The Other McCain

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The Billionaire Landlord Cartel

Posted on | June 26, 2021 | Comments Off on The Billionaire Landlord Cartel

Buck Throckmorton at AOSHQ has a long post about what’s going on in the real estate market that everybody needs to read. For a few weeks now, ever since the Wall Street Journal did a feature article about the phenomenon, people have been pondering what this means:

From individuals with smartphones and a few thousand dollars to pensions and private-equity firms with billions, yield-chasing investors are snapping up single-family houses to rent out or flip. They are competing for houses with ordinary Americans, who are armed with the cheapest mortgage financing ever, and driving up home prices.
“You now have permanent capital competing with a young couple trying to buy a house,” said John Burns, whose eponymous real estate consulting firm estimates that in many of the nation’s top markets, roughly one in every five houses sold is bought by someone who never moves in. “That’s going to make U.S. housing permanently more expensive,” he said.
The consulting firm found Houston to be a favorite haunt of investors who have lately accounted for 24% of home purchases there. Investors’ slice of the housing market grows—as it does in other boomtowns, such as Miami, Phoenix and Las Vegas—among properties priced below $300,000 and in decent school districts.
“Limited housing supply, low rates, a global reach for yield, and what we’re calling the institutionalization of real-estate investors has set the stage for another speculative investor-driven home price bubble,” the firm concluded. . . .
“A lot of things that would have been for-sale housing are going to be for-rent housing,” said Josh Zegen, [Madison Realty Capital’s] managing principal.
Bruce McNeilage began building houses to rent out around Nashville, Tenn., in 2005. After the housing crash, his Kinloch Partners expanded into other Southeastern markets, flipping occupied rentals to bigger investors.
Kinloch was financed mostly by community banks in the cities where it rehabbed foreclosures and built rentals. These days Kinloch can borrow far more from Walker & Dunlop Inc., a commercial real estate lender forging into suburban rentals. Mr. McNeilage’s problem is that others are bidding up houses and lots.
“I am boxed out,” he said. “There’s too many people chasing things and they’re willing to overpay. It’s silly money right now.”

In short, every would-be home buyer is now effectively bidding against rental/investment companies, and more and m0re residents in suburban neighborhoods are not home owners, but tenants, because this bidding war has put the American Dream of home ownership out of reach.

The potential secondary and tertiary consequences of this are frightening, and if you think it won’t affect you, you’re wrong. People who already own homes may be under the delusion that they’re exempt from the ripple effects of this phenomenon, but what happens when your neighbor sells his house and the purchaser is a rental investment firm? Next thing you know, a dozen Guatemalan refugees are moving in next door.

OK, that’s hyperbole and probably racist, too, but for a few years now I’ve been watching California circle the toilet bowl, even as real-estate prices in the state skyrocket, and remembering what a California resident explained to me: Ever since the real-estate bubble burst in 2008, suburban neighborhoods aren’t what they used to be. Single-family homes are being converted to rentals, often with multiple tenants, so that instead of your typical family — mom, dad and a couple of kids — many homes are now housing at least five or six adults, plus however many children. Because all of the adult residents have cars, there are unprecedented problems of parking and traffic in these neighborhoods. This is something you can actually see, whenever the TV news helicopters show one of those police pursuits that seem to happen every other day in Southern California. Whenever the fleeing suspect goes through a residential neighborhood, notice how many cars you see parked on the side of the streets. These homes have garages, or at least, they used to have garages, before those were converted to extra bedrooms to provide more rental opportunity. And every home already has three or four cars in the driveway, too. Do you see now what I was signifying with that hyperbole about a dozen Guatemalan refugees moving in next door?

The conversion of suburban real estate into rental property is the real explanation for why California simultaneously experiences a declining quality of life and soaring home prices, and the billionaire real-estate barons are now bringing that formula to your community.

Buck Throckmorton’s contribution to this discussion is the suggestion “that obedience to woke culture will be a lease requirement of all renters by the emerging landlord cartel” — for example, lease requirements that tenants can’t keep firearms in their rental residences. In other words, your Second Amendment rights will be effectively negated by the terms of the lease you sign with the Billionaire Landlord Cartel.

Here’s something funny: A couple of weeks ago, the left-wing Vox site did an “explainer” that was dismissive of the threat posed by the Billionaire Landlord Cartel. Someone quickly pointed out that the CEO of the media conglomerate that owns Vox is on the board of directors of Blackrock, one of the biggest players in the rental real-estate game.




 

Category: Economics

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