Financial giants crowd out homebuyers
According to Fortune magazine, the two groups of people Americans dislike more than Congress are f i nanciers and landlords.
Given that financiers — and hedge funds, in particular — have emerged as the largest owners of single-family homes in the US, it’s little wonder Americans are more anxious than ever about housing affordability.
In an article called “The New American Dream: Rent Your Home From a Hedge Fund”, author Simon Black says the transformation in the US housing market over the past 10 years is extraordinary.
“Buying and renting out singlefamily homes has long been the mainstay investment of small, individual investors. The big banks and hedge funds pretty much monopolise everything else. They own the stock market. They own the bond market. They own all the commercial real estate. They even own the farmland.
“Family homes were one of the last bastions of investment freedom for the little guy. But that’s all changing now.”
In early August, a huge merger was announced between Invitation Homes — a real estate company spun ties from their housing portfolios — bundling rental properties together to become a bond, paying bondholders out of the rental cashflow. Blackstone expects this “exciting new asset class” to grow into a US$1 trillion industry in the next few years.
Critics say the effect of this exciting industry has been to push up house prices, squeeze out individual house buyers and turn America into a nation of renters forever.
US Census Bureau statistics confirm the number of rental households has been rising steadily while the number of homeowner households has been falling.
One commentator concludes: “The new reality in America, especially for young people, is you’ll be relegated to renting your house from Blackstone. Unfortunately this is not like renting your grandma’s old house. Maximising profit is their sole purpose and they are ruthlessly efficient in raising rent.”
It’s hard being outside the housing market, waiting for an opportunity to buy. It will be even worse if your competition can pay more than you, will not even live in the house, and may instead become your landlord.
No wonder hedge funds are unpopular.