You've probably heard it's a hot real estate market. And if you're a first-time homebuyer or looking for a small, single-family house in Charlotte, it's probably especially tough for you. That's partly because corporate landlords have significantly increased their share of the market. The shift started during the Great Recession. As a result, there's a smaller supply of homes that typically appeal to first-time homebuyers, and that means prices are pushed way up.
Ely Portillo researched this issue and wrote about it for UNC Charlotte's Urban Institute. He joins WFAE's "Morning Edition" co-host Marshall Terry as part of our series Rebuilding Charlotte.
Marshall Terry: So, how many homes do corporate landlords own in the Charlotte market?
Ely Portillo: So, when we talk about corporate landlords, we're talking about companies like Invitation Homes, Tricon and American Homes 4 Rent that are really pretty new since the last decade or so. We analyzed property records and found that in Mecklenburg County, these companies now own almost 11,500 single-family houses.
Terry: And what is the ratio there? What's the overall percentage?
Portillo: So, it's a small percentage of the overall market, less than 5%. There's about 268,000 single-family homes in the county. So really, even though 11,500 is a big number, it's a smaller slice of that overall pie. But what's really interesting is what part of the pie and where they're buying.
Terry: And what is that?
Portillo: They have really focused on lower-priced starter homes. What traditionally someone might get if they are looking to buy a house for the first time, if they're looking to move from an apartment. You know, so you kind of have that typical young family first house, and that's where they've really focused.
We analyzed the appraised value of single-family rental houses that these companies have purchased and found that it's about $206,000. That's well below the average appraised value for all single-family houses in Mecklenburg County, which is about $325,000. And that slice, that starter home, lower-cost house, is really where the market is tightest already. So they're buying a lot of inventory in parts of the market where there's already a crunch.
And geographically, not a lot of these houses have been purchased in the sort of wedge between I-77 and 74 that makes up southeast Charlotte. A lot of purchases in both areas near uptown and east and west of that — but also in fast-growing suburban areas like Steele Creek, Huntersville, northeast Charlotte — a real heavy concentration of purchases in those areas.
Terry: Why do they tend to buy these smaller homes or homes that usually do attract first-time homebuyers?
Portillo: So, these companies, their business model is really built on buying homes in growing areas with limited supply. So there's a lot of demand and not a lot of spare housing. That makes it easy to rent them for attractive rates. They're also not looking for fixer-uppers that take a ton of work. They want houses that they can buy in areas like Steele Creek that attract a lot of young families, people looking to maybe buy their first house, spend some money on renovating — you know, maybe a few thousand, maybe $10,000 — and then rent pretty quickly for a profit.
If you look at how much they're renting for, you can peruse online listings and see a lot of these are maybe in the $1,500 to $2,000 range. So we're not talking about luxury housing that's renting for $4,000, $5,000 a month, like, you know, really nice uptown condos with skyline views. And we're also not talking about really low-priced housing that is only renting for a few hundred a month or something like that. They want to be right in that middle sweet spot.
Terry: Well, how much have they pushed up not only the price of these homes that you're referring to, but also the price of rent?
Portillo: We unfortunately haven't had a chance to look into that level ourselves, yet. What we can say is that we know they've bought a lot of houses over the last few years and that they're continuing to buy houses. We also know that this is a record tight real estate market, that we've seen record speed of sales, prices increasing — I think 27% year over year was the most recent that we had. We've seen fewer houses than ever before for sale. At the same time, we're seeing these companies purchase more and more.
So, you know, supply and demand. We know that there is an impact on housing availability in terms of the for-sale market, we don't quite know enough yet to say it's "X percent" higher or something like that.
"We've seen fewer houses than ever before for sale. At the same time, we're seeing these companies purchase more and more."Ely Portillo, UNC Charlotte Urban Institute
Terry: And this is happening in cities across the country, right?
Portillo: Yes, it is. This has been something that's gotten a lot more attention recently. The profile of cities that are attractive to these companies sort of look all like Charlotte. You know, you have growing cities in the Sunbelt where this has become a really big phenomenon. Atlanta is one of the biggest markets. Dallas, Tampa, Phoenix — kind of all those really high-growth Sunbelt cities where you've seen a lot of booming population and booming business in the past few decades and where we now have some of the biggest housing crunch.
Terry: Are these companies getting tax breaks?
Portillo: There's been some national reporting about how they've financed some of their purchases. I haven't seen anything locally about that. A lot of their holdings are financed by firms like Blackstone and BlackRock, these big hedge funds that have really been pouring a lot of capital into these.
Terry: What effect are these corporate landlords having on neighborhoods?
Portillo: So there's been a lot of really interesting national reporting on this. We've seen articles in The New York Times in recent months, for example, about problems reported with these companies and their holdings in other cities in the U.S. I haven't seen a deep dive locally on it, but we're looking at that. You know, especially around, as we come out of the pandemic, issues like eviction. There's going to be probably a lot of focus on that in the coming months. And one question that we're going to be looking at is, are these companies evicting people more quickly than other landlords and what effect that has on residents?
Terry: What does Charlotte city officials say about this? What can be done about it?
Portillo: There's been a lot of focus on housing affordability and home ownership recently, especially with the debate about the 2040 plan that we've seen. We haven't seen Charlotte leaders addressing this particular business model from Wall Street-backed rental companies directly. But we have seen a lot of focus on creating more opportunities for homeownership, possibly programs to subsidize homeownership. You know, the city has increased its affordable housing bond to try to address some of that shortage.
But I think there is a lot of concern. And one reason that this particular story resonated is just the general concern around housing affordability and people being priced out. You know, if you try to buy a house in Charlotte right now, you're seeing it. Houses are selling faster. So in the middle of this frenzied real estate market, this new phenomenon is something that a lot of people are just starting to take notice of.
You know, I don't know that there is necessarily a big policy that the city could pass to change this or regulate it in some way. But I do expect that you're going to see a lot of focus on trying to preserve affordable housing that we already have and create more opportunities for homeownership, because there is a lot of concern that people are going to be locked out of the real estate market for a long time.
Terry: Thank you for joining us.
Portillo: Thanks for having me.
Terry: That's Ely Portillo of UNC Charlotte's Urban Institute.
