House Panel Questions SFR Investors

A memo prepared for a House subcommittee charges that large investment firms have contributed mightily to the housing crisis by doing everything from outbidding would-be first time home buyers for affordable starter houses to accelerating gentrification by displacing residents in low-income communities of color.

The report, prepared for the Subcommittee on Oversight and Investigations, also charged that investors in single-family rental houses are landlords who “more than doubled” rents between 2018 and 2021. And, it claimed, five companies in particular boosted their late fees and filed evictions despite federal and local moratoria against repossessions.

The report was prepared by the Financial Services Committee’s majority staff, and was the basis of a hearing late last month. The highly footnoted document was based heavily on press reports and academic studies.

The findings were largely confirmed by several witnesses. “These homes would likely have been bought by first time home buyers, low- to middle-income buyers, or both,” said the panel’s chair, Rep. Al Green. “These companies make that wealth gap worse because they buy homes in communities…and instead transfer them to shareholders,” as opposed to selling them back into the community, added Sofia Lopez, deputy campaign director of housing at the Action Center on Race and the Economy.

But the lone conservative witness pushed back. Jenny Schuetz, a senior fellow at the Brookings Institute, said many of the problems outlined by the report stem from a fundamental lack of supply. “This is a long-term problem caused fundamentally by the fact that we’re not building enough homes,” he said.

Afterwards, the National Association of Home Builders chimed in, agreeing with Schuetz, saying the subcommittee missed the mark. “The way for Congress to improve affordability conditions is to implement policies that will help builders construct more single-family homes and apartments to meet consumer demand,” the NAHB said in a statement.

The House hearing took roughly the same tone as one on the Senate side a few months ago in which Democrats made similar claims and Republicans refuted them. This time, though, the panel focused on a survey it sent to five of the largest owners and operators of single-family rentals—Invitation Homes, American Homes 4 Rent, FirstKey Homes, Progress Residential and Amherst Residential.

Data Findings

The subcommittee surveyed the group in late October, requesting national-level data from the end of the first quarter in 2018 through the end of the third quarter of 2021—March 31, 2018 to Sept. 20, 2021. Combining their responses with Census Bureau data, the majority staff found that the five companies:

• Grew its holdings by 76,235 houses, a 27 percent growth rate.
• Acquired houses through multiple channels, but largely with bulk sales from other investors. Rarely, though, did they sell a house to their own residents or other individual buyers.
• On a percentage basis, they purchased 22 percent of houses through bulk sales, sold 62 percent in the same manner and sold less than 1 percent to their residents.
• Tended to purchase places in neighborhoods with “significantly larger” Black populations than the national average. The average Black population across the five companies’ top 20 Zip codes is 40 percent black, more than three times the Black population in the United States as a whole.
• Tended to buy in neighborhoods with about 30 percent more single mothers than the national average. They also tended to purchase in neighborhoods with lower home prices and higher rents.
• Raised fees per lease per year by some 40 percent over the course of the survey period, from $147 to $205. At the same time, the number of the residents who became behind on their rents increased from 11 percent to 19 percent. And the number of residents who were in arrears with fees doubled, from 10 percent in 2018 to nearly 21 percent in 2021.
• The number of filed and completed evictions dropped by more than 50 percent. But the five companies continued to evict people during the pandemic eviction moratoria.

Separately, meanwhile, two other reports also focused on the question. One, from the Harvard Joint Center for Housing Studies, which found that investors had increased their purchases substantially of late, and the other from Redfin that said in some markets, investors had acquired more than 30 percent of the houses sold in the first quarter.

Redfin said investors snapped up 32 percent of the houses sold in the first quarter in Atlanta, Jacksonville, Fla., and Charlotte, N.C., plus 29 percent of those sold in Phoenix and 28 percent of those sold in Miami.

According to the Joint Center’s researchers, “By buying up single family homes, investors have reduced the already limited supply available to potential owner-occupants and moderate-income buyers.”

The House survey “confirms research that shows single-family rental home investors adopt policies and practices that do not benefit renters,” the staff report also concluded. And Jim Baker, executive director of the Private Equity Shareholder Project, warned that even greater consolidation at the hands of big-time investors could be coming.

“Large investors have only spent about one-quarter of the $89 billion they have raised to invest in single-family rental and build-for-rent homes, which, based on the largest companies’ harmful track record, should concern us all,” Baker said.

However, none of the five testified during either the House hearing or the earlier one in the Senate. The National Rental Home Council’s director, David Howard, submitted a statement for the record that defended the industry and blamed a lack of new construction and home buyer demographics for the housing shortage crisis.