When Wall Street Is Your Landlord

In 2010, at the height of the foreclosure crisis, the federal government watched nervously as hundreds of thousands of families lost their homes. Empty houses blighted neighborhoods, their shades drawn, their yards overgrown. Without some kind of intervention, federal officials worried, the housing market would continue in its free fall, prices would keep dropping for existing homeowners, and the economic recovery, already tenuous, would be imperiled.

But who would fill these empty homes? Few Americans were in a buying mood, and for those who were, mortgages were harder to come by than they had been before the crash. So the government incentivized Wall Street to step in. In early 2012, it launched a pilot program that allowed private investors to easily purchase foreclosed homes by the hundreds from the government agency Fannie Mae. These new owners would then rent out the homes, creating more housing in areas heavily hit by foreclosures.

“There was this glut of foreclosed properties in parts of the country, and inadequate demand from the traditional home-buying population and even traditional investors,” Meg Burns, who was at the time the senior associate director of the Office of Housing and Regulatory Policy, told me. “We were trying to influence demand.”

It worked. Between 2011 and 2017, some of the world’s largest private-equity groups and hedge funds, as well as other large investors, spent a combined $36 billion on more than 200,000 homes in ailing markets across the country. In one Atlanta zip code, they bought almost 90 percent of the 7,500 homes sold between January 2011 and June 2012; today, institutional investors own at least one in five single-family rentals in some parts of the metro area, according to Dan Immergluck, a professor at the Urban Studies Institute at Georgia State University.

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