The Impact of Single-Family Rental REITs on Regional Housing Markets: A Case Study of Nashville, TN

Abstract

The U.S. Congress authorized the creation of real estate investment trusts (REITs) in 1960 so companies could develop publically traded real estate investment portfolios. REITs focus on commercial property, retail property, and rental property. During the last decade, REITs became more active in regional housing markets across the U.S. Single-family rental (SFR) REITs have grown tremendously, buying up residential properties across the country. In some regional housing markets, SFR REITs own noticeable shares of single-family homes. In those settings, SFR REITs take large numbers of housing units off of real estate markets where homeownership transactions occur and manage these properties as part of commercial rental inventories. This has resulted in a new category of multiple property owners, composed of institutional investors as opposed to individual investors, which further exacerbates property wealth concentration and polarization. This study examines the socio-spatial distribution of properties in SFR REIT portfolios to determine if SFR REIT properties tend to cluster in distinct areas. This study will focus on the regional housing market in Nashville, TN. Nashville has one of the most active SFR REIT sectors in the country. County tax assessor records were used to identify SFR REIT properties. These data were joined with U.S. Census data to create a profile of communities. The data were analyzed using SPSS statistical software and GIS software. Our analysis suggests that neighborhoods with clusters of SFR REITs fit the SFR REIT business model. Clusters occur in communities with newer homes, residents with higher levels of educational attainment, and middle to upper-middle incomes. The paper concludes with several recommendations for future research on SFR REITs.

The financialization of rental housing in Tokyo

“…In the wake of this event, the large-scale devaluation of property markets generated vast inventories of distressed housing properties that financial investors were particularly well-placed to acquire. In Ireland, Spain and Greece, a significant number of housing units were securitized and pooled into REIT portfolios (Chilton, Silverman, Chaudhry, & Wang, 2018;Waldron, 2018;Alexandri & Janoschka, 2018), while a new class of "singlefamily rental REITs" emerged in the USA -alongside the traditional multifamily model -from the purchase of distressed homes at foreclosure auctions (Chilton et al, 2018;Alexandri & Janoschka, 2018).…”

Rental tenure and rent burden: progress in interdisciplinary scholarship and pathways for geographical research

“…The recent U.S. foreclosure crisis has led to an extensive conversion of single-family homes into rentals (Chilton et al, 2018 ; Colburn et al, 2020 ; Fields et al, 2016 ; Immergluck, 2018 ; Immergluck & Law, 2014a , 2014b ; Pfeiffer & Lucio, 2015 ; Pfeiffer et al, 2020 ). Since this crisis, there has been a pronounced tenure shift toward rentership in large U.S. metropolitan statistical areas (MSAs), and a substantial share of this increase concerns rental single-family homes (Immergluck, 2018 ), now accounting to more than one-third of all U.S. tenants residing in single-family rentals (Pfeiffer et al, 2020 ).…”

One and the Same? A Systematic Literature Review of Residential Property Investor Types

“…The entrance of institutional investors into Germany's residential property market in the mid-2000s, for example, was "based on bargain prices, cheap mortgages and low operating and maintenance costs." In the United States, "single-family rental Property Investment Trusts" (Chilton et al 2018, 1) increased considerably, shaping rental housing markets throughout the country. Wissoker (2016, 536) underscores how institutional investors tend to be heavily engaged in mergers and acquisitions, "transforming relationships between financial firms and homebuilders."…”

“…Institutional investors are particularly connected to “new global financial schemes” (Bernt, Colini, and Förste 2017, 552) and business strategies. The entrance of institutional investors into Germany’s residential property market in the mid-2000s, for example, was “based on bargain prices, cheap mortgages and low operating and maintenance costs.” In the United States, “single-family rental Property Investment Trusts” (Chilton et al 2018, 1) increased considerably, shaping rental housing markets throughout the country. Wissoker (2016, 536) underscores how institutional investors tend to be heavily engaged in mergers and acquisitions, “transforming relationships between financial firms and homebuilders.” The overbuilding of residential properties leading up the GFC, he argues, was closely tied to the need of construction firms “to meet stock analyst targets rather than to help feed demand for subprime mortgages.” Similarly, Tomaskovic-Devey and Lin (2011, 538) contend that the “increased size and scope of institutional investors” is intertwined with the 2008 collapse of the world financial system.…”