Soaring rents and home prices across the country are fueling the housing instability that forces working families into the streets. Wall Street’s increasing penetration into the single-family home market is at the core of the upheaval.

It all began in 2007, when a large number of “adjustable-rate mortgages” (or “ARMs”), also known as subprime mortgages, reached the date at which their loan rates were due to be reset. These “ARMS” had previously allowed millions of families to buy homes. But when they hit the reset date, the interest rates greatly increased, and a large swath of the population was suddenly unable to keep up with their repayments. At the same time, they were unable to sell their homes because of falling home prices. The fashionable phrase to describe this situation was “being underwater.” Rather than rescue these drowning homeowners, the Bush and Obama administrations saved the banks and let the homeowners drown.

Between 2007 and 2012, more than 12 million homes went into foreclosure, and the stock market fell by half. Many financial institutions collapsed and required government bailouts. One notable exception was Lehman Brothers, which was allowed to go bankrupt — ostensibly because the Federal Reserve ran out of money and was already too deep in the mortgage market. In the wake of the widespread devastation, only one banker — Kareem Seragedin of Credit Suisse — was arrested and convicted for corrupt practices. As is so often the case, the poor take it in the neck, and the wealthy get handed life jackets.

A 2013 report pointed to the racist dimensions of the financial crisis. The State of Housing in Black America revealed that, by the time of its publication, African Americans “lost over half of their wealth since the beginning of the recession through falling homeownership rates and loss of jobs.”

Into all this mess rushed the Federal Government and Wall Street Investors. Those 12 million foreclosed homes needed to be removed from the Federal Reserve’s portfolio. Rather than looking for ways to put people back into their homes under a state-funded mortgage program, the government looked to Wall Street, the same people who financed many officials’ election campaigns. Those initial big investors swooping in to buy up all these homes included Blackstone and its subsidiary Invitation Homes, as well as Tricon Residential, American Homes 4 Rent, and FirstKey Homes.

Government report highlights corporate takeover

In May of last year, the Government Accountability Office (GAO) released a report entitled Rental Housing: Information on Institutional Investment in Single-Family Homes. The document summarizes 74 studies of “institutional investors” — i.e. corporate investors or private equity firms, usually owning 1,000 or more properties  — that are buying up single-family homes.

These are not mom-and-pop landlords renting to college students. They are not the kind of landlords that would overlook chronic late payments. Rather, these are organizations with enough capital to acquire and rent entire housing and suburban developments in bulk quantities. And they only look at cash flow. You can imagine the impact on cash-strapped families.

The number of rental properties under the control of these large financial firms is in the tens thousands in Florida. Large institutional investment in rental property is nothing new; most multi-family properties are owned and financed by large financial groups. Many of them are listed on stock exchanges. What is new is the tremendous movement of speculative investment into a section of the nation’s housing stock once considered a pillar of working-class neighborhood stability.

No single investor owned more than 1,000 single-family homes prior to 2011. By 2022, 32 corporate investors owned 450,000 single-family homes, with five of the largest owning nearly 300,000 of them.

According to the GAO report, no single investor — corporate or individual — owned more than 1,000 single-family homes prior to 2011. That all changed thanks, in part, to the encouragement of the Federal government and the opportunities presented by the financial meltdown of 2008 and 2009. Large financial institutions wrecked the mortgage market with impunity, and turned the financial meltdown into an investment opportunity.

These institutional investors had access to considerable wealth and could get more where needed. The motto of Wall Street investors at the time was that no one should overlook the opportunities in a financial crisis. So, by 2015, large institutional investors owned 170,000–300,000 homes. By 2022, 32 of them collectively owned 450,000 single-family homes, and according to GAO, the five largest investors owned nearly 300,000 homes of those homes.

For example, Pretium and its subsidiary Progress Residential now own around 100,000 homes. (Pretium founder and CEO Don Mullen was a former Goldman Sachs executive who led the firm in betting against the mortgage market during 2007 financial crisis.) Invitation Homes owns over 84,000 homes, and bought $1.1 billion worth of houses in 2023. American Homes 4 Rent owned more than 59,000 homes at the end of that year, FirstKey Homes more than 50,000, Amherst Residential LLC more than 45,000, and Tricon Residential — recently acquired by Blackstone — owns more than 38,000. Together, these companies have more $100 billion in assets. BlackRock, Vanguard Group, State Street Corporation, Fidelity Investments, J.P. Morgan Chase, and Principal Financial Group are among their largest shareholders.

The initial large penetration into the single-family home market resulted from bulk purchases in local auctions of foreclosed properties during the 2007 and 2009 recession. These were made possible because, before taking over the single-family home market, Wall Street firms had taken over the home mortgage market. The primary lender for single family homes used to be non-commercial banks, savings and loans. Remember those? Those banks left the stage in a prior financial meltdown.

As we all should know, before the 2008 market crash, creative people on Wall Street figured out a way to create large portfolios of mortgages that could be bought and sold. Banks and mortgage companies were happy to sell off these mortgages and provide more mortgages with the proceeds. Those mortgages were bundled into portfolios that could be sold to individual investors, investor groups, and financial firms. The portfolios were called derivatives and the market for them reached a new level of dysfunction and corruption, as highlighted in the comedy-drama film The Big Short.

Each portfolio contained mortgages on thousands of properties, and most were in default. Within those portfolios were thousands of single-family homes bought by individual investors, who were not qualified for the mortgage in the first place. The investors then turned around and quickly sold the properties for a handsome profit. Most of these homes, however, were bought by families and individuals who were probably thrilled to finally own their own home. What they didn’t know was their American dream had finally been realized thanks to financial corruption, and was soon revoked.

Once assembled, these derivatives could be sold just like stocks. Large investors had access to ready money, as well as government sources. And with insider knowledge, small investors were at a big disadvantage. Government officials wanted to facilitate the quick sale of failed portfolios, so they used federal funds to facilitate the acquisition of as many homes as possible by large corporate investors.

The principal operators in this regard were Fannie Mae and Freddie Mac. These are two government-sponsored enterprises overseen by the Federal Housing Finance Agency (FHFA). They contributed greatly to the growth of these large corporate investors. Fannie Mae, for instance, created a program for that specific purpose — the REO-to-Rental. This program ostensibly allowed pre-qualified investors to bid on large portfolios of foreclosed properties and buy them.

They claimed the program was launched in 2012 solely to stabilize the housing market. Initially, roughly 2,500 properties were sold this way — a drop in the bucket compared with today. But soon after, the scheme took off. In 2017, to further “stabilize the market,” Fannie Mae turned to large financial concerns and arranged for federal largesse. For example, a $1 billion loan was awarded to Invitation Homes, one of the largest investors in single-family homes, allowing them to buy more homes with federal money. Another $1.3 billion in loans was given out to other big investors. The corporate hand outs continued until 2018, when FHFA terminated both programs.

Large institutional investors own 25% of Atlanta’s single-family rental housing, 21% of Jacksonville’s, 18% of Charlotte’s, and 15% of Tampa’s.

Many of the homes acquired by these investors were resold. Others were kept as rentals. Presently, large institutional investors own roughly 2% of the single-family rental stock across the U.S., according to the GAO report. A MetLife Investment Management research paper put that estimate at 3%. At first glance, this might not seem significant. But these are targeted acquisitions concentrated in certain areas — particularly in the South. GAO estimates that these large institutional investors own 25% of Atlanta’s single-family rental housing, 21% of Jacksonville’s, 18% of Charlotte’s, and 15% of Tampa’s.

Given current trends, it has been estimated that 40% of all single-family homes will be owned by institutions (large and small) by 2030. This has sparked interest in legislation like the Stop Wall Street Landlords Act, first introduced in 2022, and the End Hedge Fund Control of American Homes Act. The National Rental Home Council, the main lobbying organization for companies that rent out single-family houses, spent $310,000 in 2023 to kill these types of potential regulations.

Community and environmental impacts

It can be difficult to assess the impact of these institutional investments on housing outcomes for a variety of reasons. For example, what makes for an “institutional investor” is not well defined, and there is a lack of data about certain outcomes such as evictions. But the studies reviewed by GAO indicate in general that institutional investment increases rents and home prices, particularly in areas where it is concentrated. After all, as a 2022 Stateline article pointed out, “investors often can outbid other buyers, keeping starter homes out of the hands of would-be owners, especially suburban Black and Hispanic families.” Meanwhile, rents have become more uniform and leasing procedures stricter. Some studies also indicate that large-scale investors are more likely to file evictions.

The GAO report claims that corporate investment in single-family rental housing also has positive impacts on residential communities. According to the agency, corporate ownership increases neighborhood diversity and educational opportunities, because rental housing can provide entry to neighborhoods at a lower (initial) cost than homeownership. Families who cannot afford a downpayment can still get housing, the argument goes. Of course, this assumes they can pay first and last month’s rent, provide a security deposit, show they have never been evicted, and pass a financial means test.

Florida appears as the epicenter for these investors. A seven-part Tampa Bay Times series, Buying Up the Bay, focuses on the expanding interest of corporations, and other large financial entities, in single-family housing in the Tampa Bay area. The corporations and hedge funds named in that series are involved in all the housing markets in Florida, and throughout most of the South. 117,000 single family homes in Florida are owned by them, and 27,000 of these homes are in Tampa Bay. Nonetheless, these numbers are somewhat surprising, especially for Florida.

The housing market in Florida is out of control and getting crazier. The market here for home insurance is a minefield. In certain areas, insurance companies are leaving in droves, thanks to hurricanes, repeated floods, and other factors. Now, millions of homeowners cannot get insurance, with costs rising to five times the national average and getting steeper. Florida’s average home insurance premium is nearly $11,000, while the national average is just under $2,400.

The only foreseeable solution to this situation was the creation of a publicly controlled insurance company, “Citizens,” owned and operated by the Florida government. You can imagine the attitude of Governor Ron Desantis toward this idea. A state-owned insurance company was and is a very bitter pill for the Florida legislature and Governor to swallow. With every category-five hurricane, they choke further.

Nonetheless, there are lots of homes still being built in sprawling residential complexes, along with the development of multi-family homes. While marketed with names like Eagle Ridge or Heron Landing, they have annihilated any possible home for the birds. They are only intended to sop up cash from people looking to relocate, often using money from the sale of homes up north and healthy retirement plans. These investments represent capital’s flight to markets and regions, not where it’s most needed, but where it can turn the quickest buck — a core feature of capitalism.

To longtime residents of the state, a drive down an interstate or the turnpike provides convincing proof that the natural parts of Florida are under a relentless attack by bulldozers and front-end loaders, driven by non-union workers.

The writers of the Tampa Times series put considerable effort into identifying specific targets of the corporate developers. They were able to graphically show that corporate investors have targeted the new suburban residential developments, in some cases buying out large portions of them. This makes sense, in that large financial interests can, and often do, buy directly from the builder and the developer — before the construction is even finished and other buyers know what is happening.

Several interviewed people who bought into these developments soon learned, after they were built, that an institutional investor — perhaps in Texas or Arizona — already owns most of the properties, controlling all the votes on the homeowner’s association and the maintenance of the amenities and infrastructure, not to mention the association fees.

They had no way of knowing this before buying. The corporate investors conceal their ownership by setting up a variety of identities — e.g. trusts, limited liability corporations, and partnerships — and using those names on the title. The researchers on the Tampa Bay series exposed the ruse by researching the contact addresses, rather than the owner’s name. These corporate investors used only one mailing address for all these fronts.

Their concealment strategy created a legal rats nest. Foreclosure defense lawyers, of which there are hundreds in the state, learned to demand that all foreclosure documents be signed by the actual investor that created these assorted entities, not by the front group. Because many law firms dealing with the foreclosure could not locate the identity of the party that actually owned the mortgage, cases were dismissed, giving homeowners a chance to obtain new financing, sell the property, or negotiate a solution. Sooner or later, the mortgage lenders would figure things out, but for some time, it created many headaches in the courts. Many counties had to open dedicated foreclosure courts.

Here in Central Florida, around Orlando, home buyers have struggled with developments having a large number of absentee owners. Mostly, these owners buy homes as a short-term rental for Disney family vacationers. (Some are even marketed specifically to British families.) As a result, some developers now promote their projects as immune from these problems, prohibiting new buyers from renting the property within a year or more of purchase, and barring short-term rentals. According to the writers of the Tampa Bay Times, these rental restrictions are becoming more popular, but unfortunately cannot have an effect on existing developments.

It is hard to imagine how all this is happening here. It is hot as hell in Florida, and getting hotter. There is a special way now of reporting air temperature, using an average figure that may be ten degrees lower than the real time temperature. Traffic is out of control; there isn’t a single area in Florida with a workable public transportation system. And after every hurricane, the cost of home insurance rises with the sea level.

And it gets worse: the primary threat to our homes and everything else in Florida is flooding, not hurricane winds. We have many floods without hurricanes. In Miami, there is a weather condition called “sunny day floods.” For this reason, flood insurance has to be purchased separately from home insurance, and it is not cheap. It, too, is getting more expensive every hurricane season. On top of the floods are the red tides — toxic algae that makes our beaches intolerable. Yet, still, our state government does not believe in global warming or environmental protection.

Conclusion

Corporate investors have wreaked havoc in the Florida markets in other ways — too many to recount in one article. There is nothing illegal about what is happening with single-family homes. It is just another place to make large profits. But there is another great irony in all of this that needs finally to be mentioned.

There are now over 23 million people in Florida. Approximately 738,000 moved here in 2022, and another 940,000 came in 2023. The numbers of people moving out of Florida is also increasing, but not as quickly. The developers promote Florida as a good place to invest and live — despite the heat, the traffic, the red tides, and the stink from the fish it kills.

And I can’t fail to mention the snakes that can eat a person whole. I used to take my children kayaking every Christmas in southwest Florida. We looked forward to it, until we saw a 20-foot reticulated python. That put an end to that kind of holiday.

All this to say, Florida is really no place to try to retire comfortably. But for large financial interests, it seems an ideal place to park their billions. Of course, this can only make sense because they don’t live here.

The opinions of the author do not necessarily reflect the positions of the CPUSA.

Images: 2015 Stop Blackstone protest in 2015 by Right To The City (CC BY-NC-SA 2.0); 2011 Stop speculating on our homes NYC protest by New York Communities for Change (NYCC) (Facebook) / 2011 Foreclose on banks not people protest by Miranda Leitsinger (X) / 2013 “Foreclose the banks, citizens arrest” protest by Rania Khalek (X) / 2013 “Foreclose on banks NOT people!” protest by Dr. Lucky Tran (X); 2012 victory rally against Bank of America by Right To The City

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