House Reps Ask Investors: “Where Have All the Houses Gone?”

Members of Congress are taking a deep dive into the single-family housing market to find out “Where Have All the Houses Gone?” In this investigation, they took a close look at the business practices of the nation’s largest landlords – the institutional landlords that buy huge lots of homes at one time. Although the results show an adverse impact on certain communities and potential homebuyers, housing experts argue that investor ownership of rental property is more of a symptom than a cause. (1) Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review. This investigation began last fall when a subcommittee of the House Committee on Financial Services sent a survey to five of the largest single-family rental companies in the U.S. Asked to participate in this survey were Invitation Homes, American Homes4Rent, FirstKey Homes, Progress Residential and Amherst Residential. The survey dug into things like where they are buying homes, what they are paying, how much rent they are charging, etc. The final analysis used that information along with government data to come up with a few conclusions. Mass Predatory Purchasing The subcommittee just held a hearing on the results last week. Subcommittee Chair, Representative Al Green, said during the hearing: “We have found that private equity companies have bought up hundreds of thousands of single-family homes and placed them on the rental market.” He referred to this practice as “mass predatory purchasing.” He also said:“These corporate buyers have tended to target lower-priced starter homes requiring limited renovation; these homes would likely have been bought by first-time buyers, low- to middle-income home-buyers, or both.” (2) The investigation also found that a disproportionate number of homes have been purchased in communities of color, and communities with a higher number of single mothers. An examination of the top 20 zip codes where institutional investors have purchased show that about 40% of the population is Black while just 13.4% of the overall population is Black. The number of single mothers is reportedly about 30% higher than average. Other findings include rents that are up 40% over three years from 2018 to 2021, and a doubling of the number of tenants who are behind on their rent. Lawmakers were also critical of automated property management, often used by institutional investors. They say if tenants can’t get a hold of someone about a problem, they could be at risk of mismanagement and eviction when problems occur. (3) Investors as a Symptom, Not the Cause Even though the numbers have grown, Representative Tom Emmer sided with landlords, and reminded hearing attendees that 8.6% inflation is having a big impact on housing. He also said that institutional investors still account for a very small percentage of single-family rentals, which appears to mean that they couldn’t possibly be a huge part of the problem. Jenny Schuetz of the Brookings Institution also testified that these big investors are not the cause of the housing gap. She says they are a symptom, because of the high demand for rentals and the critically low inventory of affordable homes. She says: “Private equity firms and other institutional investors benefit from tight housing supply, but they did not create the problem. Local governments across the U.S. have adopted policies that make it difficult to build more homes where people want to live.” The Executive Director of the National Rental Home Council, David Howard, also spoke out at the hearing. He answered the question about where all the houses have gone in a similar way – that they were never built. He also says that “single family rental home providers are not influencing local and national housing market dynamics.” In other words, they are “responding” to housing market dynamics. Collaboration to Find a Solution Howard says that these large landlords along with The National Rental Home Council have been working with the committee, and welcome the opportunity to continue with that collaboration to find meaningful solutions to this problem. In the meantime, landlords are needed to help fill the housing gap. You can find out more about the housing market, the rental market, and the economy by listening to one of my recent webinars. You’ll find a replay for my Q2 2022 Housing Market Update at newsforinvestors.com under the “Learn” tab. And please remember to hit the subscribe button, and leave a review! Thanks for listening. I'm Kathy Fettke. Links: 1 - https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=409611 2 - https://www.marketwatch.com/story/institutional-investors-have-bought-hundreds-of-thousands-of-single-family-homes-many-in-black-communities-critics-say-its-creating-a-generation-of-renters-11656514935 3 - https://nationalmortgageprofessional.com/news/congressional-committee-exploring-where-have-all-houses-gone