Corporate landlords expand home affordability inequity

HERBERT L. WHITE | THE CHARLOTTE POST

Corporate-owned landlords are buying up more single-family homes in Sun Belt cities like Charlotte, which expands an affordability gap.

Black America’s landlord tends to be a Wall Street-connected rental company with outsized influence in Sun Belt cities, according to new research.

Southern Economic Advancement Project last week released "An 8-point framework for tracking the rise of large corporate landlords in single-family rentals," research authored by Elora Raymond, Ph.D, an urban planner and assistant professor at Georgia Tech College of Design. The research, which uncovers how real estate processes widen inequalities in metro Atlanta, also has implications for Charlotte’s housing market, which is under stress to maintain affordable stock for lower-income residents during a period of increasing scarcity.

The UNC Charlotte Urban Institute cited in a 2021 report that corporate renters are snapping up moderate- and lower-price homes in Mecklenburg County at a rate that has altered who can afford to lease housing.

“We found that while they only own a small percentage of total houses, the new single-family rental conglomerates have built portfolios of houses heavily concentrated in the starter home segment of the market – where the supply crunch is tightest right now,” author Ely Portillo wrote. “And they’re still adding to their holdings, concentrating on suburban properties in mid-priced neighborhoods like Steele Creek and Highland Creek.”
Key takeaways from the SEAP paper include:

• Large corporate firms are buying up larger shares of neighborhoods—especially in majority Black neighborhoods.

• The racial wealth gap will widen if Black households are crowded out of the market.

• Policymakers should consider tenant protection in response to the increasingly consolidated rental markets controlled by economically powerful firms, especially those connected to Wall Street.

After the Great Recession of 2008 and its resulting foreclosure crisis came a rise in single-family rentals as an investment, which sparked growing concern on the impact rental property investors have on low-income tenants.

Often, the corporate rental companies flowed into neighborhoods – mostly Black – where lenders lured homeowners into subprime mortgages. When those loans were defaulted, corporate investors scooped them up at a discount and turned them into rentals. Among the concerns brought on by large corporate landlords relates to the growing racial wealth gap between Black Americans and other groups. Forty-five percent of Black households in the U.S. own their house, compared to 74% white households and 48% of Hispanic households.

“Large [single-family rental] investors purchased foreclosed homes en masses during the foreclosure crisis, often in predominantly Black and Hispanic neighborhoods,” the SEAP researchers wrote. “Now, fifteen years later, these firms have continued to invest heavily in communities of color.”

Corporate investors jumped on the COVID-19 economic crisis as another opportunity to snap up even more residential housing, including single-family houses, apartment buildings, long-stay motels and even mobile home parks.

According to Redfin, a Seattle, Washington-based company that provides residential real estate brokerage and mortgage origination services, investors bought 18.4% of U.S. homes in the fourth quarter of 2021 – a record high. Investor demand for single-family homes has increased along with home prices, which allow them to charge higher rents and sell flipped homes for higher prices.

“While record-high home prices are problematic for individual homebuyers, they’re one reason why investor demand is stronger than ever,” Redfin economist Sheharyar Bekhari said in a report published last year. “Investors are chasing rising prices because rental payments are also skyrocketing, incentivizing investors who plan to rent out the homes they buy.”  

Another concern found in SEAP’s research is that institutional investors often resort to predatory tactics as landlords, including higher eviction rates, hidden fees, aggressive rent increases and embracing gentrification to increase long-term profits.

“Institutional investors in single-family rentals have been found to crowd out homeownership, particularly in communities of color,” the researchers wrote. If they emerged as distressed property investors following the foreclosure crisis, they now outcompete homeowners for homes in strong housing markets.”

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