As single-family rental companies scoop up Charlotte houses, some neighborhoods push back
An analysis of sales data in five counties in the Charlotte area found thousands of single-family homes, condos and townhomes were snatched up by single-family rental companies.
WCNC reporter Nate Morabito dug into the data for the Charlotte Journalism Collaborative, a collaborative reporting project focused on solutions to the affordable housing crisis in Charlotte that includes WFAE. Morabito joins WFAE's Marshall Terry to talk about the impact these so-called SFR companies are having on the area’s housing market.
Marshall Terry: And Nate, let's start right there. What exactly are single-family rental companies? And how do they work?
Nate Morabito: So, a single-family rental company is a company that generally is an outside investor. They're not really home in a community — often backed with money from Wall Street. And these are companies that really focus on the need for single-family rentals in communities across the country. They are basically a corporate landlord in a neighborhood.
Terry: You reviewed real estate data and Cabarrus, Gaston, Iredell, Mecklenburg and Union counties. What's the price range you found these companies are targeting?
Morabito: So, you know, generally these companies are targeting around the $300,000 price range. Anything really below $400,000 is what Realtors tell us is kind of what they're looking for, particularly homes that may be a little bit older, and the data support the idea that these are homes that are under $400,000, which are generally homes that a first-time homebuyer is seeking. And that's why we thought this was such an important topic because you have competition now — not just a human being competing for a first-time home in our Charlotte market, but you also have corporations now competing for those same properties.
Terry: And just how much of the market to do these SFR companies own in the Charlotte area?
Morabito: So, over the course of the year in those five counties you mentioned, we identified 5% of all homes, condos and townhouses that were acquired that went to these SFR companies. So, 5%. I think the industry would suggest that that's a low number. But when you look at a market like Charlotte, where there's so much demand for housing right now and so little stock, 5% equates to 4,100 homes that did not go to individuals.
Terry: How long has this been happening? Is it a new thing?
Morabito: You know, I think there's talk that there have been different companies over the last several years that have started kind of looking at this market. What we found is that this trend is obviously growing right now. I think it's growing even faster than some of the industry groups will suggest it is, because I think that they suggest that the numbers are actually relatively low for the market. But the fact that 5% of all homes acquired during that time frame went to these companies shows that really the numbers are increasing, even if just a little bit year over year.
Certain reports that we identified as well found that Charlotte's a top market for these companies, and the industry group that we talked to basically said the same thing — that this is a hot market for a variety of reasons. No. 1, because of the economy, because of the jobs here. And as people move here, because they're attracted to Charlotte, they're looking for a place that's accessible, that's close to good schools, that's close to their jobs. And the idea is they won't always be able to afford that when it comes to buying a home, to having a down payment to taking out a loan and said the rent helps them get into these neighborhoods that maybe would block them out.
Terry: So, that's kind of the view from the SFR company side of things. But you also talked with a homebuyer and a real estate agent as part of your reporting to get their take on the impact these sales are having on the area's housing market. What were their thoughts?
Morabito: So, I want to tell you about Katlyn Pflederer. This is a mother who now lives in a home in Union County. She has a husband, and she has three kids, and they were looking for a modest $275,000 home last year. They put down eight offers and lost every one of them, including several to these single-family investment companies. They eventually were able to try a ninth time and get the home they wanted.
I mean, it was farther out. It was a little bit smaller, they had to make some concessions. But for them, their point is that look, when you're when you want to buy a home in this market, you'd expect it to be tough. But no homebuyer who has the money to find a home should face this kind of competition. At least that's the stance from them, and they're happy now. But you can imagine how much of a rollercoaster ride that was for their family.
And from the Realtor perspective, we talked to a couple of different Realtors who say that even before these homes are listed, these same investment companies are reaching out with offers. And these are not just offers at asking price. These are over-asking offers, oftentimes in cash. And so how is a home buyer supposed to compete with that when oftentimes they need to get a loan and they need to have some additional kind of hurdles to secure a deal, so the idea is it just puts them at an unfair advantage.
Terry: Now you found that some neighborhoods and homeowners are pushing back, so to speak. Your story with the Charlotte Journalism Collaborative points out that the Highland Creek Community Association and Avalon at Mallard Creek Townhomes Organization are finding ways to stem the sale to these companies. What are they doing exactly?
Morabito: And so first, let's start with Avalon. That's something that my colleague Lauren Lindstrom at The Charlotte Observer found out about. Basically, they put a cap on the number of SFR rentals in their community and also came up with kind of a waiting period. And that's what Highland Creek did as far as a waiting period. Let me explain that. Last year, Highland Creek decided that they wanted to kind of create and maintain a community that's know majority owner-occupied.
So, they created and amended their covenant to require 12-month waiting periods for any sale of a home, which means if I buy a home, and my intent is to rent it out, the covenant prevents me from doing so until a year has passed, and the idea is that will discourage these investment companies from setting up shop there. The president of the homeowners association there told me it's working so far.
The word's getting out — investment companies are not welcome there, and it'll be curious to kind of see if more neighborhoods will do that. I heard from another person in another neighborhood in the Charlotte area that really wants his neighborhood to do that. But there's also the concern of what the legal battle will be eventually if these investment companies try to fight these covenants.
Terry: Nate, if there's a home buyer out there, either just starting their search or finding out that they're losing out to these single-family rental companies, what advice would you give them?
Morabito: So, I'm going to give you the advice of what Realtors told me. No. 1, they say that you should consider offering a sizable due diligence amount because these companies do not have to offer due diligence oftentimes. So, this is basically your seed money — you're committing to going through this with this property. No. 2, if you like a home or neighborhood or a community, ask around in that community. Ask your Realtor to ask in that community and call around: are any homeowners considering selling? See if you can get one of these homes before it goes on the market. That way, it kind of eliminates the competition.
I also thought this was really interesting — the idea of making sure you get a lender that's going to be speedy and is not going to drag out the process because again, you're looking at a company that can put cash down, whereas you have to go through the loan process. So you want to have that underwriting upfront and quickly done so you're not really dragging your feet. So, to me, those are the really the big tips there. You've got to consider other opportunities, too.
You can be a little bit more flexible, but even this Pflederer family, I think they waived an inspection, and even then they still couldn't get the property. So, you have to be resilient and a bit patient and find a good Realtor that's going to be willing to fight for you and to continue to push for this. And from the other perspective, the Realtors really say sellers could help by just selling to other people.
And I think that's a bit difficult sometimes because you have the opportunity to make more money, potentially, by selling to a company that can offer more than asking price. But you know, Jonathan Osman, a Realtor and broker in town, told me not all those deals go through. Sometimes they fall apart, and there's no guarantee. So, on the other side, I think sellers need to commit to actually selling to human beings instead of corporations.
Terry: All right. Well, thank you for taking the time. We appreciate it.
Morabito: Thanks so much for having me.
Terry: Nate Morabito is a reporter with WCNC-TV. His report is part of the Charlotte Journalism Collaborative.