Institutional landlords list more US rental homes after buying ban

Large US single-family rental landlords are putting more homes up for sale after new federal housing legislation barred many institutional investors from buying additional properties. Real estate data provider Parcl Labs said homes listed for sale by institutional owners rose to 9,447 this month from 4,166 on Feb. 1, representing $3.1 billion in total asking prices.

The law defines institutional investors as owners of 350 or more homes, a lower threshold than the 1,000-home level commonly used by the industry. It does not require those owners to sell existing properties, but it blocks further purchases of single-family rental homes except in specified categories, including build-to-rent projects.

Jason Lewris, co-founder of Parcl Labs, said the speed of the increase in for-sale listings bears watching. He said listings will take months to show up as completed sales because housing transactions have long closing cycles, but they offer a timely signal of how institutional owners are responding.

Large landlords become net sellers

Parcl Labs estimates that investors covered by the 350-home threshold own about 589,000 homes, equal to 3.9% of the 14 million single-family rental homes in the US. The same group has accounted for roughly 40% of net selling so far this year, according to Parcl.

The largest operators, including Progress Residential, Invitation Homes, AMH, Tricon, FirstKey, Amherst and VineBrook, have each sold more homes than they have bought since Jan. 1, Parcl said. Together, those landlords have sold 3,180 more homes than they purchased this year. They still own about 400,000 homes in aggregate.

VineBrook is the most active seller among that group by portfolio share, with nearly 10% of its homes on the market, according to Parcl. That amounts to about 1,900 homes carrying $285 million in asking value. Publicly traded single-family rental real estate investment trusts Invitation Homes and AMH have 549 and 536 homes listed for sale, respectively. Progress Residential, the largest landlord cited by Parcl, has 143 homes on the market.

Policy shifts capital toward permitted channels

Lawmakers supporting the ban argued that cash-rich investors were helping push up home prices and making it harder for owner-occupant buyers to compete. The proposal drew bipartisan support. Large-scale single-family rental ownership began expanding after the 2008 financial crisis, when private equity firms bought foreclosed homes in bulk in markets including Atlanta, Las Vegas and Phoenix and converted them into rentals.

Stephen Scherr, co-president of Pretium, the parent company of Progress Residential, said on CNBC’s “Squawk on the Street” that policymakers now broadly recognize a role for private capital in rental housing. He said Progress is focusing on areas allowed by the law, including build-to-rent, rent-to-renovate and programs intended to help renters become owners.

Build-to-rent refers to homes developed specifically for rental use rather than purchased from the existing owner-occupied market. AMH began building rental homes in 2017 and has developed more than 14,000 homes across 180 communities, according to the company. Invitation Homes bought Atlanta-based homebuilder ResiBuilt at the start of this year.

Chris Nebenzahl, vice president of rental research at John Burns Research and Consulting, wrote in a report that the removal of a forced-sale mandate had changed the financing case for build-to-rent. He said lenders can again underwrite those projects and that activity is beginning to appear.

Institutional sellers are also cutting prices more often than the broader market, according to Parcl Labs. Nationally, 38.7% of listings have had price reductions, compared with 54% among institutional single-family rental listings. Since early May, average markdowns in that cohort have widened from about 3.1% to 4% of asking value, Parcl said.

This story draws on original reporting from CNBC.