PRS Financialization I: US Single Family

The Week in Housing 21/03/25

Thanks to everyone who came along to the first of our Making Rental Housing Affordable webinar series on Wednesday (recording available soon). The next installment will look at issues like affordability and costs in Austria’s Cost Rental sector with Dr Gerald Koessl (1-2pm on Wednesday April 16). Register here.

This is the first of what will be a multi-part series on the financialization of the PRS. Institutional Landlords have been one of the most controversial features of hosing politics over recent years, not just in Ireland but internationally. But the public and political debate is often wanting in terms of evidence. This series will summarize the international literature, focusing on the four forms of PRS financializaton: acquisition of Single Family Dwellings in the US (today’s topic); post-GFC acquisition of distressed assets, focusing on Ireland and Spain; the mass-privatization of former public housing in Germany and Sweden; and the ‘rennoviction’ strategy pursued in a host of countries. I mainly draw on research from housing studies, political economy and geography. One consequence of this is that this literature tends not to focus on the potential benefits, e.g. increased supply, and there is also very little on the Build to Rent sector specifically. This is a gap in this series of posts but something I hope to return to. As it mainly summarizes the academic literature, and therefore might be useful to academics/students, I’ve included citations and include a bibliography at the end.

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The Global Financial Crisis provides the backdrop to two of the forms of PRS financialization discussed in this series. Next week we’ll look at Ireland and Spain, where ‘bad banks’ sold distressed real estate assets en masse to international financial institutions. This week we look at the US, where financial institutions took advantage of the country’s repossession crisis to enter the Single Family Dwelling market.

The United States has a long history of institutional PRS housing. Until recently this was confined to what is known in the US as the ‘multifamily’ sector of the housing market, referring to apartment complexes. The market segment known as Single Family Rental (SFR), comprised of suburban detached, semi-detached and terraced housing, was dominated by smaller landlords. In the wake of the GFC institutional players rapidly entered this market. The proportion of SFR homes which are rental grew from 13% in 2006 to 17% in 2015, representing an increase of over 34% in less than a decade (Colburn et al., 2021), driven by a new breed of large firms driven by Wall St. money (Christophers, 2022).

Fields and Vergerio (2022) note that today the four biggest SFR operators together control over 200,000 homes, and Colburn et al. (2021) argue, ‘[i]n less than a decade, this industry went from non-existent to a new asset class with over $30 billion’. Investment has continued in more recent years. In 2021 institutional landlords purchases 21% of all single-family homes for sale (Nethercote, 2024). The significance of institutional landlords in the SFR market has been further enhanced by a series of mergers that took place as the industry matured, leading to the dominance of a small number of firms. Invitation Homes and American Homes 4 Rent, the two largest companies, together owned around 130,000 SFR dwellings by the end of 2018.

Despite this rapid growth, it is important to highlight that institutional landlords represent less than 2% of the national SFR market. It is thus important not to overplay the significance of this phenomenon, Nevertheless, because institutional investment in SFR tends to be highly geographically concentrated, it can have a significant impact on particular markets. For example, institutional ownership of SFR properties in 2015 represented 14% of stock in Phoenix and 12% in Tampa (Pfeiffer et al., 2021). This geographical concentration relates to the specific business strategy of institutional SFR landlords. Between 2007 and 2012 more than 8 million homeowners experienced foreclosure in the US (Schwartz, 2023). Private equity firms, hedge funds and REITs could take advantage of access to cheap Wall St. capital to acquire the resulting distressed properties in bulk (Christophers, 2022). Foreclosures, and consequently institutional investment in SFR, were concentrated above all in the Sun Belt region, where property prices fell the sharpest, thus explaining the concentration of institutional SFR in these areas.

In terms of impact, Raymond et al. (2018) found that institutional SFR landlords are 68% more likely than small landlords to file eviction notices, even when controlling for property, neighbourhood and tenant characteristics. There is also research indicating that financial investors are more likely to engage in harsh cost cutting measures to boost profits, which can in turn lead to poor tenant experiences (Colburn et al., 2021). This is also suggested in research which highlights the importance of technology and the automation the property management of SFR, which can lead to a lack of responsiveness on the part of institutional SFR landlords (Fields & Vergerio, 2022). Although research is limited, it has been argued that institutional SFR landlords dampen access to homeownership, due to their outsized ability to acquire properties in a way which households cannot compete with (An, 2023). Thus, while institutions own a small minority of Single Family Dwellings nationally, the pace at which they have grown, their extremely high level of consolidation, and the concentration of their investments in particular local markets, all mean they can have important impacts on the nature of PRS housing.

Events & News

Focus Ireland are launching new research on public expenditure and homeless services next week. Respond have just put out a call to tender for a research project on older residents’ housing needs.

What I’m reading

Missed this when it first came out, but really looking forward to reading this recent ECB report on the impact of institutional investors on house prices. A new report on the impact of mortgage rate rises in the non-bank sector.

Bibliography

An, B. Y. (2023). The influence of institutional single-family rental investors on homeownership: Who gets targeted and pushed out of the local market? Journal of Planning Education and Research, 0739456X231176072.

Christophers, B. (2022). The Role of the State in the Transfer of Value from Main Street to Wall Street: US Single-Family Housing after the Financial Crisis. Antipode, 54(1), 130–152. https://doi.org/10.1111/anti.12760

Colburn, G., Walter, R. J., & Pfeiffer, D. (2021). Capitalizing on collapse: An analysis of institutional single-family rental investors. Urban Affairs Review, 57(6), 1590–1625.

Fields, D. (2018). Constructing a new asset class: Property-led financial accumulation after the crisis. Economic Geography, 94(2), 118–140.

Fields, D., & Vergerio, M. (2022). Corporate landlords and market power: What does the single-family rental boom mean for our housing future?

Immergluck, D., & Law, J. (2014). Investing in crisis: The methods, strategies, and expectations of investors in single-family foreclosed homes in distressed neighborhoods. Housing Policy Debate, 24(3), 568–593.

Nethercote, M. (2020). Build-to-Rent and the financialization of rental housing: Future research directions. Housing Studies, 35(5), 839–874.

Nethercote, M. (2024). Monopoly dynamics and the rise of UK single-family rental. Geoforum, 148, 103907.

Pfeiffer, D., Schafran, A., & Wegmann, J. (2021). Vulnerability and opportunity: Making sense of the rise in single-family rentals in US neighbourhoods. Housing Studies, 36(7), 1026–1046.

Raymond, E. L., Duckworth, R., Miller, B., Lucas, M., & Pokharel, S. (2018). From foreclosure to eviction: Housing insecurity in corporate-owned single-family rentals. Cityscape, 20(3), 159–188.

Schwartz, A. (2023). Rental housing dynamics and their affordability impact in the United States. In P. Kemp (Ed.), Private Renting in the Advanced Economies (pp. 42–68). Policy Press.