton says the corporate landlords’ market share has increased since then. “The reality is that the corporate stranglehold on the single family rental market in places like Atlanta has only gotten worse,” he said in an email.

Raising rents, charging fees

Invitation Homes owned 12,726 rental houses in metro Atlanta at the end of 2023. The company exercised its market power by raising the average rent there 7.1% last year, according to the company’s annual reports, while the area’s median home price went up 1.3%, according to the National Association of Realtors. Invitation also stacks up to $145 in mandatory monthly fees on top of rent: up to $40 for smart home technology, $9.95 for quarterly air filter delivery, $9.95 to manage utility billing and up to $85 for internet.

Corporate landlords raise rent and charge ancillary fees because they can. “These institutions have outsized power in our housing market, and that influence is growing,” said U.S. Sen. Jeff Merkley, D-Oregon, in an email. “By 2030, Wall Street could control 40 percent of U.S. single-family rental homes.”

How corporate landlords get so many houses

Big corporations have two main methods of accumulating rental houses: buying homes when the owners list them for sale and build-to-rent. In recent years, build-to-rent has dominated.

In the build-to-rent model, a company constructs houses that are intended for the rental market from the time the company buys the land. According to an Urban Institute analysis, construction was started on 120,000 build-to-rent houses in 2022 — 12% of all single-family starts.

The other way these companies collect houses is by buying them on the resale market. When they do, corporations have the resources to outcompete folks who browse for houses online.

Progress Residential is the largest corporate landlord, with 85,000 houses. It bought most of them on the resale market, competing with ordinary people. But Progress has an edge over people, a company executive explained in a 2021 episode of the Leading Voice in Real Estate podcast.

“We have an incredibly effective system for acquiring homes one at a time,” Progress’s then-CEO, Chaz Mueller, said. Every 15 minutes, the company got an update of newly listed homes in its markets. When an algorithm identified a house that met its criteria, the company’s acquisition team made an offer “within a couple of hours of the home going on the market. So we’re able to analyze it very quickly, make an offer. Our offers are all cash, very flexible closing, basically whenever the seller wants to move out,” Mueller said.

A bill to make them sell

Merkley, the Oregon senator, has introduced a bill that would force corporate landlords to sell their houses. The End Hedge Fund Control of American Homes Act “is intended to give all families a fair chance to buy a decent home in a decent community at a price they can afford, because houses should be homes for families, not a profit center for Wall Street,” Merkley said in an email.

His bill would make corporate landlords sell at least 10% of their inventories of single-family rental homes every year for 10 years or face steep tax penalties. A similar bill was introduced into the House, sponsored by U.S. Rep. Adam Smith, D-Washington.

Are corporate landlords giving people what they want?

Corporate landlords point out that they build houses in a country that needs millions more dwellings. “We continue to do our part in solving the housing shortage by providing new premium housing options in desirable family-friendly locations across the country,” said David Singelyn, CEO of AMH, the third-largest corporate landlord with about 60,000 houses, in a recent earnings call.

Sean Dobson, CEO of The Amherst Group (fourth-biggest, 50,000 houses), made a similar point when he was interviewed for Barry Ritholtz’s Masters in Business podcast in March. He described a family that outgrows an apartment, but can’t afford to buy a house. Then the family rents from Amherst: “These are homes that [the] resident would have a very difficult time getting into without us,” he said.

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