Key Points
- Institutional investors hold a small percentage of the single-family rental market currently, but industry analysts predict they could control over 40% of it by 2030.
- Lawmakers have introduced the Stop Wall Street Landlords Act of 2022, calling for private equity firms to stay away from buying single-family homes to avoid driving up rental prices.
- Despite recent declines in investor purchases, institutional investors are expected to remain a significant force in the single-family rental market in the long term.
- By 2030, institutional investors may own over 7.6 million homes or more than 40% of all single-family rentals on the market.
The Role of Institutional Investors and Calls for Regulation
Since the Great Recession, Wall Street firms backed by private equity groups have invested in hundreds of thousands of single-family homes in the US. Corporations like Blackstone and Pretium Partners have bought tens of thousands of homes across the Sun Belt, where detached home prices have risen faster than the national average.
While institutional investors currently hold a small percentage of the single-family rental market, industry analysts predict they could control over 40% of it by 2030. The single-family rental industry began with government backing after the 2008 financial crisis, which presented a unique opportunity for institutional investors to build a portfolio out of foreclosed properties.
The Call for Regulation
There is a growing concern that these companies could drive up rental prices, particularly in markets like the Sun Belt, where rents for a two-bedroom detached home have increased significantly more than the national average. To address this concern, lawmakers have introduced the Stop Wall Street Landlords Act of 2022, which calls for private equity firms to stay away from buying single-family homes.
The Future of Institutional Investors
Despite recent declines in investor purchases, institutional investors are expected to remain a significant force in the single-family rental market for the foreseeable future. By 2030, the institutions may own over 7.6 million homes, or more than 40% of all single-family rentals on the market. However, some companies may retreat from the market in the short term as correction concerns mount.
As the rental market continues to evolve, it will be interesting to see how the presence of institutional investors affects rental prices and market dynamics.
