How Corporate Landlords Are Impacting Charlotte's Housing Market
Charlotte has a shortage of affordable housing, and city officials and nonprofit groups are working to address it. Some people say the task is being made more difficult by the actions of Wall Street investors and out-of-state corporations that own thousands of rental homes in the area.
One such company, California-based Tricon American Homes, says it owns more than 1,500 houses in Charlotte with plans to buy more.
Local housing officials worry that Tricon and other investors are scooping up too much of the city's supply of affordable housing and are forcing some renters out of those homes. The Charlotte Observer has highlighted this issue and reporter Fred Clasen-Kelly joined “All Things Considered” host Mark Rumsey to talk about it.
Mark Rumsey: For context, do we know roughly what percentage of homes in Charlotte are owned by these corporate landlords?
Fred Clasen-Kelly: It's sort of a moving target. What we know from our reporting is that a handful of large companies have bought about 10,000 houses in the Charlotte area over the last several years, taking their holdings from zero to over 10,000 in a relatively short amount of time.
Rumsey: Corporations started buying up homes in cities like Charlotte — Sunbelt cities in particular — in the aftermath of the recession after 2008, I believe. Is that what you've found?
Kelly: That's the correct timeline. So after the Great Recession, there were millions of troubled, soured mortgages. There were foreclosed homes all across Charlotte and all across the country. And the folks on Wall Street saw an opportunity and they decided to make a bet.
Their bet was this: That people would not be buying houses — that more of them would be renting and that they would have a chance to make money by raising the rent. By and large, they've been proven right.
The problem is, and what critics would say, is that their purchases are concentrated in only a handful of areas [and] in a handful of cities. So overall, Wall Street companies own about 300,000 homes across the country. But these 300,000 homes are in less than 20 cities. If a big company that can raise billions of dollars moves into Charlotte and buys them all in west Charlotte or north Charlotte, you can have a tremendous impact on the residents who live there.
Rumsey: What kinds of impacts do you see that having?
Kelly: Well, the local nonprofits and other critics would say that the business model is built on raising the rent — that the companies have to raise the rent to satisfy the demands of their investors. And so they often raise their rents at faster rates than the overall market.
They often have to charge rents that they view as the maximum they can charge. Whereas, mom and pop landlords — who control most of the market — typically will raise the rent as they see it fitting their business needs or their needs to get by because they only on a few homes and they have close or personal relationships with their tenants.
What we've seen in our reporting is that Tricon has bought houses in minority and low-income areas where the affordable housing crisis is the most acute and has been widely reported. Wages have largely been flat, particularly for low-income workers, and so the pay that people receive in their paychecks isn't keeping pace with the rent.
Rumsey: And your reporting has also shown that Tricon specifically has basically forced out some renters who were receiving Section 8 federal subsidies. Is that right?
Kelly: Absolutely. The company in a statement to the newspaper said that it was moderating its participation in the program, which is a fancy way of saying we're reducing the number of people who receive government housing benefits who can live in our houses. [This makes] it very difficult for those families to sort of carry out the mission of the program, which is to allow people to move from neighborhoods that are concentrated in poverty into neighborhoods that are higher performing with jobs and good schools and to improve their economic mobility.
Rumsey: The fact that these long-distance landlords, if you will, have bought up thousands of homes in Charlotte and renting them out. Does that hurt the market for first-time homebuyers by reducing the available stock?
Kelly: So the industry would say that they've been a net positive. They've bought abandoned and troubled houses. They fixed them up. They've invested thousands of dollars on them and they've made neighborhoods look and feel better.
But of the chief criticisms of this business model is this that first-time homebuyers in many cases have been pushed out of the market. They've put in bids for homes and been outbid by Wall Street. Often Wall Street comes in with cash offers. Sometimes these offers are significantly higher than what a first time homebuyer can offer and they've simply been beat out.
WFAE reached out to Tricon American Homes. In an emailed statement, the company said, “Our goal is to provide our residents with a quality home, a clean and healthy living environment and value for their monthly rent payment.”
Tricon added, “Our standard rental rates reflect market rates and over time, these are adjusted to keep pace with market changes.”