Two indicators for lowering the rent
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This is Planet Money from NPR.
A few years ago, Amanda Cantrell was looking for a new house to live with her boyfriend and a friend. She wanted to rent a home with a large garage that would take pets.
I have a rescue dog. His name is Digby.
Amanda was searching in one suburb in Murfreesboro, Tennessee, and she noticed a lot of the houses were owned or managed by big corporations.
It seems that those companies own all of those houses in that suburb, but I didn't see one private landlord when I was looking.
This made Amanda a little concerned for when she becomes a buyer.
We would like to buy a home in the future, and the fact that corporate investors can take all of them feels unfair.
This feeling of unfairness crosses the political spectrum. The 21st Century Road to Housing Act is a bill aimed at improving housing affordability. It was passed in a bipartisan sweep, and this bill restricts large institutional investors from owning too many single-family houses.
There are pockets in the country where institutional investors account for a higher share of homeowners, but across the country, it's tiny, less than 1%. So we wanted to know, could banning institutional home investors improve housing affordability? Hello and welcome to Planet Money. I'm Darian Woods.
And I'm Waylon Wong.
Today on the show, two indicators about lowering the rent. We take a look at the power players and regulations that help and hurt housing affordability. We look at the absolute cheapest of accommodation. And we ask how a particular type of ultra-affordable housing went from widespread in American cities to nearly vanished.
But first, we ask, are corporate landlords really the villains of the housing market? So let's start with the history.
Stephen Billings is a professor of real estate at the University of Colorado Boulder. Stephen starts the story during the 2008 Great Recession, when homes all around the country were going into foreclosure.
We saw a lot of investors see an opportunity to buy things really cheap.
These investors soon realized that having these regular rent payments coming in was actually more lucrative than selling the homes, flipping them.
Finance people would take a whole lot of properties with these regular cash flows and sell it as an investment product. Some of these are called real estate investment trusts or REITs. For investors in REITs, it's a way to get skin in the real estate game without needing to do the messy work of actually being a landlord.
This became a real boon for this whole industry because it led to tons of money.
It also led to a backlash from people like Amanda Cantrell, the renter in Tennessee. When house prices in general started to rise a lot in the early 2020s, politicians from Democratic Senator Elizabeth Warren to Republican Vice President J.D. Vance would blame institutional investors.
Stevens says there's a grain of truth here.
In general, the large presence of institutional investors will drive up housing prices a little bit.
But just a grain of truth, because these companies make up such a small share of home purchases nationally, less than 1%. The much bigger drivers of housing prices are low construction and low interest rates.
Also, Stephen says corporate landlords actually tend to reduce rental prices by bringing more rental homes into the market. That matters because about a third of American families rent.
Lori Goodman runs the Housing Finance Policy Center at the Urban Institute, a think tank. She's also involved in the housing industry as a consultant. Lori points out that institutional investors tend to buy houses that are in worse condition than average and then fix them up.
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