Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Buying a home in America is getting harder and harder,
Speaker 2: and President Donald Trump has been throwing a lot of
Speaker 2: ideas at the wall to address the country's persistent housing
Speaker 2: affordability crisis.
Speaker 3: The President says he's directing the federal government to buy
Speaker 3: two hundred billion dollars in mortgage bonds working on a
Speaker 3: fifty year mortgage for home buyers, calling it a complete
Speaker 3: game changer.
Speaker 1: Trump is also considered declaring a national housing emergency due
Speaker 1: to high prices and low availability.
Speaker 2: But his latest idea came as a bit of a surprise,
Speaker 2: taking on corporate landlords. Just last week, Trump posted on
Speaker 2: truth Social that he would be quote taking steps to
Speaker 2: ban institutional investors from buying more single family homes, in
Speaker 2: other words, getting Wall Street out of the housing market.
Speaker 1: Lawmakers advocates on both the left and right have identified
Speaker 1: this new phenomenon as a culprit in the greater housing
Speaker 1: affordability problem.
Speaker 2: Kristen Capps covers housing for Bloomberg City Lab.
Speaker 1: However, it's not something that President Trump or the White
Speaker 1: House has talked about very much in this term, and
Speaker 1: in fact, this same week, the Trump administration also approved
Speaker 1: a big merger of two large real estate companies.
Speaker 2: Trump is famously a real estate guy, and some of
Speaker 2: his biggest donors are in the very sector that his
Speaker 2: proposal would target. But as housing costs become a major
Speaker 2: political issue, his administration has been looking for ways to
Speaker 2: bring them down, and banning big investors from the housing
Speaker 2: market is a policy idea that's actually circulated for a
Speaker 2: while among both Republicans and Democrats. Here's Patrick Clark, who
Speaker 2: covers real estate for Bloomberg.
Speaker 3: In talking to people over the last week, there's definitely
Speaker 3: a sense that one the administration wanted to do something
Speaker 3: meaningful on housing affordability, and going after these companies is
Speaker 3: something that plays well.
Speaker 2: But Trump hasn't revealed much about how a policy like
Speaker 2: this would actually work.
Speaker 3: Trump said he's going to announce more details at Davos,
Speaker 3: you know, the place that everyone goes to talk about
Speaker 3: housing affordability and inequality.
Speaker 2: And whether cracking down on corporate landlords will make a
Speaker 2: meaningful difference is another question.
Speaker 1: The number of homes that large landlords buy at any
Speaker 1: given year is very, very small, and I think it's
Speaker 1: difficult to really attach the greater affordability problem to you
Speaker 1: know those companies who do emerge as boogeymen on both
Speaker 1: the left and right.
Speaker 2: Solder and this is the big take from Bloomberg News
Speaker 2: today on the show, How Wall Street bought up a
Speaker 2: slice of the US housing market, why Trump wants to
Speaker 2: stop it, and what impact that policy could have. The
Speaker 2: subprime mortgage crisis of the late two thousands led to
Speaker 2: a wave of foreclosures across the US. Millions of Americans
Speaker 2: lost their homes, and in the wreckage of that Great
Speaker 2: Recession period, private equity companies and Wall Street investors saw
Speaker 2: an opportunity.
Speaker 3: Homes were very cheap, and number of Wall Street firms
Speaker 3: stepped in, sometimes buying homes with cash on the courthouse steps,
Speaker 3: and were able to start amassing pretty large portfolios.
Speaker 2: Starting in twenty twelve, investors were scooping up thousands of
Speaker 2: homes a month at steep discounts. By the start of
Speaker 2: twenty thirteen, investment firm Blackstone had spent over two and
Speaker 2: a half billion dollars buying up homes to manage his rentals.
Speaker 3: It's all PTSD from the Great Financial Crisis and the
Speaker 3: foreclosure crisis, or at least a lot of it is
Speaker 3: that was really a terrible time in the economy and
Speaker 3: many people, you know, in different walks of life were
Speaker 3: affected by it, and there was a sense that these
Speaker 3: were the guys who came in and bought at a
Speaker 3: discount and made money out of that turmoil.
Speaker 2: And after years of Wall Street firms buying homes, another
Speaker 2: inflection point came in twenty twenty post.
Speaker 3: COVID when interest rates were cheap, when you know, Sun
Speaker 3: Belt migration was the theme that everyone wanted to bet on,
Speaker 3: you know, a lot, a lot more money.
Speaker 2: Came into this investment firms had a leg up in
Speaker 2: the post pandemic housing market when home prices and rents
Speaker 2: were bouncing back up but interest rates were low, they
Speaker 2: could outbid the competition with all cash offers. Since then,
Speaker 2: institutional investors have continued to buy multi family properties and
Speaker 2: single family homes and rent them out to families across
Speaker 2: the US. It can be a lucrative business.
Speaker 3: The US housing market is this is a huge market, right,
Speaker 3: There's trillions of dollars worth of homes, so it's a
Speaker 3: big market you can invest in like you can tailor
Speaker 3: portfolios in the way that you won't because it's so big,
Speaker 3: and because there's different types of assets, so there's opportunities
Speaker 3: to diversify and sort of hedge risk. You know, if
Speaker 3: the economy in one city is you know, is hurting
Speaker 3: and you're not collecting as much rent, you know there
Speaker 3: in Birmingham, Alabama or something, but Indianapolis is thriving, you know.
Speaker 3: So there's there's those kinds of opportunities, and it's a
Speaker 3: very liquid market. And if at some point you decide
Speaker 3: you want to sell homes, you feel very comfortable that
Speaker 3: there's a buyer, like probably more so than any other
Speaker 3: kind of real estate you can invest in.
Speaker 2: One twenty twenty four working paper from the Federal Reserve
Speaker 2: Bank of Philadelphia found that large financial firms went from
Speaker 2: owning almost no single family rental properties in twenty ten
Speaker 2: to almost four hundred thousand by twenty twenty one, but
Speaker 2: when interests went up in the middle of twenty twenty two,
Speaker 2: the industry's buying slowed. Last year, Blackstone's Tricon bought about
Speaker 2: fourteen hundred homes, and Predium bought less than six hundred,
Speaker 2: according to the Real Estate Investment data firm SFR Analytics,
Speaker 2: And when you think about the fifteen million single family
Speaker 2: rental homes in the market. The share that's actually owned
Speaker 2: by these big players is pretty marginal.
Speaker 3: Overall, it's somewhere between five hundred and six hundred thousand homes.
Speaker 3: Those are estimates, but it's three or four percent of
Speaker 3: the total rental homes in the US. You know, the
Speaker 3: total single family housing stock owner occupied or renter occupied
Speaker 3: is it's less than one percent of that. And these
Speaker 3: are the numbers of industries I always liked to put
Speaker 3: out there and to say, listen, we're not why are
Speaker 3: you guys targeting as we're a very small part of
Speaker 3: the housing market.
Speaker 2: In a statement to Bloomberg, Blackstone said its ownership of
Speaker 2: single family homes in the US represents zero point five
Speaker 2: percent of the overall firm and that it's been a
Speaker 2: net seller of homes over the last decade, with the
Speaker 2: company's holdings down more than a fifth. But housing reporter
Speaker 2: Kristen Capps notes that in some parts of the country,
Speaker 2: institutional investors own a larger concentration of rental properties, and
Speaker 2: Atlanta is the starkest example of Wall streets hold on housing.
Speaker 1: Atlanta was hit harder than most metros during the Great
Speaker 1: Financial Crisis, but it's also grown more than many metros
Speaker 1: since then, so that's provided both the opportunity and incentive
Speaker 1: for institutional buyers to invest. And now in Metro Atlanta,
Speaker 1: more than thirty percent of the area's single family rental
Speaker 1: properties are owned by large corporations. Charlotte and Jacksonville come
Speaker 1: close as areas with maybe twenty five percent ownership share
Speaker 1: by large corporations.
Speaker 2: In those areas especially, it can be hard for regular
Speaker 2: home buyers to compete with institutional buyers, who usually have
Speaker 2: more cash and sometimes use sophisticated algorithms to generate offers
Speaker 2: for homes.
Speaker 1: One reason that home buyers complain about institutional buyers is
Speaker 1: that algorithmic buying really locks out potential home buyers for
Speaker 1: institutional investors. As soon as something hits the multiple listing
Speaker 1: service database for new homes that lines up with their
Speaker 1: area of specialization, these corporations can submit and all cash
Speaker 1: offer with no contingencies, no inspections over asking price. You know,
Speaker 1: there's no household that can or would buy a home
Speaker 1: in that way.
Speaker 2: Here's Bloomberg's Patrick Clark.
Speaker 3: Again, you find yourself biting against a company that can
Speaker 3: move more quickly, and that making buying decisions like in
Speaker 3: a way that has no relation to the way you're
Speaker 3: thinking about it. You know, what is this home going
Speaker 3: to yield on a yearly basis? And that's why that's
Speaker 3: why people don't like them, That's why they've become popular
Speaker 3: or can targets.
Speaker 2: Patrick says, some firms argue that by turning these homes
Speaker 2: into rental properties, they're playing an important role in the
Speaker 2: housing ecosystem.
Speaker 3: Some of their arguments are fair, right, It's like they
Speaker 3: at least particularly initially, but even you know, even still,
Speaker 3: if they buy an existing home, it's very often a
Speaker 3: home that needs some repair. They'll invest, you know, thousands
Speaker 3: or tens of thousands of dollars into fixing up the
Speaker 3: home and making it nicer. And you know what they
Speaker 3: would say is that they are then by doing that,
Speaker 3: giving you know, a family that can't afford to buy,
Speaker 3: access to a higher quality home in a better neighborhood
Speaker 3: with a better school district.
Speaker 2: The research on how corporate landlords impact rental prices is mixed.
Speaker 2: Research from places like the Federal Reserve Bank of Philadelphia
Speaker 2: have shown that larger landlords do drive higher rents, though
Speaker 2: there's disagreement about how significant those effects are on the market.
Speaker 2: Another working paper from Quney Baruch suggests that by increasing
Speaker 2: rental supply, larger landlords can put downward pressure on rents,
Speaker 2: but investment firms entering real estate markets have other effects too.
Speaker 2: Research compiled in a report by the Lincoln Institute of
Speaker 2: Land Policy in the Center for Geospatial Solutions from studies
Speaker 2: in Boston, Atlanta, and Kansas City found that corporate landlords
Speaker 2: were more likely to submit eviction filings than smaller landlords.
Speaker 2: In Memphis and Indianapolis. Analyzes show some corporate landlords had
Speaker 2: higher rates of code violations.
Speaker 1: It's not necessarily the case that large landlords are worse
Speaker 1: than small landlords, but in the areas where they have
Speaker 1: been most active, there are fewer tenant protections in local
Speaker 1: or state law that afford tenants certain rights, certain ability
Speaker 1: to challenge landlord practices, and tenants in those places say
Speaker 1: that corporate landlords take advantage of these laws to raise rents,
Speaker 1: to provide substandard housing, and to affect many households across
Speaker 1: the metro areas.
Speaker 2: Trump's proposal to cut those landlords out is hitting at
Speaker 2: a really pivotal time. Housing feels increasingly out of reach
Speaker 2: for renters and buyers alike, and some Americans want someone
Speaker 2: to blame.
Speaker 3: Affordability is the political issue of our of the moment. Right.
Speaker 3: It feels unfair if you want to buy a house
Speaker 3: and you lose to a company. And it's just been
Speaker 3: red meat politically for years.
Speaker 2: So could Trump be teeing himself up for a political
Speaker 2: win ahead of midterm elections this year? And would a
Speaker 2: band provide meaningful change to the housing affordability picture that's
Speaker 2: coming up? Targeting private equity for its role in America's
Speaker 2: housing crisis has been, as Bloomberg's Patrick Clark called it,
Speaker 2: political red meat for a while now. It's an idea
Speaker 2: that politicians on both sides of the aisle have gotten behind.
Speaker 4: Private equity firms and other Wall Street investors were busy
Speaker 4: scooping up homes and communities across the country, even in
Speaker 4: the middle of an historic housing shortage.
Speaker 2: Democratic Senator Elizabeth Warren has been trying to regulate corporate
Speaker 2: landlords for years, says Bloomberg's Christen caps.
Speaker 1: It's also something that former Vice President Kamal Harris advanced
Speaker 1: on the campaign trail.
Speaker 3: We will make.
Speaker 5: Sure those homes actually go to working and middle class Americans,
Speaker 5: not just investors.
Speaker 2: Current Vice President JD. Vance has weighed into here. He
Speaker 2: is on Columbus, Ohio's ABC six in twenty twenty three.
Speaker 1: They have access to lower interest rates, they have access
Speaker 1: to cheaper money, and they completely crowd out the availability
Speaker 1: of home for people who want to, you know, just
Speaker 1: buy it by a piece.
Speaker 4: Of their community.
Speaker 2: But it wasn't a given that Trump would take this
Speaker 2: on politically. It's worth noting Trump's donor base includes Steven Schwartzman,
Speaker 2: the CEO of Blackstone. He's given generously to Trump's re
Speaker 2: election campaign and his pack, and after Trump's truth social post,
Speaker 2: Blackstone's shares fell by as much as nine point three
Speaker 2: percent before pairing some losses.
Speaker 3: I think the selloff in Blackstone shares doesn't make much sense.
Speaker 3: As Blackstone said on the day, you know, single family
Speaker 3: rentals are a very small piece of Blackstone business in
Speaker 3: Blackstone has probably more important matters in front of the
Speaker 3: federal government.
Speaker 2: And Patrick says many of the people he's spoken to
Speaker 2: in the single family rental industry have brushed off Trump's
Speaker 2: proposal as all talk.
Speaker 3: Say, this is just Trump being Trump. Half the stuff
Speaker 3: he says, doesn't go anywhere. People have been talking about
Speaker 3: this forever and it's always just grant standing and we
Speaker 3: don't have anything to worry about. There are so few details,
Speaker 3: you know, that the President has.
Speaker 1: Provided all about what it could potentially look like, what
Speaker 1: it would mean for there to be, you know, a
Speaker 1: ban is that a ban on purchasing? Is that a
Speaker 1: ban on ownership? Is that legal? I don't think that
Speaker 1: these questions have been fully played out.
Speaker 3: There's at least five or six states that have proposed
Speaker 3: some version of this in the past, and they go
Speaker 3: at it a little differently. Sometimes they'll set a limit,
Speaker 3: you know, if you own more than a thousand homes
Speaker 3: or more than two thousand homes, you can't buy anymore.
Speaker 3: I think there have been some bills that have approached
Speaker 3: the tax status of owners and in fact, Treasury Secretary
Speaker 3: Scott Besson said recently at the Economic Club of Minnesota
Speaker 3: that they're studying this. The thing that he said that
Speaker 3: people in the industry liked is that this is not
Speaker 3: a divestiture. They're not going to make companies sell homes
Speaker 3: they already.
Speaker 1: Own bygones or bygones. We're not going to have a
Speaker 1: force sale here.
Speaker 2: Besson's remarks also raise questions about which institutional investors this
Speaker 2: ban might apply to. Would it be targeted at the
Speaker 2: large firms who own thousands of homes or even smaller
Speaker 2: investors who own more like twelve.
Speaker 1: So we will decide what the correct level is. Is
Speaker 1: it a dozen homes? Is two dozen? What makes you
Speaker 1: an aggregator?
Speaker 2: With the policy idea now on the table and Trump
Speaker 2: teasing more information to come at the World Economic Forum
Speaker 2: meeting in Davos next week, some major players are taking
Speaker 2: potential regulation seriously.
Speaker 3: The industry is in bargaining mode. They're talking amongst themselves
Speaker 3: and trying to come up with things that they can
Speaker 3: offer the administration and a potential deal. And they're hopeful
Speaker 3: that this is a transactional administration and there's something that
Speaker 3: can get done.
Speaker 2: Because if legislation to ban institutional investors from the housing
Speaker 2: market makes its way through Washington, Patrick says it could
Speaker 2: have real bipartisan support and momentum behind it.
Speaker 3: I think it's very likely that someone will introduce a bill.
Speaker 3: I think there's a pretty decent chair as it will pass,
Speaker 3: and I think that'll leave the landlords in the position
Speaker 3: of challenging the constitutionality.
Speaker 1: Of a band.
Speaker 2: But the other big question is whether tackling this issue
Speaker 2: will actually make it easier for people to buy and
Speaker 2: rent homes.
Speaker 3: I would say, in terms of sort of more mainline research,
Speaker 3: as I take it in, this is pretty low priority.
Speaker 1: There's not many macro economics who are going to point
Speaker 1: to institutional buyers as a major factor in America's problems
Speaker 1: with housing affordability. Those you know, major factors continue to
Speaker 1: be a lack of supply, a lack of good options
Speaker 1: in particular geographies. You know, when it comes to home ownership,
Speaker 1: high interest rates are still, you know, the principal problem
Speaker 1: that buyers are struggling with.
Speaker 2: Congress has proposed ways to address some of these other factors,
Speaker 2: like housing supply legislation, like its Road to Housing Act,
Speaker 2: which passed the Senate last year with bipartisan support, but
Speaker 2: was stripped from the Defense spending bill that Trump signed
Speaker 2: in December. Now, lawmakers and the House Financial Services Committee
Speaker 2: are trying to push forward another bipartisan housing package.
Speaker 1: What Senator Elizabeth Warren told me is that the Trump
Speaker 1: administration has taken no moves to try to move the
Speaker 1: needle on the housing bill, the major housing bill that's
Speaker 1: been before Congress, and she said that she does not
Speaker 1: think that you astray somewhat isolated post on social media
Speaker 1: really moves the ball or indicates that the Trump administration
Speaker 1: is focused on this issue.
Speaker 2: For now, Wall Street investors may just need to wait
Speaker 2: and see what Trump says next.
Speaker 3: It's historically been an industry that likes to keep its
Speaker 3: head down and try to avoid attention. I think what's
Speaker 3: happening now is forcing it at least some of the
Speaker 3: companies to step out and try to argue for themselves.
Speaker 3: And being such a small share of the housing market
Speaker 3: cuts both ways for these companies. On the one hand,
Speaker 3: they've often said, why are you guys worried about us?
Speaker 3: We're tiny? But as a potential band gained some momentum,
Speaker 3: or if it gains momentum, you can kind of turn
Speaker 3: that idea around. And on some level, I think there
Speaker 3: are lawmakers who will say, why should I pick a
Speaker 3: fight with the president? You're tiny.
Speaker 2: This is the Big Take from Bloomberg News. I'm Sarah Holder.
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