Corporate landlords caused billions in lost wealth, study says

New research out of one the nation’s hottest housing markets shows that Wall Street-backed landlords reduced homeownership as they converted homes to rentals, removing billions in wealth from one metro area in the process.

As large firms bought up thousands of homes in the Atlanta area after the Great Recession, they were responsible for a “substantial” portion of the metro’s declining homeownership rate, according to an analysis by Georgia Tech School of Public Policy Assistant Professor Brian An published this week.

The research shows Black residents felt the brunt of those impacts, experiencing a larger drop in homeownership as firms snapped up homes.

Although limited to the Atlanta area, the findings may have serious implications for markets like Charlotte and Raleigh, which have seen a boom in homebuying by Wall Street-backed firms. About two dozen large, national corporations owned more than 40,000 single-family homes across North Carolina, largely concentrated in the state’s urban centers, a 2022 investigation by The Charlotte Observer and The News & Observer found.

Understanding the impacts these companies have on the neighborhoods where they operate is tricky, given the complexity of the housing market and the relative novelty of the barely 10-year-old single-family home rental industry.

The Atlanta research also comes amid signs that corporate homebuying is slowing in many of the country’s fastest-growing markets, including Charlotte. Despite a stark drop in buying, companies still gobbled up about 1 in 5 of the homes in Charlotte during the first three months of 2023.

Concern over the growth of these companies in North Carolina has so far sparked a patchwork of bans from homeowners’ associations and one dead-on-arrival bill from Democratic state lawmakers to cap corporate homebuying.

But given the heavy concentration of Wall Street landlords in certain neighborhoods, An argues planners and policymakers may need more localized efforts to limit the companies’ market influence.

The trade group representing some of the country’s largest corporate landlords balked at An’s findings, telling the N&O in a statement that the “narrative that these companies are impacting rates of homeownership, either nationally or locally, is just not supported by the facts.”

“The real challenge confronting housing in America is supply,” David Howard, CEO of the National Rental Home Council, said in the statement. “There simply aren’t enough homes to meet the demand, whether those homes are for sale or for rent.”

An estimated $5 billion in ‘home equity loss’

An’s analysis, which appears in the Journal of Planning Education and Research, focused on Atlanta during the period from 2007 to 2016, before and after the Great Recession that upended the global economy.

The homeownership rate in Atlanta, like other places across the country, was already on the decline after peaking around 2004.

But An wanted to know how the growth of Wall Street landlords, all but absent from the housing market prior to the 2008 housing market crash, directly contributed to that homeownership decline.

The question wasn’t just an academic one.

“Home is, for most Americans, the largest asset,” An told the N&O in an interview last week.

Owning a home is a critical part of the typical U.S. family’s wealth. And changes in the concentration of homeowners have major implications for the economy.

By measuring the concentration of corporate ownership on the neighborhood level and adjusting for other factors affecting home buying, An found the rental home industry accounted for about one-quarter of the decline in homeownership over the decade he studied.

Homeownership, in other words, fell by about 1.3 percentage points on average because of corporate landlords, An’s research found. And effects were more pronounced for Black families, whose dip in homeownership attributable to corporate landlords was three times larger.

Those single-digit declines roughly translated to an estimated $5 billion in property value, according to the study, the vast majority of which would have otherwise been in the hands of Black homeowners.

“The resultant implication for communities is home equity loss triggered by large investment firms who translate these real estate assets to profits for their non-local shareholders and global investors,” An wrote.

An’s research also shows that smaller firms buying up and renting out homes in Atlanta – mom-and-pop landlords and local investors, for example – did not drive down homeownership rates.

“The size of home purchasing – in terms of the property numbers and transactions and the size of the portfolio held by institutional investors – that actually really matters when we think about whether that would have suppressed the homeownership rate,” An said in an interview.

‘Lots of things to blame’

In his statement Monday, Howard pushed back against An’s findings, noting that a lot in Atlanta has changed since the 10-year period represented in the study.

He pointed to Federal Reserve Bank of St. Louis data showing homeownership rates in the Atlanta area are higher than they were in 2016.

“Further, although more work needs to be done to address disparities in homeownership rates, recent research by Zillow found that the Black homeownership rate in Atlanta increased nearly five percent between 2019 and 2021, the sixth highest increase of America’s largest cities,” Howard said.

Laurie Goodman, founder of the Housing Finance Policy Center at the Urban Institute, a Washington-based think tank, has her own critiques.

“There’s lots of ways you can look at this problem and lots of things to blame,” Goodman said.

Corporate landlords got their start in the wake of the housing collapse with mass purchases of foreclosed properties in cities like Atlanta.

“People started losing their homes because of the foreclosure crisis,” Goodman said. “Then institutional investors entered these markets because homes were cheap.”

Because of those buying patterns, she argued “it’s almost impossible” to directly link the decline of homeownership to corporate investors rather than the foreclosures themselves.

From a policy perspective, she said this and similar research ask the wrong sorts of questions.

“The question is not, ‘Are they doing more harm than good?’ They are here, They are the reality,” she said. “The question is: How do you make the tenant experience better?”

‘We need evidence’

For his part, An acknowledged there are plenty of challenges when it comes to untangling the complicated cause-and-effect of the housing market. He said Goodman and others have raised valid critiques, some of which the paper addresses directly.

The study doesn’t capture, for example, more recent changes in the buying habits of investor-landlords like Invitation Homes, Progress Residential and American Homes 4 Rent.

A Redfin analysis of investor purchases in the nation’s largest metro areas in the first quarter of 2023 fell by almost 50% compared to previous year. But the analysis found investors still bought up 18% of homes sold during the period.

In Charlotte, the only North Carolina metro area tracked by Redfin, investors’ share of home purchases dropped by 66% year over year. That decline tied the Queen City with Atlanta, both of which saw some of the largest declines in investor purchases nationwide.

An and other housing experts, like Cornell University Associate Professor Suzanne Lanyi Charles, say more research on the impacts of the rental home industry can help policymakers and the public understand both negative and positive aspects.

“It has effects on neighborhoods and families that we need to be aware of – and some we need to push back on,” Charles said.

An argues his work is an attempt to help fill that void.

“We really need evidence,” An said. “Whether it’s perfect or not, I think it provides some evidence based upon which people can add more.”