Investors bought a quarter of homes sold last year, driving up rents
Investors bought nearly a quarter of U.S. single-family homes sold last year, often driving up rents for suburban families.
The problem is particularly acute in some Sun Belt states amid evidence that investors can often outbid other buyers, keeping starter homes out of the hands of potential owners, especially black suburban and Hispanic families. Some local officials in those states are pushing for more regulation of investor purchases, but many Republican lawmakers oppose such controls.
According to a Stateline data analysis provided by CoreLogic, a California-based data analytics company. This share fell only slightly in the first five months of 2022 to 22%.
Investor purchases doubled or more in Florida, Nevada, Vermont and Washington State from 2020 to 2021. In Vermont, they fell from 7% of sales in 2020 to 17% last year and in Nevada from 18% to 30%.
Five states recorded the highest share of investor purchases. Investors bought a third of single-family homes sold in Georgia (33%) last year, with Arizona (31%), Nevada (30%), California and Texas (29% each) not far behind.
Investor ownership began to grow after the Great Recession of 2008-2009, when large swathes of overbuilt Sun Belt homes were seized and investors snapped them up. Investor ownership rose again last year as demand for pandemic-related suburban housing surged, and investors saw a chance to win bidding wars with cash offers.
In most states, home purchases by investors increased in 2021 and remained high in the first months of 2022. Investors made 29% or more of home purchases last year in Arizona, California , Georgia, Texas and Nevada, and investor buying doubled or more. starting in 2020 for Florida, Nevada, Vermont and Washington.
The Sun Belt has also attracted investors because there are fewer statewide restrictions than in a state like California, which heavily regulates landlord-tenant issues, said Jenny Schuetz, a policy expert at the housing at the Brookings Institution, who has testified in congressional hearings on investor ownership. of hearths.
Local governments need help identifying problematic landlords and drafting new regulations, she added, such as landlord registries and standard lease language requirements that protect tenants.
“They are not ready to deal with this. We need to put more tools in their hands,” Schuetz said.
In northern Las Vegas, Nevada, which is predominantly Hispanic and black, residents have rallied petitions for a ballot initiative limiting rent increases, saying they have been outbid by investors who have raised rents sharply these last years.
The controls were backed by Democratic Gov. Steve Sisolak, who blamed “out-of-state speculators coming to buy homes in our neighborhoods and raise the rent,” and said the North Las Vegas plan could become a model for statewide rent control.
In Georgia, local officials are fighting for more regulation of rental housing, but some Republican lawmakers are seeking a more passive policy. GOP leaders in the legislature, joined by some Democrats, sponsored bills in February that would have preempted local landlord and rent regulations.
The bills would have banned “any restriction” by local government on rental housing, threatening to withhold state funding if violated. The legislation immediately sparked protests from many cities and counties.
The state Senate and House bills both died in committee but could return in another session, said Mayor Bianca Motley Broom of College Park, a mostly black suburb south of Atlanta.
“That’s really been one of the defining issues of the last two years,” Motley Broom said.
Most of his constituents are renters hoping to buy homes, and they were disappointed when a new development of more than 200 homes announced a change to “build-to-let”, meaning the units would be rentals at long term, she said.
“Pre-emption laws tie our hands and essentially force 537 cities, each with unique dynamics, to be force-fed with a cookie-cutter approach,” Motley Broom said.
Michael Malcolm, 65, said he struggled to find affordable rent in College Park as a retired, disabled telemarketing executive. When a landlord raised his rent from $750 to $1,500 two months ago, he found a relative to share his three-bedroom home with after searching in vain for something more reasonable.
“One house we visited was fine when we looked at it. Our budget was $1,500, but within two days it went to $2,000,” he said. “It’s crazy . Yet there are people who come in and pay those rents.
The Georgia Municipal Association, representing municipalities in Georgia, opposes preemption bills that have been introduced, in part so cities can decide on “build-to-let” policies for themselves, Charlotte Davis said. , the association’s deputy director of government relations, speaking at an Atlanta-area housing forum in June.
“It’s been a very heavy-handed approach, going to the state legislature to get ahead of mayors and county commissions and ultimately local residents, because it’s easier to arm the state,” Davis said.
State bill sponsors did not return Stateline calls for a comment.
Owners of large-scale rental homes are often blamed for rent hikes but still make up a tiny fraction of single-family homes, said David Howard, director of the National Rental Home Council in Washington, D.C., a trade group representing landlords. of single-family homes.
“The idea that big, faceless, deep-pocketed outside investors are taking over all the housing markets and dictating rents just isn’t true,” Howard said, speaking about what he has. called half a dozen companies with tens of thousands of homes nationwide.
Data from CoreLogic shows what it calls “mega” investors, with a thousand homes or more, bought 3% of homes last year and in 2022, up from around 1% in previous years, the bulk investor purchases being made by smaller groups. .
U.S. Representative Tom Emmer, a Republican from Minnesota, defended the homeowners during a U.S. House committee hearing on the issue of investor-owned homes in June. Racially diverse suburbs in Minnesota are among those targeted for home purchases by investors, according to a report released last year by the Federal Reserve Bank of Minneapolis.
“We must not forget that single-family rental homes fill a void for a large portion of our country’s population who prefer or need to rent,” Emmer said. “We cannot demonize institutions to facilitate this supply of quality housing that would otherwise be out of reach for many Americans.”
Institutional buying in Georgia has focused on a ring of middle-class townships south of Atlanta, according to research by Brian An, an assistant professor of public policy at Georgia Tech. A reported buy since 2007 was concentrated in the southern suburbs of Atlanta with predominantly black populations, low poverty, good schools, and small affordable homes considered good starter homes.
Institutions began investing in black and Hispanic neighborhoods near Atlanta when unsustainable subprime mortgages led to foreclosures after the Great Recession, said another Georgia Tech assistant professor, Elora Raymond. Raymond’s studies found that investor ownership in some Atlanta-area neighborhoods has led to evictions, gentrification, and the displacement of longtime black residents, with investors seeking higher-income tenants who could pay more. rent to increase their profits.
Schuetz said investor ownership may not be a bad thing in itself, if landlords treat tenants well. Investor interest in homes is a symptom of a larger problem – low supply of homes, she pointed out.
“If 50 people bid on a house, 49 will lose, but they still need a place to live,” Schuetz said.
She said states and localities could create landlord registries, like the one Los Angeles County adopted last year to help local governments recognize which companies or other investors have patterns of tenant abuse with rapid evictions or excessive fees, or neglecting the upkeep of the property.
States and cities could strengthen legal protections for tenants as some professional landlords have been quick to evict when tenants fall behind on rent, said Desiree Fields, an associate professor at the University of California, Berkeley who studies the issues. single family rental.
“States where investor ownership [of rental homes] most important are also states where there are virtually no tenant protections,” Fields said.
This story was originally published on July 22, 2022 by Stateline, an initiative of The Pew Charitable Trusts.