The House Committee on Financial Services, led by Chairwoman Maxine Waters, Subcommittee on Oversight and Investigations held a hearing on June 28, 2022, entitled, “Where Have All the Houses Gone? Private Equity, Single Family Rentals, and America’s Neighborhoods.”
According to the subcommittee chair, Al Green, the committee found that “private equity companies have bought up hundreds of thousands of single-family homes and placed them on the rental market. This removes from the housing market, homes that might otherwise have been purchased by individual homeowners.”
Two high-profile targets of the committee’s recent investigations include real estate investment trusts (REITs) Invitation Homes Inc. INVH and American Homes 4 Rent AMH.
According to the Committee Memorandum, the subcommittee's investigation found that corporate ownership of single-family rental homes rose significantly following the 2008 financial crisis, growing 3% annually since 2010, with the fastest year-over-year increase being in the third quarter of 2021.
In October 2021, the subcommittee sent a survey to the five largest owners of single-family rentals in the U.S.: Invitation Homes, American Homes 4 Rent, Cerberus Capital Management’s FirstKey Homes, Pretium Partners’ Progress Residential and Amherst Residential.
The survey requested national-level quarterly data, from March 31, 2018, through September 30, 2021, on issues such as the total number of properties each company owns, their methods of acquiring and selling homes, and the value of bonds offered to investors. The survey also requested data from each company on the timeframe for late fees, tenant income, tenant demographics, and eviction rates in the zip codes where the company owned the most rental properties.
The committee analyzed the national-level and ZIP code-level data from each company to understand the industry and company-specific trends over time and analyzed estimate data from the U.S. Census for the same five-year period.
Based on the survey data, the committee found these companies had an aggregate 27% net growth in their housing stock over the survey period, representing a total net property gain of 76,235 single-family rental homes.
These companies acquired homes through multiple channels, including the Multiple Listing Service (MLS), foreclosure auctions and constructing build-to-rent homes. The companies primarily sold homes through bulk sales to other institutional investors, with only 0.5% of their properties being sold to tenants.
The survey data showed these companies purchased homes in neighborhoods with lower home prices and higher rents. The average median home value in the top 20 ZIP codes where these companies owned homes was $198,766, approximately 14% below the national median home value of $229,800. Meanwhile, the average median gross rent in the five companies’ 20 top ZIP codes was $1,259, approximately 13% above the national median of $1,096.
The committee’s investigation also found that the companies increased fees per lease by approximately 40% over the survey period, from $147.20 in 2018 to $205.29 in 2021.
While the committee hasn’t yet recommended any specific action regarding private equity ownership of single-family homes, some possible solutions that were recommended during the hearing include rent controls for corporate owners of apartments and single-family rentals, required disclosures of beneficial ownership and providing some type of incentive for owners to sell to individuals rather than institutional investors.
Photo: courtesy of Gage Skidmore on Flickr.
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