Investment firm Blackstone Group has struck a $6bn deal to buy a company that rents out over 17,000 single-family homes across the US, a sign of investor confidence that the country’s housing market will continue to grow amid skyrocketing prices and a housing crunch.
Blackstone, the country’s largest private equity firm, has agreed to purchase Home Partners of America, a company which owns and rents out homes throughout the US, according to the Wall Street Journal. The investment firm previously owned Invitation Homes, currently the largest owner of single-family homes in the country with 80,000 homes, until Blackstone sold the last of its shares in the company in 2019.
Concerns have been raised over the presence of investment firms in the housing market as prices have soared over the course of the pandemic due in part to increased demand for homes, low mortgage rates and a low supply of available housing.
Data from the US Bureau of Labor Statistics show that housing prices for renters and homeowners this spring were up 2.2%, while other data, like the S&P Case-Shiller home price index for March 2021, showed home prices were up more than 13% compared to last year.
Big investment companies currently make up a very small percentage of single-family homes – about 2% or 3,000 homes are owned by large companies, according to the Wall Street Journal. A bulk of the rental market, about 85%, is owned by companies with 10 or fewer properties.
While their presence may seem small in comparison to the scale of the entire US housing market, investment companies’ presence are concentrated and can be large in certain areas of the country. Home rental companies are believed to have the upper-hand in the housing market as they can more easily borrow money than the typical average homeowner. They typically target housing markets in cities that are attracting a growing number of young professionals looking for good paying jobs, like Charlotte, North Carolina, and Phoenix, Arizona.
Some analysts have pointed out that home ownership by investment companies helps to hold up the housing industry should there ever be a decline in demand as well as service people who move around frequently and would prefer to rent.
In a press release, Blackstone said that Home Partners of America, which gives renters the option to buy the home at a predetermined price within a 30-day notice, “expands housing access and choice, while providing a clear path to homeownership”.
“The fundamental premise of the [Home Partners of America] platform is to provide residents with the opportunity to live in their chosen home with the option to purchase it,” said Jacob Werner, senior managing director of Blackstone Real Estate. “We intend to build on that goal and expand access to homes across the US.”