- Real estate investors have dominated the single-family home market during the pandemic.
- Lawmakers and HOA members are mobilizing to stop investors from controlling their neighborhoods.
- Dallas sees a model in Canada’s efforts to curb investor activity.
As housing market outlook weathers extreme conditions
in the financial markets, investors are betting on investments in single-family homes.
Whether they’re looking for long-term rentals or for a quick ride, investors like Invitation Homes, owner of 83,000 properties, and mom and pop operations, are making it harder for people to compete when looking to buy. in their own neighborhoods. Investors bought 33% of U.S. homes on the market in January alone, the highest percentage in at least a decade, according to John Burns Real Estate Consulting, a housing research and advisory firm.
The investor push to rent has only intensified during the pandemic as city dwellers seek more space and more bucolic lifestyles. But their demand hasn’t been met with plenty of extra supply, leading them to fight for the few homes available. Some of the investors have become aggressive with their tactics, sounding the alarm from Newark, New Jersey, to Dallas and the California State Capitol.
“Looks like we’re the prey,” Deborah Smith-Gregory, a Newark homeowner who fended off cold calls from investors urging her to sell her home, told PIX11, a New York television station that reports. described the neighborhood as “up and coming.”
Such experiments are leading to a flurry of interventions from city leaders and housing advocates who fear that increasing corporate ownership of their housing stock will increase housing costs and unravel communities. closely related. In Newark, Mayor Ras Baraka told PIX11 the city is considering legislation to prevent steep rent increases and is urging the state to come up with a general policy to regulate institutional ownership.
In North Carolina, a state that has seen an influx of people from the northeast, landlord groups are taking matters into their own hands. For example, the Whitehall Village Master Homeowners Association in Walkertown, NC, is going after investors by proposing changes to their covenants, to insist that buyers live in the home or leave it vacant for at least 6 months. before renting it.
“They come in, and they basically intimidate people with cash offers,” Chase Berrier, president of the association, told The Wall Street Journal.
In the Dallas metro area, another area where the population is exploding, leaders are considering a limit on the number of homes investors can buy. The measure, while possibly drastic, is seen as potentially necessary given Dallas’ rapid growth.
According to US Census data, Dallas’ population grew 8.9% in the decade to 2020, to 1,304,379 people. At the current rate, that number will more than double, and the area is expected to add an additional 1,393,623 residents from 2020 to 2029, according to real estate services firm Cushman & Wakefield.
Dallas was inspired by a bold move by the Canadian government.
In April, Canada announced an outright ban on foreign investors buying homes in the country to prevent its booming real estate market from overheating. It also institutes a higher tax for those who sell their homes within a year of purchasing them.
The Canadian housing market saw prices rise more than 20% in 2021, according to NPR, while in the United States they rose nearly 19% for the largest increase in 34 years of measured data. by the S&P CoreLogic US National Home Price Index. Home prices in the Dallas area rose 26% last year and top the national average in the first two months of 2022, according to another S&P index.
In California, where affordability has been a nagging issue for far longer than most countries, lawmakers are further along in their battle with investors.
Last month, Democratic Congressman Christopher Ward introduced the California Housing Speculation Act, also known as AB 1771. The bill aims to discourage property flipping by short-term investors by adding a tax on profits from sales made within three years of purchase. .
Ward thinks the effort will give normal buyers the chance to compete with the homebuyers and real estate speculators who have driven up prices for everyone else.
“Speculators are taking tens of millions of dollars out of our community through the cumulative effect of all of these transactions,” Ward said in a statement. “It’s not fair either, because people who struggle are people who outbid 30 times trying to get into their homes.”
But the efforts of housing advocates are being pushed back by investors who claim their money is as green as anyone else’s, and by lenders who finance both big investors and family operations.
Some critics of Ward’s “flip tax” say the bill would actually hurt the individual buyer. That’s because the law doesn’t distinguish between investor and owner-occupied properties, and it favors large investors who can “walk in and sit on properties” over smaller flippers, said Michelle Corning, a real estate agent from Southern California. the California Globe.
Moreover, the tax does nothing to solve the lack of supply, which is at the heart of soaring house prices, Lori Pfeiler, managing director of the Building Industry Assn. of San Diego County, told the LA Times.
“While we appreciate Chris’ goal, it is ultimately a supply issue,” Pfeiler said. “We don’t have enough homes to sell, inventory is low and anyone thinking of selling their home just won’t sell their home; they’ll figure out how to keep it.”
Back in North Carolina, the homeowners association’s efforts drew a swift rebuke from the rental industry. “I don’t think a homeowners association should be able to say that you as a landlord can’t rent,” David Howard, executive director of the National Rental Home Council, told the Charlotte Observer.
Whichever side you take, one thing is clear: investor activity is transforming the housing market. Whether in Dallas, North Carolina or California, attitudes toward real estate investing are changing — and lawmakers are taking notice.
“Homes are places to live,” Assemblymember Ward told East County Today. “Homes help families preserve and grow their wealth. Homes are not a quick trade in the market – and this unchecked activity affects us all.”