ORLANDO, Fla. – The top 10 home-buying investors of 2021 in metro Orlando were tied to investment firms in the single-family rental house business, leading at least one expert to worry about the pressure such deals are putting on both the housing and rental markets.
An Orlando Sentinel review of data from the property appraisers for Orange, Osceola and Seminole counties showed the growing trend of existing homes – as opposed to new construction – bought by single-family rental companies. It happened during a year of bidding wars that drove median prices through the roof and locked out individuals and families seeking to buy new homes.
“Why now?” asked Elora Raymond, an urban planning professor at Georgia Tech who recently testified before Congress about the issue. “Why for 100 years did we have big financial firms with no interest in single-family rentals until now?”
Companies tied to Progress Residential, a subsidiary of Arizona-based private equity firm Price Partners, purchased the most properties across the three counties with 740.
The top 10 included companies from California to New York tied to Main Street Renewal, Invitation Homes, FirstKey Homes, My Community Homes, Beacon Ridge Capital and Tricon Residential. Of the remaining three, Offerpad and Opendoor are online institutional buyers, and Home Partners of America, offers a lease-to own program.
Single-family rental purchases were also concentrated in predominantly Black neighborhoods. Of the 38 ZIP codes in Orange County where single-family rental companies bought, the four ZIP codes with a Black population above 40% accounted for a quarter of all purchases.
The top 10 investors bought 3,496 homes. Known single-family rental companies accounted for 3,330 sales – 12% – of the total 28,295 homes sold to investors.
Raymond was a featured speaker at a congressional subcommittee hearing in June titled, “Where Have All the Houses Gone?” A survey by the committee showed the top five US single-family rental companies have increased their holdings by 27% on average since 2018, with FirstKey and Progress growing by more than 60% over that time.
Raymond said she is concerned about the way that these purchases affect the market overall. Investors are paying higher prices for homes, usually with cash, which beat out the offers for many mortgage buyers.
In metro Orlando, the median price investors paid was $310,000 in 2021, the same as the median for buyers overall. The range of prices was largely tied to where homes were bought. A proxy company for the Amherst Group, which owns Main Street Renewal, snagged a home in Apopka for $215,000, while a company connected to Progress bought one south of Windermere for $616,000.
Companies bought many of their homes in bulk from other institutional buyers such as Zillow. Another finding of the congressional committee was that homes bought by institutional investors tend to get sold to other large companies, keeping them off the market for the average buyer and shrinking the inventory, which in turn increases prices.
Raymond says that selling to other investors makes sense when you’re selling thousands of properties at a time. “You’re not going to hire 600 lawyers and 600 brokers to find 600 buyers for 600 homes,” she said.
Representatives for the top investors did not return requests for comment.
David Howard, executive director of the National Rental Home Council which represents rental homeowners big and small, says these companies are responding to growing demand for rental properties. The majority of them rose out of the Great Recession of 2007-2008, when banks and investment firms found themselves with millions of foreclosed homes in a market with few buyers. Some companies began renting the properties while they waited for buyers to return.
“What they found is that there was more money in renting over the long term,” Howard said.
Interest in Central Florida shouldn’t come as a surprise, Howard said, given its growing population and major employers such as Disney World and other tourism businesses. “Markets like Orlando really led the country in terms of where this demand for single-family rental housing was the greatest,” he said.
Howard said rental homes give people a chance to “test drive neighborhoods,” looking for the best schools and commutes. They also give those without the means to purchase a home more space than the typical apartment.
“Just because someone can’t afford a 20% down payment to buy a home doesn’t mean that they should be excluded from the single-family home lifestyle,” Howard said.
Howard also points out that the institutional single-family rental market only makes up 2% to 3% of the housing inventory nationally, and that the vast majority of rentals are owned by individuals. And Howard notes that homeownership in Orlando has increased over the past five years, the same period over which the major institutional investors have been active.
Homeownership in Orlando has increased since 2016, from 55.6% to 57.6% in 2020, though that was after taking a sharp nosedive during the Great Recession. Homeownership in Orlando has not returned to its 2010 peak of 62%.
Raymond said she suspects the companies aren’t only using these properties for rental income but also to increase the value of their portfolios. So driving up prices by taking homes off the sales market wouldn’t be an unintended byproduct of the process, but the point, she said.
“These guys didn’t start as landlords,” Raymond said. “They started as financial firms. Think about how financial firms make money.”
But Howard says that his conversations with owners of these companies leads him to believe they see their money in rent.
“They’re in the business of renting homes,” he said. “They are not in the business of buying homes, sitting on them and waiting for them to appreciate.”
Howard says that many of the large rental companies are moving away from buying existing inventory and into building their own homes for rent, such as the Crestridge community in Leesburg, built by American Homes 4 Rent.
“It’s much more difficult to purchase housing [than build], whether you’re an individual or a company,” Howard said. “There’s as much of a supply crisis for rental housing as there is for owner-occupied housing.”
Raymond, however, remains concerned about what this might mean for the future of homeownership.
“If the market isn’t letting homeowners win, what are the tools in America to help?” Raymond asked.
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