Right as housing prices bottomed out around
In only a year, private equity giant
Now, several companies, including Blackstone, are packaging their SFRs into bonds similar to the mortgage backed securities that fueled the financial crisis.
Like those securities, SFR bonds are backed by homes; but this time rental payments, rather than mortgage payments, pay the interest. Securitisation frees up money, allowing big buyers to purchase more properties with less capital by increasing their leverage – and risk.
“Previously you had individual ‘mom and pop’ landlords, but now you have companies that have large portfolios that span multiple states – [will] the systems that they are putting in place [...] be able to keep up?” --
Issuances thus far are small – less than
Last year, two senior Federal Reserve economists warned institutions could “have difficulties managing such large stocks of rental properties or fail to adequately maintain their homes.”
Indeed, this May, a couple in
“Securitisation allows for bad practices to flourish exponentially,”
The deal was only a drop in the bucket of 44,000 homes Blackstone owns nationwide. This summer, they aim to package a billion dollars’ worth of units.
Collectively over the past three years, large investors have spent an estimated
Their entrance into the housing market comes amid historic inequality in the U.S., where extracting wealth from the poorest has become normalised.
The financialisation of everyday life means that something as commonplace as the landlord banging on your door for rent now involves thousands of investors, thousands of miles away, all urging that landlord to extract greater profits.
“Single family rental is not new,”
Because institutional investors can pay more than the asking price – in cash – for multiple properties, they’ve edged out local would-be homeowners and driven up prices in several hot markets. The percent of all-cash buyers has doubled in only a year, to over 40 percent of all home sales.
Tight credit for personal mortgages – from the same lenders that liberally dished out dangerous subprime loans before 2008 – has only worsened the picture for renters looking to move into a home of their own.
That has resulted in homeownership rates at two-decade lows and rising rents in practically every region. Income, however, is moving in the opposite direction. Between 2000 and 2012, rents rose 12 percent in real dollars; over that same period, the median income of renters fell 13 percent.
SFR-backed securities do theoretically open up funding for an expansion of the rental market. Though there is an immediate need for affordable housing, seeing
“Millions of families lost their homes during the foreclosure crisis and now as a result we have millions of families that are looking for homes to rent,” said Edelman. “We do need an increased supply of rental housing, but we also need to make sure those are stable.”
But as SFRs, like seemingly every financial instrument, become increasingly inevitable, housing advocates don’t want regulators to be playing catch up.
“The industry doesn’t have much of a track record – it’s important that the industry establishes best practices and that state and local policy makers revisit their landlord-tenant policies,” said Edelman.
Issuances are picking up. In April, Colony American homes sold bonds totaling
More than half of the properties in the
“Securitisation just provides a mechanism to increase the volume of this activity,” Stein told IPS. “It’s not surprising people have found out a way to make money out of this.”
Most Popular Stories
- Americans Still Pessimistic Despite Economic Growth
- Apple to Unveil New Items on Sept. 9
- Bogdanovitch Delivers Laughs With 'She's Funny'
- Axxis Solutions Appoints Benites as CEO
- Friends Followed Similar Paths to Violent Jihad
- Parra Joins Exclusive Club of Hispanic CEOs
- Obama Puts Ukraine Violence on Russia
- California Moves Toward Ban on Plastic Bags
- Nintendo Launching 'Amiibo' Toy-game Franchise
- Identity Thieves Prey on Job Seekers