Virtual Hearing - Where Have All the Houses Gone? Private Equity, Single Family... (EventID=114969)

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Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Tuesday, June 28, 2022, at 12:00 p.m. (ET) Oversight and Investigations Subcommittee Chairman Green and Ranking Member Emmer will host a virtual hearing entitled, “Where Have All the Houses Gone? Private Equity, Single Family Rentals, and America’s Neighborhoods." - - - - - - - - Witnesses for this one-panel hearing will be: • Jim Baker, Executive Director, Private Equity Shareholder Project • Shad Bogany, Agent, Better Homes and Gardens • Sofia Lopez, Deputy Campaign Director of Housing, Action Center on Race and the Economy • Elora Lee Raymond, Assistant Professor, Georgia Institute of Technology • Jenny Schuetz, Senior Fellow, Brookings Institute Background Following the 2008 financial crisis and subsequent home foreclosure crisis, corporate ownership of SFR homes rose significantly, growing 3% annually since 2010, with the third quarter of 2021 posting the fastest year over year increase in 16 years. Several conditions led to this increase in institutional investment in the housing market, including ample supply of for-sale homes available for bulk-purchase particularly due to foreclosures, tight credit for individual homebuyers, and the introduction of federal policies meant to shore up the housing market. After the financial crisis, institutional investors, including large private equity funds, acquired large portfolios of foreclosed homes. The federal government enabled this growth through bulk sales of distressed federally-backed mortgages and foreclosed properties to institutional investors, as well as providing Fannie Mae-backed financing. ... Single-Family Rental Home Trends Before the financial crisis began in 2008, investors owned about 10 million SFR homes and the market was dominated by smaller investors who owned 10 or fewer homes. As late as 2011, no single investor in the U.S. owned more than 1,000 homes. From 2013–2017, the largest institutional investors market was dominated by smaller investors who owned 10 or fewer homes. As late as 2011, no single investor in the U.S. owned more than 1,000 homes. From 2013–2017, the largest institutional investors consolidated their holdings into two companies—Invitation Homes and American Homes Rent—resulting in larger portfolios for large corporate investors. Large scale investors have continued to increase their footprint in various local markets since then. For example, in the third quarter of 2021 alone, institutional investors bought 42.8% of homes for sale in the Atlanta metro area and 38.8% of homes in the Phonenix-Glendale-Scottsdale area. In recent years, technological advances have also facilitated consolidation. For example, some firms, such as OpenDoor, Knock, and Offerpad (and until 2022, Zillow) make use of a business model known as iBuying, in which online buyers use algorithms to rapidly price and acquire homes for cash using their digital housing platforms. To fund their acquisitions, companies raise billions of dollars in capital from hedge funds, pension funds, ultra-high net worth individuals, and other institutional investors, who such companies consider to be their customers. The ability of SFR companies to purchase homes with cash provides a competitive advantage over buyers using a mortgage, especially in an environment with rising mortgage rates. In recent months, home builders have sought out SFR companies to finance construction when buyers have been forced to abandon their homes mid-deal. Geographic Concentration and Neighborhood Characteristics Securitized SFR homes are heavily clustered in the Sunbelt, which comprises the Southeastern, Southwestern, and Western U.S. region, and in communities that previously experienced high foreclosure rates following the 2008 financial crisis. Mass foreclosures that disproportionately affected lower income homeowners and homeowners of color who were targeted with subprime mortgages, pushed many families into rentership and contributed to the current U.S. housing crisis. Institutional investors have been able to buy foreclosed homes in bulk at monthly public auctions, including for example in Georgia, resulting in large concentrations of SFR homes in that state, especially in the City of Atlanta. The geographic concentration of institutional investment in SFRs is also influenced by local place-based policies, such as landlord-tenant, fair housing, and zoning laws, as well as tax incentives, including the Opportunity Zones program that offer investors capital gains exclusions to direct funds into economically distressed areas. Hearing page: https://financialservices.house.gov/events/eventsingle.aspx?EventID=409520