“It’s Literally Decaying While We’re Living in It”

Millions of people lost their homes to foreclosure during the 2008 financial crisis, as small-time homeowners suffered the costs of years of predatory mortgage lending by big banks. Many of those homes were bought up by investors — the first time so-called mega-investors had ever entered the single-family home market. Over the next decade, Wall Street interests would buy hundreds of thousands of homes, contributing to the rapid growth of single-family rentals owned by corporate landlords.

“Institutional operators said, ‘Wait a second, the rate of return on this looks good. I think I can operate this as a business,’ and they went into the market,” said Laurie Goodman, founder of the Housing Finance Policy Center at the Urban Institute, a think tank studying economic and social policy.

The trend accelerated during the COVID-19 pandemic when low interest rates and rising real estate prices spurred investors to expand their portfolios. By 2022, investors accounted for nearly 30 percent of sales of single-family homes, up from an average of 16 percent just three years earlier. In some cities, institutional investors account for a far higher share of single-family homes.

“They tend to target fast-growing areas where rental increases and home price increases are large,” said Goodman, though she said she didn’t believe institutional investors were driving up prices.

Because investors are paying in cash, they can often easily beat out first-time homebuyers. Researchers in Atlanta estimated that institutional investors robbed potential homeowners of $4 billion in equity by weakening homeownership between 2007 and 2016, an impact felt predominantly in the city’s black neighborhoods.

Some of these buyers are massive single-family rental companies like FirstKey, American Homes 4 Rent, Invitation Homes, and Tricon Residential (which was acquired by Blackstone in a deal finalized earlier this month). Together, these four companies hold around 228,000 homes nationwide. Other buyers are investment funds like Pretium Partners, a firm founded by a former Goldman Sachs executive that in February said it was putting $1 billion toward its single-family rental investments.

While corporate landlords have long owned apartment buildings and other multifamily housing, advocates worry that as they encroach on single-family homes, they take away opportunities for homeownership and raise new concerns for tenants.

Once they buy the homes, single-family rental companies often prove to be bad landlords, critics charge. A 2022 study by federal lawmakers found that five major rental companies hiked their fees by 40 percent over a three-year period and saw their tenants fall behind in rent. In California, the state’s largest corporate landlord, Invitation Homes, was forced to pay $2 million in sanctions after the state attorney general found it was charging tenants illegally high rents.

Harris, the mother in North Carolina, first encountered FirstKey Homes, a single-family rental company that claims to own more than fifty thousand properties across the country, in early 2020. She and her two children, then aged four and seven, had moved in with Harris’s parents after a divorce, and were searching for a place to live. When she first found the house in Huntersville, she was elated.

“We didn’t care that we didn’t have anything in the house yet,” she recalled. “We had a home.”

Public records show that in the months before FirstKey leased the house to Harris, the company applied for a permit to do plumbing repairs on the property. But the company didn’t complete the work, and the permit expired. Months later, Harris and her children moved in.

Within weeks, the first-floor bathroom flooded the house with sewage. It was the first sign of what was to come. Ongoing plumbing issues followed over the four years that Harris lived there, causing significant damage. The walls were “just bubbled with water damage,” Harris recalled. In July 2022, part of the ceiling in her young son’s bedroom buckled in.

“I feel like I’ve been in a constant fight,” Harris said. “My kids are living in this house, and we’re paying a good bit of money for this house, and yet it’s literally decaying while we’re living in it.”

A complaint filed by Harris’s attorney with the North Carolina Real Estate Commission, a state watchdog agency, documents her issues with the house. It includes years of emails, maintenance records, and a notice of violation issued by a county code enforcement officer.

In the fall of 2023, after she was late to pay rent, Harris says a FirstKey property manager told her over the phone that she did not have to pay rent until the issues with the house were fixed. Harris noted the reprieve in multiple emails to six different FirstKey representatives that fall.

Yet this January, Harris came home one day to find an eviction notice on her door. The company had filed an eviction against her, which a county judge ultimately upheld. When Harris spoke with us, she had just moved into a new town house after a brief spell without housing, as she struggled to find a landlord who would lease to her with a recent eviction on her record.

“It made it almost impossible to find a place, which led to me almost losing my kids,” Harris said.

A representative for FirstKey wrote in an email in response to questions from us that the company “worked with several vendors to address [Harris’s] concerns, which took longer than usual since we had challenges getting permission to access her home on multiple occasions.” The representative denied that Harris was told she did not owe rent and said that “none of [the maintenance issues] made the house uninhabitable.”

“The Largest of the Largest Corporations”

Tenants who have struggled with corporate landlords say that renting from these large companies — as opposed to mom-and-pop landlords — was at the heart of their housing issues.

“You could never get anybody to talk to you,” Harris said of FirstKey.

“The big corporations, they don’t care,” said one former tenant of an Invitation Homes property in Pasco County, Florida, who struggled to get maintenance issues at the house addressed during her time renting from the company.

When mega-investors buy up blocks in your neighborhood, it is often difficult to ascertain who is doing the buying. Major investors can easily conceal the true ownership of properties through layers of limited liability companies, incorporated in states like Delaware and Nevada where ownership information does not have to be disclosed.

The companies themselves have seen big profits. Tricon Residential has seen its annual revenue more than double since 2020, reaching $850 million last year. American Homes 4 Rent boasted to investors in February that rising rents had helped increase revenue from properties by $20 million between 2022 and 2023.

As these companies have expanded their reach, calls for reform have grown.

On the federal level, Merkley is spearheading the End Hedge Fund Control of American Homes Act, which would give major corporate investors in single-family homes — defined as any investor with more than $50 million in assets — a decade to sell off the properties they own to individual homebuyers or face significant sanctions. The bill is currently stalled in a Senate subcommittee.

Merkley’s attempt followed legislation introduced by Democratic California representatives Ro Khanna and Katie Porter in 2022 that would have taxed the sale of single-family homes to investors with more than $100 million in assets. That legislation also did not make it out of committee.

State lawmakers, too, have crafted similar proposals. In California, there are several bills being considered that would deter major investors from acquiring single-family homes. One proposal, introduced by Assemblymember Alex Lee in February, would bar a company that owns more than one thousand single-family homes from buying any additional properties. The bill survived a committee vote in April and is now undergoing an additional policy review.

“We wanted to make it very clear that we were targeting the largest of the largest corporations,” Lee said.

Lee’s proposal has been mirrored in bills introduced this year in Minnesota and Arizona that would cap the number of homes any institutional investor can own or rent. Lawmakers in Indiana, Illinois, and New York have also proposed phasing in bans on institutional investors from owning single-family homes over several years.

“A Robust Government Affairs Function”

Single-family rental companies have taken notice of lawmakers’ new push to rein in corporate landlords. In a February earnings call for investors in American Homes 4 Rent, which owns nearly sixty thousand single-family homes nationwide, one analyst inquired about “some of this legislation” against single-family home companies moving through the states and in Congress.

“This is where having a robust government affairs function and getting in front of it and having the relationships at both the federal and the local levels is very, very important,” an American Homes 4 Rent executive responded, saying that the company has “invested a lot into that program.”

American Homes 4 Rent illustrates the rapid expansion of a well-funded single-family rental lobby. The company did not report any federal lobbying expenditures until 2023, records show. Last year, it hired two different lobbying firms in Washington and has since spent $230,000 lobbying lawmakers, according to federal disclosures. In several reports, the company mentioned lobbying on Merkley’s bill.

The National Rental Home Council, too, has only recently emerged as a major force to represent the increasingly consolidated single-family rental industry. The group was founded in 2014, and within four years, its membership had grown from four companies to nearly thirty. Its presence in Washington is also relatively new; it first reported federal lobbying expenditures in 2019.

Disclosures show that a host of financial firms have also begun to lobby on single-family rental issues within the last three years, including private equity behemoth the Carlyle Group, the real estate investment firm the Amherst Group, and the financial services company CoreLogic.

FirstKey Homes, the company that owned Harris’s home in North Carolina, has spent more than $320,000 lobbying lawmakers in Washington since 2020, the first year it reported lobbying expenditures, according to federal disclosures.

In California, the bill capping ownership of single-family homes came before a California judiciary subcommittee on April 9. A litany of lobbyists from state real estate groups and single-family rental companies flocked to testify against it, among them the California Apartment Association, the California Rental Housing Association, and the National Rental Home Council.

“We don’t think there is a market presence that is actually squeezing anyone out,” a representative of the National Rental Home Council told California lawmakers at the hearing, urging them to oppose the bill.

Lee’s bill survived the April 9 vote, and is now moving forward. A similar bill in the California Senate, which would bar real estate investment trusts from acquiring single-family homes unless they have been on the market for more than sixty days, is set for a first hearing in the coming weeks.

It’s important to take aim at corporate landlords at a state level, said Noble of the Private Equity Stakeholder Project, which in December published a report analyzing how states were beginning to push back against corporate landlords. But because such investors often obscure the properties they own via shell companies, he noted that to ensure the bills could actually be enforced, regulators need to know who actually owns the properties, such as by requiring landlords to register with the state.

“The key here is that these bills also have to be paired with some transparency piece,” Noble said. “There has to be some way to enforce these penalties. There has to be some way to really get at who owns what.”

Real estate interests often oppose any attempt to force greater transparency. As we reported in February, New York governor Kathy Hochul, a major recipient of real estate industry campaign dollars, killed an attempt to force the secretive limited liability companies (LLCs) that own significant amounts of New York real estate to publicly reveal their true owners.

In the meantime, thanks to the growing single-family rental lobby, tenants are forced to deal with the consequences of unaccountable rental companies. While Harris has now escaped the FirstKey house and the endless strife it caused her family, she worries about the tenants who will take her place.

“I guarantee you when FirstKey goes into the house to get it ready for the next people, they’re not going to repair that water damage,” Harris said. “They’re going to paint over those walls. They’re going to shampoo the carpet. And they’re going to put that sucker back up for rent.”