Housing Woes: The Rise of Wall Street Landlords
The modern housing market in the United States is facing major issues, with the cost of homes being the biggest challenge. In the final quarter of 2022, the average American home sold for a record-high of $468,000, making it unaffordable for many. This has led to an increase in renters, as people are unable to buy homes due to the influence of Wall Street landlords driving up prices.
The reasons behind the unaffordability of homes are multifaceted. One of the key reasons is the rise in housing costs, which increased by 40% from the start of the pandemic. Another factor is the disparity between wages and housing costs, as wages have not kept pace with the rising cost of homes.
Wall Street has also come under scrutiny as a potential contributor to the problems in the housing market. Some members of Congress believe that Wall Street is part of the problem, and that taxpayer dollars are being used to help Wall Street buy single-family homes. This is because massive private equity firms such as Blackstone and Pradium Partners are backing a growing industry of corporate landlords, who buy or build single-family homes and then rent them out.
The rise of corporate landlords and their impact on the housing market will be covered in the next section. However, it is important to note that despite the growth of this industry, corporate landlords still only account for a small portion of rental housing in the United States. The vast majority of rental units, including apartments, are owned by individual small-time investors.
The modern housing market in the United States is facing significant challenges, with the high cost of homes being the biggest problem. While Wall Street and corporate landlords are contributing factors, a range of issues, including the disparity between wages and housing costs, are also driving the problem. In the following sections, we will examine the impact of corporate landlords on the housing market and potential solutions to the problem.
The rise of corporate landlords
In recent years, the number of corporate landlords in the United States has been growing. This relatively new breed of homeowner has been backed by large private equity firms such as Blackstone and Pradium Partners. While corporate landlords still only account for a small portion of rental housing in the United States, they have been making their mark on the housing market.
The main players in the corporate landlord industry are Pradium, Blackstone, American Homes for Rent, Tricon Residential, and Amherst. These companies are the big five in the industry and together own hundreds of thousands of homes. Pradium, for example, is the parent company for Progress Residential, which owns about 90,000 homes.
One of the key characteristics of the corporate landlord industry is their focus on maximizing short-term returns. The goal of many of these companies is to take a company, increase its cash flow, and then sell it or take it public. Unlike small landlords, who see their investments as a long-term investment and are more concerned with stability and satisfied tenants, the focus of private equity is on maximizing short-term returns.
Corporate landlords have been most active in the Sunbelt region of the United States, including Texas, Georgia, and Florida. In 2021, corporations bought 28% of all the homes sold in Texas, 19% in Georgia, and 16% in Florida. Companies like Pradium and Blackstone target these markets, and Blackstone, in particular, has held large stakes in several companies that dominate the region.
The rise of corporate landlords is a growing trend in the United States. These companies, backed by private equity firms, are focused on maximizing short-term returns and have been most active in the Sunbelt region of the country. The impact of their activities on the rental market has been significant, with rent hikes outpacing other parts of the country. In the next section, we will examine the potential impact of corporate landlords on the housing market and the communities they serve.
The impact of corporate landlords on the housing market
One of the key impacts of corporate landlords is the rising rental prices for single-family homes in some regions, particularly in the Sunbelt. According to the original text, rents for a two-bedroom detached home increased by 43 percent in Phoenix, 44 percent in Tampa, and 35 percent in Atlanta between the start of the pandemic and 2022. This is compared to a national average increase of 24 percent.
These high rental prices are contributing to the financial success of companies like Blackstone, which delivered an 8.4 percent return on investment in 2022, even during a year when the wider stock market declined by nearly 20 percent. However, some experts are concerned about the short-term focus of these private equity groups, as they aim to maximize returns in the short term, rather than maintain stability and satisfied tenants over the long term.
This short-term focus has led to criticism of corporate landlords, who are accused of buying up single-family homes, taking them off the market, and making it even harder for working-class families and young people to own a home. However, it’s worth noting that corporate landlords only account for about 1 percent of all rental housing in the US and only about 2 percent of single-family rental housing.
The rise of corporate landlords has had a noticeable impact on the housing market in the US, contributing to rising rental prices and financial success for companies like Blackstone. However, this growth has also raised concerns about the short-term focus of these private equity groups and their impact on access to homeownership for working-class families and young people.
The solution to the problematic housing market
The modern housing market has faced numerous problems, with high prices being the biggest one for Americans. However, the solution to this problematic market is not clear cut. In this section, we will take a closer look at the potential solutions to the housing crisis.
One solution that has been proposed is to increase the supply of housing to meet the growing demand. Experts believe that this is the best way to address the issue, as the lack of supply has been a major contributor to the high prices. In the late 1970s and early 1980s, the United States routinely built between 300,000 and 400,000 starter homes a year. In contrast, in 2020, only 65,000 homes were built. To resolve this, the government could incentivize new housing development, new housing investment, and new market participation.
Some members of Congress believe that limiting corporate activity in the housing sector is a good first step. They argue that Wall Street’s involvement in the housing market is contributing to the high prices, and that by limiting the number of homes that investors can own, there will be more single-family homes available on the market. However, it would take significant bipartisan efforts to pass such legislation, as there are concerns that it would be too drastic.
Another solution is to provide direct relief to tenants through policies like rent control. On the ground, a number of states have tried to implement such policies, but groups backed by companies like Blackstone have fought back against these efforts. In 2018, Blackstone spent approximately $7 million to oppose rent control for single-family homes in California.
Finally, some experts believe that a combination of solutions may be the best way to address the housing crisis. For example, the government could incentivize new housing development while also implementing additional taxes on corporate landlords to generate money for affordable housing. At the same time, the private equity group could make meaningful investments in building new single-family homes.
The solution to the problematic housing market is complex and multi-faceted. However, by increasing the supply of housing, limiting corporate activity, providing direct relief to tenants, and using a combination of solutions, we can work towards a more affordable and accessible housing market for all Americans.
