The house panel questions SFR Investors
A memo prepared for a House subcommittee accuses big investment firms of having made a powerful contribution to the housing crisis by doing everything from outbidding potential first-time home buyers for affordable starter homes to accelerating gentrification by displacing residents of low-income communities of color.
The report, prepared for the Oversight and Investigation Subcommittee, also accused investors in single-family rental homes of being landlords who “more than doubled” rents between 2018 and 2021. And, according to him , five businesses in particular have increased late fees and filed evictions despite federal and local moratoria against repossessions.
The report was prepared by majority staff of the Financial Services Committee and served as the basis for a hearing late last month. The extensively footnoted document was heavily based on news articles and academic studies.
The findings were largely confirmed by several witnesses. “These homes would likely have been purchased by first-time homebuyers, low- or middle-income buyers, or both,” committee chair Rep. Al Green said. “These companies are making this wealth gap worse because they are buying homes in communities…and instead transferring them to shareholders,” instead of reselling them to the community, added Sofia Lopez, deputy housing campaign director at the Center. Action on Race and the Economy.
But the only conservative witness pushed back. Jenny Schuetz, Principal Investigator at Brookings Institute, said many of the problems highlighted by the report stem from a fundamental lack of supply. “This is a long-term problem caused fundamentally by the fact that we are not building enough houses,” he said.
After the National Association of Home Builders intervened, agreeing with Schuetz, saying the subcommittee had missed the mark. “The way Congress can improve affordability is to implement policies that will help builders build more single-family homes and apartments to meet consumer demand,” NAHB said in a statement. communicated.
The House hearing took on much the same tone as that on the Senate side a few months ago, in which Democrats made similar claims and Republicans rebutted them. This time, however, the panel focused on a survey it sent to five of the largest owners and operators of single-family rentals –Invitation houses, American Houses 4 Rental, FirstKey Homes, Residential Progress and Amherst Residential.
The subcommittee polled the group in late October, requesting national-level data from the end of the first quarter of 2018 through the end of the third quarter of 2021, from March 31, 2018 through September 20, 2021. Combining their responses with the Census Bureau data, the majority of staff found that the five companies:
- Increased its holdings by 76,235 homes, a growth rate of 27%.
- Acquire homes through multiple channels, but largely with bulk sales from other investors. Rarely, however, did they sell a home to their own residents or other individual buyers.
- As a percentage, they bought 22% of the houses wholesale, sold 62% the same way and sold less than 1% to their residents.
- Tendency to buy places in neighborhoods where the black population is “significantly larger” than the national average. The average black population of the top 20 five-company ZIP codes is 40% black, more than three times the black population of the entire United States.
- Tendency to buy in neighborhoods with approximately 30% more single mothers than the national average. They also tend to buy in neighborhoods where house prices are lower and rents are higher.
- Fee per lease per year increased by approximately 40% over the investigation period, from $147 to $205. At the same time, the number of residents who fell behind on their rents increased from 11% to 19%. And the number of residents in arrears has doubled, from 10% in 2018 to nearly 21% in 2021.
- The number of evictions filed and completed has dropped by more than 50%. But the five companies continued to evict people during the pandemic eviction moratorium.
At the same time, two other reports have also focused on the issue. One, of the Harvard Joint Center for Housing Studieswhich found that investors had significantly increased their purchases lately, and the other from Redfin which said that in some markets investors had acquired more than 30% of homes sold in the first quarter.
Redfin said investors bought 32% of homes sold in the first quarter in Atlanta, Jacksonville, Florida and Charlotte, North Carolina, plus 29% of those sold in Phoenix and 28% of those sold in Miami.
According to Joint Center researchers, “By repurchasing single-family homes, investors have reduced the already limited supply available to potential homeowners and modest-income buyers.”
The House survey “confirms research that shows that investors in single-family rental homes adopt policies and practices that do not benefit tenants,” the staff report also concluded. And Jim Baker, executive director of the Private Equity Shareholder Project, warned that even greater consolidation in the hands of big investors could come.
“Big investors spent only about a quarter of the $89 billion they raised investing in single-family rental and build-to-let homes, which based on the bad track record of the biggest companies , should concern us all,” says Boulanger.
However, none of the five testified at the House hearing or the previous one in the Senate. The National Council of Rental HomesDirector David Howard submitted a statement for the record that defended the industry and blamed a lack of new construction and homebuyer demographics for the housing shortage crisis.