Blackstone would once have happily rented you a house. Now it will sell you one too. On Tuesday, the world’s biggest property investor announced that it would acquire Home Partners of America at a $6bn valuation. HPA offers 17,000 homes for rent across the US in cities such as Atlanta, Dallas and Seattle.
The twist of HPA is that it gives its renters the option to one day buy their property. Perhaps such options are exercised by some renters but across America, first-time ownership is increasingly imperilled.
On the same day Blackstone’s investment was announced came news that the median home purchase price in America had jumped almost a quarter, year over year. House sales fell for the fourth straight month. The explanation is simple: insufficient housing stock has been built to keep pace with population growth. One trade group estimates that the US, over the past two decades, is 6m housing units short of an equilibrium. The big winners of this failure have been Blackstone and other money managers. They have the capital for the downpayments ordinary Americans simply cannot afford.
A populist backlash has suddenly appeared against Wall Street’s rush to buy up single-family homes to rent, which allegedly squeeze individual buyers. Blackstone pioneered this American buy-to-let strategy after the financial crisis. The rental group it built, Invitation Homes, is listed and has an enterprise value of $30bn. Even so, institutional capital remains a small slice of the 17m single family rental market, more than 16m remained owned by family-run businesses.
Yet the deals keep coming. Announcements of the latest platform backed by Wall Street money to buy up and then rent homes are a regular occurrence. HPA itself is backed by BlackRock and KKR. Trepp, a research firm, recently described single-family rentals as “recession-resistant”. Its own data point to the mortgage-backed securities behind the asset class as having a default rate below 1 per cent.
Home ownership may be aspirational, but that is made difficult when single-family home rents in April grew at the fastest rate in 15 years, according to CoreLogic.
Institutional homeowners claim they provide a valuable service to Americans unwilling or unable to buy a home. That may be true. But the result of public policy and commercial failures means that they have also become rent-seekers, in both senses of the word.
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