- Single-family homes have become a hot real-estate play for investors during the pandemic.
- Wall Street firms, pensions, and other investors are plowing billions into homes to rent out.
- Here are the major players piling into the booming single-family-rental sector.
- See more stories on Insider’s business page.
Single-family homes have become the hot real-estate play of the pandemic, with major Wall Street firms, corporate investors, and institutions like pension funds pouring billions of dollars into buying suburban houses across the country and renting them out for healthy profits.
As Americans migrated away from cities during the depths of the crisis and gained an appreciation for the added space and suburban surroundings of single-family properties, those homes’ value has skyrocketed. The National Association of Realtors recently reported that the median home price rose by a record 23.6% in May — the most recent month with data available — over the previous year.
The brokerage firm Redfin found that investors purchased a record $77 billion worth of homes during the fourth quarter of 2020 and the first quarter of 2021. In the first quarter, one in seven home purchases in America were made by investors. They’re looking away from office towers, hotels, retail spaces, and other more traditional real-estate offerings to focus on the single-family-rental, or SFR, business.
More recently, big investors have begun to buy or build new homes to repurpose as rentals, eating into new supply at a moment when the nation has a deficit of millions of for-sale houses.
There’s an outrage cycle around the industry: A tweet on June 8 from an anonymous right-wing commentator about Wall Street firms buying up thousands of homes — to rent out to the same population they’re outbidding — stoked anger among the growing number of Americans who have been shut out of the housing market. Many critics feel the presence of investors in local markets leads to increased competition for single-family properties when inventory is already at historic lows.
Major players in the SFR business own a little over 300,000 houses, according to estimates, or only about 0.2% of the single-family-home rental market. They see that tiny share as an opportunity. Institutional owners control about 55% of the nation’s rental apartments, which are often stacked in multifamily buildings — a potential guidepost for the kind of market share that big investors see as possible in the single-family market.
The major players’ rapid expansion into SFR is underway. Here are the biggest names buying up American homes right now.
A decade ago, Jon Gray, now Blackstone’s president and chief operating officer, encouraged executives at the firm to take advantage of the financial crisis and buy up homes through Invitation Homes, a company it launched to handle get into the SFR business.
Blackstone brought Invitation Homes public in 2017 and sold off its shares by 2019. The investment firm continues to be active in the SFR business. In August, it announced that it led an investment group that had purchased a $300 million equity stake in Tricon Residential, an SFR company in Toronto that owns 25,000 homes in Canada and the US, through a private real-estate investment trust it manages, Blackstone Real Estate Income Trust, or BREIT.
Last month, BREIT paid $6 billion for Home Partners of America, an SFR company that owns 17,000 homes in the US, tuning Blackstone again into a major holder of SFR units.
BREIT’s biggest shareholders are a collection of investment firms including MAI Capital Management and Silvercrest Asset Management, wealthy individuals, and Blackstone itself.
Founded by the alternative-asset giant Blackstone in 2012, Invitation Homes grew by acquiring thousands of homes across the country one by one, including many that had fallen into distress during the financial crisis.
The company went public in 2017, and Blackstone has since sold off all its shares. It now has a market cap of over $22 billion and owns about 80,000 homes, making it the largest SFR company in the country. It has outlined plans to undertake a record expansion in 2021, aiming to spend over $1 billion on home purchases and sell off fewer homes in its portfolio than in recent years.
The company’s shares have surged by 40% in 2021, and its market cap is now $22.6 billion.
BlackRock was thrust into the center of the controversy surrounding the SFR industry when J.D. Vance, a US Senate candidate from Ohio and the author of “Hillbilly Elegy,” implicated the firm in the corporate takeover of American homes.
While that message ricocheted across social media, the truth is more complicated. BlackRock, an investment firm that manages $9 trillion for a host of clients, including institutional investors, held an ownership stake in Home Partners of America in 2014, along with the private-equity firm KKR, before selling the company to Blackstone last month.
As of March, BlackRock held about $1.5 billion worth of Invitation Homes stock, making it the second-largest shareholder, behind only Vanguard. Other major holders include Cohen & Steers, Principal Financial Group, and State Street Corporation.
But BlackRock is invested in Invitation Homes not as part of a specific stock-buying investment strategy but as a byproduct of exchanged-traded funds it operates that are pegged to indexes that include Invitation Homes shares, a spokesman said.
Goldman Sachs and JPMorgan
Two of Wall Street’s biggest players have pushed into the SFR business.
Last month, Goldman Sachs extended a $300 million loan to Fundrise, a crowdfunded real-estate investment platform, which plans to use the facility to invest in newly built single-family homes.
Last year, JPMorgan Chase announced that it would team up with American Homes 4 Rent — the country’s second-largest SFR company, with over 50,000 homes — in a $625 million venture to build 2,500 homes. The investment is being made by JPMorgan Asset Management, an arm of the bank that invests institutional money, and will be overseen by Mike Kelly, the division’s head of real estate in the Americas.
Tricon Residential, a $2.4 billion firm based in Toronto with a portfolio of 25,000 homes in the US and Canada, has taken a multipronged approach to growth, buying properties one by one on the open market, purchasing newly built houses, and building homes from the ground up.
In May, the firm entered into a $450 million joint venture with the insurance firm Pacific Life to buy 5,000 newly built homes. The company had launched another $450 million joint venture in 2019 with the Arizona State Retirement System, a $40 billion pension fund, to build homes from scratch.
SFR companies and investors in the sector have increasingly focused on buying and building new homes that investors can erect efficiently by the dozens and that have roofs, appliances, and other components of the same type and vintage, making maintenance and replacement more orderly and predictable.
“It creates a more homogenous product,” Jonathan Ellenzweig, the chief investment officer for Tricon, said of the so-called build-to-rent segment of the market, adding that the segment had become more attractive to institutional investors.
Mynd, a property-technology company
Mynd got its start developing property-management software to help SFR investors oversee a collection of homes that may be scattered widely and have varying maintenance needs.
In June, the company, which has raised over $40 million in funding, announced a partnership with the money manager Invesco that will aim to spend $5 billion on acquiring 20,000 single-family homes across the country.
Doug Brien, a former NFL placekicker who founded Mynd in Oakland, California, in 2016, said it planned to begin its buying spree on behalf of Invesco in September and was ramping up its operations to take on the huge task of purchasing so many homes.
“We’re at 450 people now, and we need to hire 50 more to support this buying operation,” Brien told Insider.
Pension funds and sovereign wealth funds
The North Dakota State Investment Board recently committed $200 million to Invesco’s Value Added Fund VI, which plans to allocate funds to SFR. “There’s so much room to run,” Darren Schulz, a manager with the board, told Insider of SFR’s growth potential.
The Pennsylvania Public School Employees’ Retirement System said earlier this year that it would commit $200 million to the private-equity firm Carlyle’s ninth US real-estate fund, which will invest in SFR and other property assets.
The New Mexico State Investment Council, a $30 billion sovereign wealth fund, put $100 million into that same Carlyle fund. Paul Chapman, a director who oversees the fund’s real-estate investments, told Insider that it was focused on future SFR investments that would buy or build new single-family rental homes.
“My ears would perk up” if an investment firm “said they were doing a build-to-rent strategy,” Chapman said.
The State of Wisconsin Investment Board recently committed $150 million to an SFR investment fund managed by Hudson Advisors.
And the $300 billion pension CalSTRS — which is helmed by chief investment officer Christopher Ailman — and Pacific Coast Capital Partners recently announced a $1 billion partnership to invest in SFR homes.