Corporations that buy starter homes make it harder for first-time buyers, analysts say
It’s no secret it can be especially hard for people to buy their first homes, especially in the Charlotte area.
Some analysts tell Action 9′s Jason Stoogenke corporations are snatching up many starter homes so they can rent them out, making it that much more difficult for first-time homebuyers.
Ely Portillo co-wrote a UNC Charlotte Urban Institute study last year. He looked at the impact corporate landlords have on housing. He concluded they tend to buy starter homes, driving supply down and price up for first-time buyers.
“This is really something else that, for many people, [is] another hurdle on their journey to homeownership,” Portillo told Stoogenke. “People who might have less money, who might need more time to line up a mortgage, who might not be able to put as much down, when you’re talking about generally all cash offers from companies that can close quickly, that can be really tough for a family to compete with.”
Portillo says that as of last summer, corporations owned more than 11,000 homes in Mecklenburg County alone. In a map he made of the data, you can see clusters -- especially in certain parts of town like Steele Creek, north Charlotte, the University area and Mint Hill.
Stoogenke spoke with Tom Barkin about the lack of starter homes in general. Barkin is the president and CEO of the Federal Reserve Bank of Richmond, which covers North Carolina and is very involved in housing issues.
“We have government programs for affordable housing, that housing which is for people with income less than ‘x,’ but we don’t really have programs to support workforce housing, starter housing, and that is a real challenge in a lot of these markets is policemen, firemen, teachers -- where are they going to find a place to live?” Barkin said.
ALSO READ: Some renters in Charlotte now have new protections
Neighborhoods fight against corporate landlords
Some neighborhoods are fighting to keep corporate landlords out. Michael Hunter is a lawyer who represents HOAs. He says he’s the founder and leader of Community Association Practice Group, which provides collection services and real estate and general counsel to HOAs.
He told Stoogenke he’s been working with about 10 to 15 neighborhoods per month using two HOA rules to block corporate landlords:
Putting a cap on the number of houses that can be rentals at one time, and
Saying a buyer can’t lease a home until he/she has owned it for 12 or 24 months, for example.
You may also remember, Mecklenburg County set aside $500,000 to study the impact corporate landlords are having on the community.
ALSO READ: Report: Wall Street-backed landlords own thousands of homes in Charlotte
Shayna Whitman said she and her fiancé are first-time homebuyers. She said they only bid on a few houses but kept getting outbid. She feels a big reason is because there aren’t enough starter homes to go around.
“There’s just so much pressure to make a decision right then and there. If you see a home that goes on the market, it pops up on Zillow, it’s been on for an hour, you might have already gotten outbid,” she said. “So all this pressure of go, go, go.”
>>DIGITAL EXCLUSIVE: Action 9′s Jason Stoogenke looks at the impacts of corporate home buying, and what you can do if you’re in the market.
Whitman doesn’t know if corporations buying homes in Charlotte made it harder for her and her fiancé to land their first home. She just knows their search hasn’t been an easy one.
Good news -- the couple finally got a house in northwest Charlotte. They close next month.
Portillo says the four corporations that owned the most houses when he mapped them out were Progress Residential, American Homes 4 Rent, Invitation Homes and Tricon.
Most of those companies referred Stoogenke to the National Rental Home Council for their side of the story. The Council speaks for the rental home industry.
In a statement, the Council says that proportionally, its member companies own very few homes across the country -- usually fewer than 1%. The group says Charlotte has the fourth-highest rate of homeownership of any major city in the country, and that the companies tend to buy homes that are already rentals.
ALSO READ: Home building, inventory take upward turn in Charlotte housing market
The Council also relies on a recent study the National Association of REALTORS did, which says the percent of millennial homebuyers continues to rise. It says 81% of the younger millennials who bought homes -- and 48% of the older millennials who did -- were first-time homebuyers.
NRHC’s full statement is below:
“In terms of context, NRHC member companies who are large providers of single-family rental homes own about 300,000 properties across the country. This equates to approximately 0.2% of the country’s residential real estate. Additionally, large companies do not own more than 1% of the housing in any individual state, to include North Carolina. According to NRHC member-provided data, member companies own about 22,000 homes throughout the state of North Carolina, equal to just 3% of the number of single-family rental homes (720,000) and 0.45% of the total housing in the state (4,748,000). In the Charlotte area, UNC Charlotte has reported there are about 13,600 single-family rental homes owned by ‘corporations.” I haven’t verified UNCC’s data and I suspect it is not terribly accurate, but even if it were, then that would equate to less than 1.3% of the housing in the market (1,062,398).
“Reports that only cite the number of homes bought by single-family rental home companies often don’t provide a full understanding of the ways companies play an important role in the housing market of local economies. First, many of the homes purchased by single-family rental home providers are already rental properties, and are not homes being “converted” to rentals. Second, single-family rental home companies are increasingly transitioning to the building of new homes for rent rather than purchasing existing homes, an example of companies bringing new homes to market. Third, over time, not only are single-family rental home companies purchasing and building homes, they are also selling properties, mostly to individual homebuyers.
“As it relates to homeownership, in the Charlotte market, the individual rate of homeownership has increased over the past five years (1Q17 to 1Q22) from 65.0% to 75.5%. Charlotte currently has the 4th highest rate of homeownership of the 75 largest metro areas in the US. And while I don’t have data specific to the Charlotte market here, the National Association of Realtors has reported millennial homebuyers now account for 43% of all home purchases, up from 37% the previous year, and the largest of any generation. Further, NAR reported 81% of younger millennials included in the above figure were first-time homebuyers.
“Regarding maintenance and property management, NRHC member companies are committed to providing the highest level of resident service. To that end, all five of NRHC’s largest member companies (American Homes 4 Rent, FirstKey Homes, Invitation Homes, Progress Residential, Tricon Residential) maintain an A+ rating from the Better Business Bureau. In 2021 NRHC members spent over $2 billion on property renovations, improvements, and upgrades.
“For more information on the single-family rental housing market in Charlotte please see: Rental Home Companies Are an Important Part of Charlotte’s Housing Mix.
(WATCH BELOW: Officials address shift from private homeownership to corporate-owned homes)
