Does Wall Street Own Your Dream Home?
Large investment funds are snapping up single-family homes in Atlanta where they own about one-third of the rental properties.
If you or someone you know has had trouble finding an affordable home to buy, the problem may not be caused by high interest rates or the population growth in the metropolitan Atlanta market.
The problem may be due to large-scale investors swooping in with vast resources of cash to jump to the head of the sales line. A new study by researchers at Georgia State University and Rutgers University in New Jersey details just how rapidly Wall Street has taken a liking to the single-family homes market.
That’s particularly true in Atlanta, which in recent years has led the nation in single-home buyers with deep corporate financial resources. In recent years, corporate investors bought more than 30 percent of homes purchased here. Charlotte was not far behind, followed quickly by fast-growing cities like Jacksonville, Las Vegas, and Phoenix.
The new report, which was authored by GSU professor Taylor Shelton and Rutgers researcher Eric Seymour, shows that in Atlanta three corporate landlords own 19,000 single-family rental homes,
“These companies own tens of thousands of properties in a relatively select set of neighborhoods,” GSU’s Shelton said, “which allows them to exercise really significant market power over tenants and renters because they have such a large concentration of holdings in those neighborhoods,”
Invitation Homes, which is the nation’s largest owner of residential real estate, has its corporate offices in Dallas but is located in Atlanta on Dunwoody Place. At last count, they own just over 7,800 homes here. Pretium Partners, which was started by a former banker at Goldman Sachs in New York, comes in just behind with over 7,100 homes in Atlanta and is the second largest owner in the nation. Third is Amherst Holdings, a Texas firm, which owns just over 4,000 single-family homes.
Profits are up at Invitation Homes, the only one of the three firms that is a publicly traded company and obligated to disclose its financial results. But the money that is pouring into this financial sector indicates business is good. Pretium Partners earlier this year announced it had raised $1 billion to acquire new built-to-rent homes. Last year, Pretium added thousands of homes in a deal worth $1.5 billion with DB Horton, a major home builder.
The firms have been criticized for charging high rental fees while providing a poor level of maintenance. Tenants who fall behind in the rent often face speedy eviction, even during the pandemic years when business operations around the country were upended by the COVID-19 virus.
Renters who have tried to force accountability to their corporate landlords face formidable obstacles. The university report shows that the three firms are protected from legal liability in the metro Atlanta market by what was described as “an extensive network of more than 190 corporate aliases registered to 74 different addresses across the states and one U.S. territory.”
“Layers of interaction that have to happen before you get to the person who’s ultimately making decisions are increased. You have to talk to your property manager,” Shelton said. “Then, the property manager has to talk to their supervisor, who talks to the local or regional manager. Then they have to run things up. It creates this distance where you don’t actually know who your landlord is, so you don’t actually know who to make demands of.”
One of the reasons corporate ownership in the metropolitan market has grown so quickly is state laws in Georgia that frustrate tenant rights. That prohibits cities and counties from tracking rents and identifying landlords.
The corporate housing buying boom is one of the bright spots in a real estate market that has created big problems for some owners of office buildings and large retail shopping malls. Just last week, Barry Sternlicht, who runs one of the nation’s largest real estate investment trusts, limited the amount of money investors can reclaim.
High interest rates are creating a cash crunch for even large companies like Starwood, which has about $10 billion under its management. Sternlicht in recent years gave back to the banks that financed his purchase of the Tower Place office buildings in Buckhead after occupancy rates plummeted.
But selling devalued properties is also not an option. In a letter to his investors, Sternlicht advised holding on for now, in the hope that better days are coming.
“We cannot recommend being an aggressive seller of real estate assets today given what we believe to be a near-bottom market with limited transaction volumes, and our belief that the real estate markets will improve.”
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