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Wall Street wants to buy your block

After the 2008 financial crisis, home prices had plummeted while the central bank reduced interest rates to support the economy. Wall Street suddenly had access to cheap capital and cheap distressed assets.

For much of the past decade, interest rates have been lower than the rental yield on most properties. That meant the corporate-landlord business model was lucrative. Companies backed by private-equity firms like Blackstone and Pretium Partners purchased hundreds of thousands of homes.

Institutional players, like Tricon Residential, Progress Residential, American Homes 4 Rent and Invitation Homes, have extensive portfolios of rental homes across the country, currently owning some 700,000 SFRs, or 5% of the market’s inventory, according to the MetLife report.

Given the recent surge in inflation and the Federal Reserve’s raising of interest rates in response, many ordinary homeowners could be forced to sell, as these financial pressures seem likely to persist. MetLife believes institutions will step in to buy many of the newly available homes, along with others that will be constructed in the coming years, giving the Wall Street-backed investment firms control of 7.6 million SFRs — 40% of the market — by 2030.

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The impact on rent

Researchers from the University of California, Berkeley dug into the public financial reports from institutional landlords and found reason to believe that ordinary Americans are bearing the brunt of the ongoing Wall Street takeover of residential housing.

Institutional landlords, according to the 2022 study, enjoyed a period of easy profits after the 2008 financial crisis because many of the single-family homes they bought were cheap and foreclosed.

Now that pool has dried up, but the pressure to deliver returns hasn’t.

So corporate landlords have pushed rents higher, added ancillary fees that increase the burden on tenants and even appealed property tax assessments to reduce their costs at the expenses of the surrounding communities.

The researchers recommended the government get involved to prevent corporate landlords from consolidating too much market power. They recommend better transparency about homes that are owned by corporate entities, better protections for tenants and strict limits on the number of homes institutions can buy within a market.

Will the government step in?

There are some signs that the government is considering the impact of corporate landlords on American families. Democratic representatives Ro Khanna, Katie Porter and Mark Takano introduced the Stop Wall Street Landlords Act in October 2022.

The bill could potentially place limits on institutional capital in the SFR market. Corporations and private equity firms may have to pay higher land transfer taxes or potentially lose the mortgage interest deduction benefit.

“What we’re saying is don’t have private equity buying up single-family homes,” Khanna told CNBC in an interview earlier this year. “What’s outrageous is your tax dollars are helping Wall Street buy up single-family homes.”


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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.


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