Mega-landlords — institutional real estate investors that own and rent out thousands of single-family homes — have quietly operated under the radar over the last ten years as they have gobbled up huge numbers of single-family homes.
Families desperately trying to buy houses are losing out to institutional investors who can out-bid them, offer all-cash deals, and waive mortgage and inspection contingencies.
But as the mega-landlords have exploded in size, so has the legion of families who rent single-family homes from them. And renters are calling attention to neglected maintenance, excessive rent increases, and capriciously non-renewed leases by the mega-landlords. While we must attend to their stifling effect on homeownership, we must also take this moment to protect the growing contingent of renters from mega-landlords’ egregious practices.
How did we get to this point? Historically, single-family rentals were the domain of small-scale mom-and-pop landlords who owned and operated a few properties. But in the wake of the 2008 housing crisis, as foreclosures spiked and house prices fell, investors seized an opportunity.
Under the guise of stabilizing neighborhoods hard hit by foreclosures, the federal government sold vacant, formerly owner-occupied homes to investors in bulk. These programs allowed investment firms to amass large portfolios of single-family houses quickly.
The mega-landlords grew even more prominent through a flurry of corporate mergers. Today, four mega-landlords —Invitation Homes, Pretium, American Homes 4 Rent, and Tricon Residential—own more than 225,000 single-family houses in the U.S.
The mega-landlords argue, though, that while the number of houses they own is large, the proportion overall is small—too small, they say, to afford them any market power. But in neighborhoods, a much different picture emerges.
Mega-landlords focus on certain places, often those with weak tenant protection laws like the Sunbelt and the Southwest. And within those places, they focus on certain neighborhoods. In my research, I find that mega-landlords own up to 35 percent of the single-family homes in Atlanta-area neighborhoods. And where their rentals are highly concentrated, mega-landlords have outsized power over the lives of residents. They can undermine renters’ access to those neighborhoods as well as housing affordability and stability.
And since mega-landlords started out by buying up foreclosed properties, the houses they own are still largely clustered in neighborhoods where Black and Hispanic residents, women, and immigrants were hardest hit by the 2008 housing crisis.
Families looking to rent a home in a particular neighborhood may find that they have few choices but to rent from a mega-landlord. Mega-landlords’ domination of some local housing markets give them the power to increase rents and dictate lease terms. Invitation Homes hiked rents 18 percent for new leases and 8 percent for lease renewals in 2021. In hot markets like Las Vegas and Phoenix, they increased rents by nearly 30 percent.
A family interested in living in a particular neighborhood might have no choice but to accept the mega-landlords’ terms. And suppose a mega-landlord raises rents or refuses to renew their lease. In that case, a family could be shut out of the neighborhood, forcing kids to change schools and families to move away from jobs and the support of friends and family.
Housing is one of our most basic human needs, the setting for our most personal and cherished moments. Still, it is also a lucrative vehicle for profit for far-away investors. We must strengthen affordability and stability for families who rent their homes from mega-landlords.
We can begin by requiring mega-landlords simply to disclose their properties. Currently, they conceal their ownership behind aliases. Disclosure is the first step so that municipalities and residents alike can understand the magnitude of mega-landlords’ presence in their neighborhoods.
Second, we should institute “good cause” eviction protections for families who rent their homes from mega-landlords. If a tenant abides by the provisions of their lease, they should be allowed to renew their lease and remain in their home. Combined with caps on rent increases, good cause eviction protections would increase housing stability and security for families. It would allow kids to remain in their schools and families to remain close to jobs and loved ones.
Lastly, to counter the market power that mega-landlords have to increase rents exorbitantly, we should limit the amount that mega-landlords can raise rents. The rent increases that mega-landlords have instituted over the past year are not based on increases in their operational costs. The increases are what mega-landlords can get away with, given their market power. A cap on rent increases will protect families from having to leave their homes when they cannot afford extreme rent increases, as we have seen from mega-landlords during the COVID-19 pandemic.
Ownership disclosure, eviction protections, and limits on rent increases, are a start to protect families from the practices of mega-landlords that compromise housing stability, security, and affordability.
Suzanne Lanyi Charles is associate professor in the city and regional planning department at Cornell University’s College of Architecture, Art, and Planning.