Photo: Geoff Smith
Recently, concentrated ownership of single-family homes by institutional investors has been in the news as awareness of the impact of these types of investor purchases on local housing markets has grown more apparent to policymakers. In 2023 and 2024 alone, several bills were introduced in Congress attempting to curb the worst behaviors of institutional investors, whose portfolios and purchasing methods are believed to contribute to higher home and rent prices, make it more difficult for new homebuyers to compete in the housing market, and who can engage in practices as landlords that have negative consequences for renters and municipalities. Recently, Vice President Kamala Harris has also highlighted this issue as a cornerstone of her plan to address housing affordability nationally.
Throughout 2023 and 2024, the Institute for Housing Studies and DePaul professor Dr. Amanda Kass explored outcomes of single-family homes purchased by three large corporate landlords (American Homes 4 Rent, Invitation Homes, and Starwood Waypoint) in Chicago and the larger region in 2013. The analysis used data from the IHS Data Clearinghouse to understand whether properties purchased by these companies continued to be held in their portfolios or had been sold to a third party as of 2022. To complement and ground this work in the policy needs of local practitioners, the research team also engaged staff and members of the Metropolitan Mayors Caucus (MMC) and MMC’s Housing and Community Development Committee to better understand how single-family ownership by large corporate landlords continues to impact communities throughout the region.
This blog explores the outcome of this work and includes data and background on the rise of institutional investors in the Chicago region, new data to contextualize the current presence of three companies who made significant and concentrated purchases of single-family homes in 2013, and key takeaways from discussions with a diverse group of municipal leadership on the issues and policy challenges in communities as a result of institutional investor ownership of single-family homes in the region’s neighborhoods.
This project was supported by a grant from the DePaul Urban Collaborative Community Research Initiative. Related to this work, an article by Dr. Amanda Kass detailing the quantitative and spatial analysis of investor activity in Chicagoland was published in the academic journal Geoforum and is available here.
Background
In the 2000s, a foreclosure crisis led to millions losing their homes, wiping away billions of dollars in housing-based wealth in the United States. Chicagoland (Cook, DuPage, Kane, Lake, McHenry, and Will Counties) was no exception. Between 2008 and 2012, Chicagoland averaged over 68,000 foreclosure filings annually with Black and Latino communities and modest-income suburban municipalities especially affected. Large-scale, national companies formed with funding from institutional investors seized on the moment by buying foreclosed properties at low prices, converting them to rentals, and proving the viability of operating a national portfolio of single-family rental properties. As a result of that crisis, there has been a long-lasting expansion of the single-family rental (SFR) market.
After the crash, the region’s housing market began to rebound in the 2010s and was spurred, in part, by institutional landlords and other investors purchasing distressed housing. Investor activity in Illinois’ residential housing market peaked in 2013, representing nearly 25 percent of all residential transfers recorded that year.
In the Chicago region, American Homes 4 Rent, Invitation Homes, and Starwood Waypoint had a particularly large market share, buying roughly 2,800 single-family homes in 2013, or about nine percent of all likely investor purchases of single-family homes. Figure 1 below maps how these purchases were concentrated in specific communities throughout the region, and also how the individual purchasing behavior of these specific companies varied. For example, American Homes 4 Rent and Invitation Homes purchased the greatest numbers of properties and bought in areas that had modest levels of foreclosure and were not the most economically distressed. While American Homes 4 Rent purchased in outer-ring suburbs, Invitation Homes bought throughout Chicagoland with pockets of concentrated purchases in suburbs bordering the City of Chicago. Starwood Waypoint, in contrast, purchased properties throughout the region including heavily in the south suburbs of Chicago. For a full-sized map, click here.
Figure 1. Purchases of Single-Family Homes in the Chicago Region by American Homes 4 Rent, Invitation Homes, and Starwood Waypoint, 2013
After 2013, large-scale institutional investor-buying activity cooled in the region, but smaller acquisitions continued. Additionally, merger and acquisition behavior further consolidated ownership and influence. For example, between 2016 and 2017, American Homes 4 Rent merged with another investor, American Residential Properties, and Invitation Homes merged with Starwood Waypoint. Today, American Homes for Rent and Invitation Homes are two of the largest SFR landlords in the United States, owning more than 100,000 single-family homes combined. Of the 2,777 properties purchased by American Homes 4 Rent, Invitation Homes, and Starwood Waypoint in 2013, 61 percent are likely still held by those companies today and are likely operated as rental properties in the Chicago region as of 2022.1 Figure 2 maps these single-family homes still held in portfolio by these entities. To explore a full-sized map, click here.
Figure 2. Single-Family Homes Purchased in the Chicago Region by American Homes 4 Rent, Invitation Homes, and Starwood Waypoint that are Likely Still Owned by these Entities, As of 2022
During the Great Recession and subsequent foreclosure crisis, local community development and housing practitioners raised concerns about the rise of institutional investors and the impact of concentrated ownership of single-family homes by these entities in neighborhoods. Chief among these concerns was 1) the impact that concentrated and absentee ownership may have on building code enforcement and housing quality, and 2) the impact of a disposition strategy on a local housing market, as well as 3) how that strategy may limit the ability of communities to respond to changing housing needs in the future. Subsequent research has now highlighted other negative outcomes. For example, corporate landlords have higher eviction rates, high fees with predatory increase schedules, and institutional landlords routinely fail to address repair and maintenance concerns. Further, research has found that homeownership rates decline in communities with high investor activity and that corporate investor activity within a neighborhood may decrease that neighborhood’s homeownership rate- a phenomenon that is perhaps associated with the concerns that institutional landlords are outcompeting first-time homeowners in the housing market. How these issues manifest at the community level and the local challenges localities face in addressing them is of critical importance.
Engagement with the Metropolitan Mayors Caucus
Substantive engagement with elected officials and staff from municipalities that are members of the Metropolitan Mayors Caucus (MMC) was a key element of this project. The Metropolitan Mayors Caucus is a membership organization of the Chicago region’s 275 cities, towns, and villages, and MMC provides a forum for the region’s chief elected officials to collaborate on common problems and work toward a common goal of improving the quality of life for the millions of people who call the region home. The research team engaged MMC staff, members of MMC’s Housing and Community Development Committee, and a broader group of MMC members whose communities had high concentrations of institutional investor purchases.
Engagement activities included 1) a data presentation and facilitated discussion at one of MMC’s Housing and Community Development Committee meetings, 2) a web-based survey to better understand specific policy issues and needs, and 3) a set of focus group discussions to have more in-depth conversations on local challenges. Representatives from 33 municipalities were asked to participate in the focus group and fill out an anonymous survey. Ultimately, representatives from 17 municipalities participated. To better understand the perspectives of municipalities with common market conditions and regulatory constraints, focus groups were organized for 1) towns from south suburban Cook County with long histories of single-family rental challenges, 2) larger towns with Home Rule authority, and 3) smaller towns with no Home Rule that had higher levels of SFR buying in 2013. DePaul presented data on housing market conditions and institutional SFR buying activity to frame the discussions.
While foreclosures and the influx of new, institutional landlords were chief concerns in the mid-2000s and 2010s, municipal representatives communicated a broader set of issues in 2024. Participants indicated they had policy concerns related to single-family rentals in their communities, but whether the landlord was a large corporation or local owner did not seem to be a main concern. Key challenges identified were:
Ability to respond to code violations, safety inspections, and property maintenance issues – Respondents highlighted the challenge of reaching property owners in response to code violations or results of safety inspections. The issue of identifying a point of contact for maintenance issues and code violations was expressed as a significant challenge for the Chicagoland municipal focus groups. A representative from one municipality felt that large landlords such as institutional landlords were less responsive to code violations than others; however, this was not a universal experience. When code violations and maintenance complaints are reported, local agencies do not always have sufficient resources or staff ability to investigate. One issue is that the actual owner of a property may be opaque due to the outsourcing of property maintenance duties to a management company. In the focus groups, municipal representatives reiterated the challenges of tracking these companies as many of the legal entities are not corporate names that officials are familiar with nor is there always a clear point of contact.
Impact of single-family rentals on local homebuying markets – Another set of concerns identified was how the expansion of the SFR market may impact homeownership. The type of homes that corporate investors typically target are at similar price points to the types of homes that first-time buyers and historically marginalized groups typically buy. This pattern of buying and holding these properties as rentals often reduces the available inventory of starter homes, exacerbating existing for-sale housing inventory shortages, and contributing to housing affordability challenges.
Addressing growing incidence of “squatting” – Local officials noted the growing number of “squatting” complaints in the communities. According to a recent article, evicting individuals who have taken up residency in a building they do not own or pay rent for can take months. This delay is often due to backlogged court systems. In some cases, prospective tenants are given codes to keypads to self-tour rental units. While this reduces the need to have agents personally attend these showings, local officials cited recent examples of prospective tenants refusing to leave and using squatting laws as their legal protection.
Opportunities and limitations of local municipal authority to address emerging challenges – In the focus groups, municipal representatives highlighted land banks, home revitalization programs, red-tagging to indicate a structure is unsafe, reviewing transfer stamps, rental registration or licensing requirements, rental inspection programs, and targeted ordinances (ie. Rental Density Ordinance or Crime-Free Housing Ordinance) as current tools being used to combat contemporary challenges. They also expressed a desire for additional resources, particularly among municipalities with smaller tax bases and capacity to implement new programs, to address some of the previously mentioned challenges such as incentivizing tools to help change rental properties into home ownership, tools to locate single points of contact for property owners, a comprehensive list of what municipalities can and can’t do depending on “Home Rule” status, and better relations with local HOAs.
Policy Intervention Scan
Just as the housing issues facing a community vary from place to place, so too do the policy tools. We conducted a national scan to identify policy interventions and tools being debated or deployed at the federal, state, and local scale. On the local level, there have been policies put into place that assist with creating landlord registries, allow for proactive inspections, increase tenant rights, and measures to hold landlords accountable for repair issues. There are other national and state legislative attempts to reign in the ability of corporate landlords to buy up properties as well as statewide attempts to limit rent increases and reduce the tax benefits available to large corporate landlords who own substantial inventories of single-family rentals.
As part of this project, the research team developed a policy document that reviews examples of policy interventions that have been proposed or implemented to address many of the key challenges identified from focus group discussions. The attached document is a resource for local practitioners looking for a starting point to understand how others are addressing these issues.
