Wall Street Investors Crowd Out Homeowners, Inflate Rents

Research by the Philadelphia Federal Reserve, reported by Capital and Main:

Wall Street firms drove up housing and rent prices while depressing homeownership rates after the financial crisis, according to a new study of economic data.

The analysis from researchers at the Philadelphia Federal Reserve found that after the collapse of the housing market a decade ago, institutional investors such as Blackstone, Cerberus Capital and Golden Tree seized on the opportunity to buy up homes and convert them into rental units.

These investment firms have driven up housing prices and rents, and crowded out individual homeowners.

In all, the researchers found that institutional investors’ purchases of residential properties represented nine percent of the overall housing price increases since the crisis — and 28 percent of the decline in homeownership rates.

“Institutional investors have helped local house price recovery but depressed local homeownership rates,” the study concluded. Such “buying and selling in the single-family housing market affected the local rental market, raising rental price growth rates.”

One of the largest such institutional investors is Blackstone (NYSE ticker BLK), in part through its subsidiary Invitation Homes. Now trading as NASDAQ ticker INVH, Invitation Homes owns $17 billion of single family houses, representing 82,000 houses mostly in Florida, the Southeast, Texas, and the Western states.

Blackstone’s Invitation Homes has raised rents more than +5.0%/year in 2016 and 2017. From 2016 to 2017, it grew its inventory of houses by +70%.

Invitation Homes is growing fast. In 2017 it collected nearly $1.0 billion in rent on which it made 11% operating profit margin. As of 3Q18, Invitation Homes is collecting $1.7 billion/year in rent on which it is making over 19% operating profit margin.

Up to now, Invitation Homes has operated in California and Seattle – not in Oregon. But the multi-billion dollar investment firms are turning their attention to Portland. Blackstone and others are now here in a big way, buying our housing and city. 

In coming posts: 

How the institutional investors and developers have joined forces to buy Portland

What front groups they operate through

What city policies and legislation they are behind

Which politicians are taking their money.