Growing concerns about unaffordable home ownership have prompted Gov. Greg Abbott to signal he will be urging the Texas Legislature to address reports of multinational investment firms purchasing single-family homes, pricing ordinary people out of the market.
“I strongly support free markets,” Abbott wrote on X. “But this corporate large-scale buying of residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home.”
“This must be added to the legislative agenda to protect Texas families.”
The comments came in response to an X video that asserted “private equity firms are buying up all the single-family homes.” The video said the trend will be the “death of our middle class,” pointing out figures that claim 44 percent of all single-family homes in America are being purchased by private equity firms.
“By 2030, [private equity firms] would own 60 percent of all of the homes in America,” the video states.
The “44 percent” claim first appeared as a headline in a Medium article from December 2023. That story links to a 2022 Business Insider story that compiled numbers from a survey conducted by John Burns Real Estate Consulting, which states, “When combining closings between both larger, private equity and smaller, independent operations, investors accounted for 44% of the purchases of flips during the third quarter.”
The claim of “60 percent” of homes being owned by private investors by 2030 may have originated with the same Medium article, which links to a CNBC story that reads, “Institutional investors may control 40 percent of U.S. single-family rental homes by 2030, according to MetLife Investment Management.” The Metlife analysis from December 2021 said that “the institutionalization of single-family rentals (SFR) which began in the early 2010s may near full maturity as an asset class by 2030.”
Abbott’s call to address the “corporate large-scale buying of residential homes” prompted debate between Derrick Wilson, chairman of the Texas Young Republican Federation, and former gubernatorial candidate Don Huffines.
“We don’t want the next generation to be rent slaves to mega corporations and rich investors as they get priced out of the opportunity to buy their own home,” Wilson stated.
“This is an emotional response to a problem that doesn’t really exist. All investors will stop buying houses when the expenses exceed the rent,” Huffines responded, along with offering his solutions such as eliminating property taxes and balancing the federal budget, among other proposals.
According to the U.S. Office of Housing and Urban Development (HUD) in 2023, “Institutional and other large-portfolio investors have substantially increased their activity in single-family rental markets over the past decade, and they have the potential to continue to extend their holdings.”
HUD stated that 39 percent of single-family dwellings are rental housing units, and roughly 41 percent of the renter population lives in single-family homes. The HUD report cites a story from The Atlantic that reads, “Between 2011 and 2017, some of the world’s largest private-equity groups and hedge funds, as well as other large investors, spent a combined $36 billion on more than 200,000 homes in ailing markets across the country.”
A 2023 Harvard University State of the Nation's Housing report highlights a variety of different insights when it comes to house affordability and availability.
A report from CoreLogic shows that “mega investors,” those with over 1,000 properties, “represented 12% of all purchases” of single-family properties in Quarter 1 2022.
“Investor purchases slumped 27% on a quarter-over-quarter basis,” Redfin reported in February 2023. That report adds that “investors have pumped the brakes on homebuying, investor market share has remained fairly steady. That’s because individual homebuyers have also pulled back.”
“Investors purchased 17.8% of all homes that were bought in the metros tracked by Redfin in the fourth quarter. That’s comparable with 17.6% in the prior quarter and down from 19.4% a year earlier.” An important aspect of the report is that Redfin defines investors as “any institution or business that purchases residential real estate.”
The Urban Institute published an analysis of “Institutional Investor-Owned Single-Family Rental Properties” in April 2023. The analysis found that “SFR investors are concentrated” in specific areas, as “almost 80 percent of the mega investor-owned properties” are located in the top 20 metropolitan areas across the country. This includes Texas cities like Houston, where according to the Urban Institute analysis 24,000 holdings are described as “mega operator-owned properties.” Institutional SFRs account for a 9.2 percent share of SFR properties in Houston.
The National Association of Home Builders conducted a report in May 2023 that found, “Single-family built-for-rent construction has cooled as investor interest has pulled back on tighter financial conditions.” While it found a decrease in single-family built-for-rent construction in the first quarter of 2023 compared to the first quarter of 2022, the overall trend over the past year shows an increase in construction activity for those types of properties.
The National Rental Home Council reported that companies that operate single-family rental estate own just 0.19 percent of the residential real estate in the U.S. and single-family rental home companies own just 1.16 percent of the 23 million single-family rental homes in the country.
“In 2020, a year when home sales were the highest in 14 years, single-family rental home companies accounted for less than .14 percent of homes purchased. When factoring in the number of homes sold by single-family rental home companies, net purchases totaled less than .09 percent.”
According to a May 2022 report by the National Association of Realtors, Texas led the nation with 28 percent of residential property sales being to institutional investors in 2021. The group defined “institutional buyers” as companies, corporations, or limited liability companies.
A New York Times story about institutional investors wrote that “large investment companies remain a small fraction of America’s home buyers,” adding that nuance is required when looking at numbers published by housing industry representatives; an investor can sometimes “represent purchases by smaller, local owners, too, who may own just one or two building through a limited liability company.”
The Texas Legislature attempted to pass two bills during the 88th Legislative Session to address investment firms purchasing residential properties. House Bill (HB) 1056 would have required a financial institution or investment firm that owns and offers leases for residential properties to register with the comptroller; the bill was introduced but never heard in committee. HB 1057 would have put restrictions on investment firms being able to purchase single-family homes before the 30th day the home is listed. The bill was sent to committee, but was never heard.
Property rights, government restrictions, and the future of the American dream in Texas continue to be debated, and as Abbott signals that large investment firm purchases of single-family homes will be a priority item for him next session, lawmakers will have to take into consideration how those investors are shaping the housing market for better or worse.
