Ban on Institutional Homebuying to Cut Prices Eventually, But ‘Not in the Short-Term’

Dallas Tanner, the CEO of Invitation Homes, expressed his belief that the newly enacted housing bill, which prohibits investors such as himself from purchasing existing homes, will ultimately lead to a decrease in home prices; however, he noted that this effect will not be seen in the immediate future.

“I believe in the medium- to long-term, it definitely will,” Tanner said. “I think 90% of the bill focuses on deregulation. How do we simplify capital coming into housing? Are there ways that we can spur up the supply side challenges that we have? I think overnight in the immediate term, it’s a bit trickier because there’s more to the story than just what the bill addresses.”

In early January, President Donald Trump advocated for a prohibition on large-scale investors acquiring single-family homes for rental purposes. This initiative was part of a broader effort to address the housing affordability crisis. Critics contended that institutional investors were displacing owner-occupants from the market and driving up home prices.

The prohibition was enacted in July, barring investors who possess more than 350 homes from acquiring any additional existing properties. However, they are permitted to purchase new single-family homes that are specifically constructed for rental purposes. This is where Invitation Homes is focusing its efforts.

“Our focus as an industry and as a company has been, how do we create new supply and bring that into the housing system today? We built or acquired, in our partnerships with builders, over 6,000 new homes in the last five years,” Tanner said. “We found through trial and error … that this new product, this beta product, the product that we do amongst these master planned developments—it works really, really well for our families. And so we were indexing on that, and that is part of our growth strategy.”

Investor Opinions

The largest investors, defined as those possessing over 1,000 homes, account for less than 3% of the single-family rental market, as indicated by multiple sources. Nevertheless, they exert a significant influence in specific metropolitan areas, such as Atlanta, where they represent 25% of single-family homes, Jacksonville at 21%, and Charlotte at 18%, according to the Urban Institute.

Invitation Homes announced earnings that exceeded expectations at the conclusion of July, despite the fact that rents and demand are not as robust as they were during the initial years of the pandemic.

“We’ve seen sort of fundamentals reset. We talked about it on our last earnings call. We’re starting to see actual pretty positive green shoots in several of our markets,” Tanner said. “But we’re really focused on—how do we navigate this and what does this mean?”

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