institutional capital investment into residential SFR rent market

[Laura Gray]

Capital investment groups are buying large numbers of Single Family Residential (SFR) houses with the goal of keeping them as rentals. Individual purchasers cannot compete against these capital investment groups to purchase a house and are effectively shut out of the market.

In Sunbelt states, large capital investment groups including Blackstone Group Inc., Brookfield Asset Management Inc. and JPMorgan Chase & Co.'s asset-management unit have made new investments in rental homes. March 2021, homebuilder Lennar Corporation has announced its Upward America Venture, which will be capitalized by institutional investors Centerbridge and Allianz Real Estate starting with $1.25 billion in initial funding. The venture's goal is to acquire single-family homes to keep as rentals in targeted markets across the US. The venture will potentially acquire over $4 billion of new single-family homes and townhomes from Lennar and possibly other homebuilders. The plan is to build entire communities that will be solely designated as SFR rental neighborhoods. Toll Brothers Inc. and Taylor Morrison Home Corp. have partnered with rental operators. DR Horton Inc. has said it was building rental communities with the intention of selling leased-up portfolios to investors.

The stock market has had wild fluctuations in recent years, so capital investment groups look for other commodities that are less volatile or can be controlled more easily. Investment in SFR housing as a for-profit commodity fills that need, for example: NorthMaq completed a $235 million purchase of 1,000 homes last year. So those homes will not be available for individual home buyers to purchase, but they will be available to rent. Individuals cannot compete with large capital investment firms that pay cash and buy in bulk. Institutional level capital investment in the SFR sector of real estate is disruptive to families and working middle-class citizens. Large Capital Investors should stay in the arena of commercial real estate. Anthony Cazazian, managing director, head of US Residential Real Estate at Man Global Private Markets says, "We are seeing very broad-based interest across different pockets of capital from REITs to private equity funds to insurance companies to pension funds to diversified real estate funds. They are allocating money away from other sectors into single-family rentals."

This will be disruptive to the US social structure. This will cause further deterioration of the middle class and increase the poverty class by increasing the number of life-long Renters who miss the opportunity to build generational wealth through long-term home ownership and building equity. These institutional Landlords will be in competition with Mom "n Pops Landlords too. The Mom " n Pops Landlords such as those on this Bigger Pockets website should be raising heck about this!
My comments have no political party angle. I am pro-democracy. I have worked in 5 different countries and observe that for democracy to work there must be a large and well-informed middle class of citizens. I am
concerned that the middle class is shrinking in the US.