- A recently introduced bill promises to rein in corporate owners of single-family rental homes.
- Companies like American Homes 4 Rent acquired thousands of homes during the pandemic housing boom.
A new bill that promises to rein in corporate owners of single-family-rental homes is the latest warning shot from federal lawmakers as they train their sights on some of the biggest winners from the recent housing boom.
The "Stop Wall Street Landlords Act," which was introduced in the US House of Representatives by a trio of California Democrats earlier this month, would make it more expensive for single-family-rental companies with more than $100 million in assets to buy and sell homes by imposing a tax on their transactions.
It would also prohibit Fannie Mae, Freddie Mac, and Ginnie Mae from buying up mortgages held by these companies, something Fannie and Freddie have experimented with in the past.
Companies like American Homes 4 Rent, Pretium Partners, and Invitation Homes each own tens of thousands of homes around the country. They scooped up thousands more during the COVID-19 pandemic as interest rates dropped and demand for rental housing soared. Private-equity firms, pension funds, and insurers lined up behind these companies with billions of dollars of investments.
Recently, though, large SFR owners have faced mounting backlash from tenants and regulators who argue that the companies are growing at the expense of average Americans who can't match their corporate buying power. A legislative push to curb that growth remains a long shot, however, particularly with the House poised to flip back to Republicans.
For their part, SFR companies insist that many of their tenants are renters by choice and that institutional landlords like themselves account for just a small fraction of the housing market.
Most single-family-rental homes are owned by mom-and-pop landlords whose portfolios typically include just a handful of properties. Institutional landlords own less than 3% of the roughly 20 million single-family rentals in the US today, according to estimates from Roofstock, a company that connects investors to rental properties. But their share of the $4.4 trillion SFR market is growing, setting off alarms among both federal and local lawmakers.
Within the SFR industry, angst over heightened criticism and the prospect of regulation was palpable during a three-day conference in late May hosted by the National Rental Home Council, the industry's lobbying group whose membership has grown to include nearly 80 companies since it was founded in 2014.
At one point, protesters stormed the main stage of the event to demand limits on rent increases and better living conditions at rental properties. At other times during the event, panelists emphasized their concerns over efforts to stymie the SFR industry's growth.
Government intervention is "the greatest threat to what we do," said Jay Byce, a cofounder and senior vice president of Atlanta's ResiBuilt Homes, one of a growing number of builders constructing single-family homes specifically to rent.
"The combination of NIMBYism and potential controls on rent could really change the trajectory of what we're doing," Byce said during a conference panel, using the abbreviation for "not in my backyard." "The lack of understanding from government, especially at the local level, is really the biggest supply constraint and our biggest risk right now."
In June, a House subcommittee held a hearing during which lawmakers and witnesses blamed SFR companies for hiking rents, driving up home prices, and edging out regular homebuyers.
The introduction of the Stop Wall Street Landlords Act marks the latest escalation.
"The financialization of the housing market by Wall Street exacerbates corporate profiteering and anti-competitive practices that makes it harder for Americans to afford housing or access homeownership," Rep. Ro Khanna of California, one of the bill's three co-sponsors, said in a release. "Low- and middle-income families in my district and across the country are being pushed out because of profiteering and unfair practices by large corporate landlords."
The NRHC has argued that the housing shortage is the real culprit behind rising housing costs, not institutional landlords. The US needs a greater supply of all types of housing, both rental and owner-occupied, David Howard, the executive director of the NRHC, said in an emailed statement.
"Increasing the supply of housing to serve the needs of both homeowners and renters is the solution to America's housing crisis, not penalizing one at the expense of the other," Howard said. "Single-family rental homes are a critical part of America's housing ecosystem, providing individuals and families the opportunity to live in neighborhoods located near quality schools, employment centers, and transportation corridors."
Tyler Blue, a senior vice president at the real-estate analytics firm Green Street who's been closely monitoring the SFR market, said he wasn't aware of previous federal legislation taking aim at SFRs, and definitely not legislation that made it to the floor. But he said heightened scrutiny, particularly from a progressive wing on the left, was not surprising given the SFR industry's growth.
If Republicans take control of the House — which they appeared set to do as of Wednesday afternoon — Blue said he didn't anticipate the bill would reach a vote on the floor. But the watchful eye of federal lawmakers is sparking concern among large SFR companies.
"I don't see that going away as they continue to grow larger and larger," Blue said.