Recent research conducted in one of the nation’s most competitive housing markets reveals that Wall Street-backed landlords have significantly reduced homeownership rates by converting homes into rentals, resulting in the removal of billions of dollars in wealth from a metropolitan area. According to an analysis conducted by Assistant Professor Brian An from the Georgia Tech School of Public Policy, these large firms, which acquired thousands of homes in the Atlanta area following the Great Recession, were responsible for a substantial portion of the decline in homeownership rates, according to a recent report by The Charlotte Observer. The research further highlights that Black residents were disproportionately affected by this trend, experiencing a more significant decrease in homeownership as these firms acquired properties.
While this study focuses on the Atlanta area, its findings have potential implications for other markets where Wall Street-backed firms have seen a surge in homebuying activity. A 2022 investigation by The Charlotte Observer and The News & Observer revealed that over two dozen large national corporations owned more than 40,000 single-family homes in North Carolina, primarily concentrated in the state’s urban centers.
Understanding the impact of these companies on the neighborhoods in which they operate is challenging due to the complex nature of the housing market and the relatively new phenomenon of the single-family home rental industry, which is just over a decade old. Additionally, there are indications that corporate homebuying is slowing down in several fast-growing markets across the country, such as Charlotte. Despite this decline, these companies still acquired approximately one out of every five homes sold in Charlotte during the first quarter of 2023.
The concerns surrounding the expansion of these companies in North Carolina have led to various measures, including bans from homeowners’ associations and a proposed bill from Democratic state lawmakers aimed at capping corporate homebuying. Given the concentration of Wall Street landlords in specific neighborhoods, An argues that planners and policymakers may need to implement localized efforts to limit the market influence of these companies.
The trade group representing some of the largest corporate landlords in the country has disputed An’s findings, stating that there is no factual support for the narrative that these companies are negatively impacting homeownership rates at the national or local level. According to David Howard, CEO of the National Rental Home Council, the real challenge facing housing in America is the lack of supply since there are insufficient homes available for sale or rent to meet the demand.
An’s analysis, published in the Journal of Planning Education and Research, focuses on Atlanta between 2007 and 2016, encompassing the period before and after the Great Recession. The homeownership rate in Atlanta, like many other areas in the country, had already been declining since its peak around 2004. An’s research aimed to determine how the growth of Wall Street landlords, who were nearly absent from the housing market before the 2008 crash, directly contributed to the decline in homeownership. The study’s objective goes beyond academia, recognizing that home ownership is a crucial component of wealth for most Americans and that changes in homeownership rates have significant implications for the economy.
By examining the concentration of corporate ownership at the neighborhood level and accounting for other factors influencing home buying, An found that the rental home industry was responsible for approximately one-quarter of the decline in homeownership over the decade under study. On average, homeownership decreased by about 1.3 percentage points due to the presence of corporate landlords, with the effects being more pronounced among Black families, whose decline in homeownership attributed to these landlords was three times greater. These single-digit declines translated to an estimated $5 billion in property value, the majority of which would have otherwise belonged to Black homeowners.
An highlighted that communities face the consequence of losing home equity as a result of large investment firms converting real estate assets into profits for non-local shareholders and global investors.
An’s research also revealed that smaller firms, such as mom-and-pop landlords and local investors, who purchased and rented out homes in Atlanta, did not contribute to the decline in homeownership rates. According to An, the scale of home purchasing, the number of properties and transactions, and the size of portfolios held by institutional investors are significant factors determining whether homeownership rates are suppressed.
The CEO of the National Rental Home Council, David Howard, challenged An’s findings, pointing to Federal Reserve Bank of St. Louis data showing that homeownership rates in the Atlanta area are currently higher than they were in 2016. Howard also cited research by Zillow, which indicated that the Black homeownership rate in Atlanta increased by nearly five percent between 2019 and 2021, ranking as the sixth-highest increase among major U.S. cities.
Laurie Goodman, the founder of the Housing Finance Policy Center at the Urban Institute, offered her critiques, suggesting that it is challenging to directly link the decline in homeownership to corporate investors rather than the foreclosures themselves. She emphasized that the focus should shift towards improving the tenant experience rather than assessing whether these companies are doing more harm than good, as they are already a prevalent reality in the housing market.
An acknowledged the complexities involved in untangling the cause-and-effect relationship in the housing market and recognized valid criticisms from Goodman and others. The study does not capture recent changes in the buying behavior of investor-landlords such as Invitation Homes, Progress Residential, and American Homes 4 Rent. However, an analysis by Redfin revealed a nearly 50 percent decrease in investor purchases in the first quarter of 2023 compared to the previous year across the nation’s largest metro areas. Despite the decline, investors still accounted for 18 percent of home purchases during that period. In Charlotte, the only North Carolina metro area covered in the analysis, the share of home purchases made by investors dropped by 66 percent year over year, aligning with Atlanta as one of the areas experiencing significant declines in investor purchases nationwide.
An, along with other housing experts like Suzanne Lanyi Charles, an associate professor at Cornell University, emphasized the importance of further research to understand both the negative and positive impacts of the rental home industry. They believe that studying these effects can assist policymakers and the public in making informed decisions and addressing disparities in homeownership rates.
An regards his work as an attempt to contribute evidence to fill the existing research gaps. While the study acknowledges certain limitations, such as not capturing recent investor purchasing habits, it aims to provide a foundation upon which additional research can be built.