Critics claim that this practice increases home prices, worsening the housing shortage and making it more difficult for families to purchase. Industry advocates dismiss these charges. They argue that large investment companies own only a small fraction of the single-family rental homes in the U.S. Less than 4%.
I was interested in how this trend affected my neighbors as a professor at Georgia Tech. I then analyzed over 1 million property transactions from the Atlanta metropolitan region between 2007 and 2016. Because the study period was during the Mortgage Crisis, I excluded bulk sales such as packages of foreclosed houses that aren’t accessible to most homebuyers. I only looked at transactions between buyers and sellers who are acting independently.
I discovered that the global investment firms who are buying up Atlanta properties, specifically Black families, are hurting Atlantans.
Transformations in the neighborhood
In the Atlanta metro region, the homeownership rate declined by over five percentage points during the period I studied. This trend is similar to that of the nation. In an average neighborhood, home purchases by large corporate investors accounted for one-quarter of this decline.
When I broke down the analysis by race, it was clear that Black families had been hit harder. Large investment firms purchasing local properties accounted for three-quarters of the decline. Whites who are non-Hispanic were not affected at all.
Wall Street firms may only control a small fraction of the rental market for single-family homes, but they have a much greater influence on the local level. These firms control nearly one-third of the single-family rentals in Atlanta. These firms are even more concentrated within predominantly Black neighborhoods where more than ten houses can be owned in a row.
My study revealed that large investors are more likely to buy homes in suburban areas with a majority of non-white residents. This makes it even harder for families of color to buy a home since global investors are pushing them out of the market.
Financial security can be found at home.
The American middle class has relied on homeownership to build wealth for decades. The national homeownership rate fell 5.5 percentage points from 2007 to 2016, reaching its lowest level in five decades at 62.9%. Even though homeownership has increased since 2016, it remains below the pre-2008 levels.
The ownership of these homes is a starkly divided one. According to an analysis conducted by Harvard University’s Joint Center for Housing Studies, between 2015 and 2019, more than 70% of white families owned their own homes, while only 41% of Black households did.
Indeed, policies such as racial agreements, mortgage lending practices, and redlining contributed to low homeownership rates among Black Americans well before the Great Recession. Global investors’ increasing control over single-family houses only increases existing racial disparities in homeownership.
New directions for research
My study was primarily focused on Atlanta. However, residents in other cities are also competing against global investors to secure housing. The single-family portfolios of investment firms are largely concentrated within Sun Belt metro areas, including Phoenix, Charlotte, and Jacksonville. This would not be surprising if similar conflicts were to occur in these cities.
My analysis ended in 2016, so I’m not sure if Black Atlanta residents have been affected by Wall Street companies buying up housing. Recently, many investment firms switched from a “buy-to rent” business model to “build-to-rent“, which could complicate the situation.
While residents, policymakers, and researchers have all claimed that large corporations do not invest in local communities. Researchers lack solid evidence to support this claim. Academics must investigate whether the properties of institutional landlords have poor maintenance and code violations. This is what anecdotal data suggests.
Investigate whether large investment firms are reducing local revenue by filing multiple property tax appeals.
Open-source housing policy research tool
Researchers have found it difficult to identify single-family homes owned by corporations, as they need proprietary data and laborious number crunching. My colleagues and I developed a simple and user-friendly method to overcome these challenges using open-source software.
Local governments and non-profits can use this methodology to reveal all corporate-owned residential property in any neighborhood and to link it to outcomes like code violations. This is a great way to develop policy solutions by using data-driven methods.
