The aftermath of the 2008 financial crisis left a glut of foreclosed homes across the nation resulting in many working-class Americans unable to purchase the tide of vacant homes left strewn across cities like Atlanta, Los Angeles and Nashville.
There were, however, plentiful cash-ready investors willing and financially able to fill the void. Those investors were none other than Wall Street firms and large investors that, ironically, helped fuel the crisis.
In an effort to prevent the housing market from crashing, the government incentivized Wall Street firms in 2012 through a pilot program that granted access to investors that could easily purchase foreclosed homes from Fannie Mae, a government-sponsored federal national mortgage association.
The idea was that private investors would become landlords to individuals in areas hardest hit by foreclosures offsetting the lack of housing with the foreclosed homes becoming rentals to those needing housing.
The plan worked, resulting in private equity and hedge funds gobbling up more than 200,000 homes between 2011-2017 – creating an entirely new industry of corporate landlords and a nation of renters on the horizon.
For investors, the plan made sense. By purchasing the foreclosed homes at a reduced price, the return on investment had the potential to be massive with significant longevity. With monthly recurring rents pouring in year-over-year piled on by the thousands, the money starts to increase drastically, creating incentives to corporations to invest in residential inventory.
While that plan injected capital into the struggling market following the financial crisis, the practice has continued – expanding seismically across the country. In Davidson County, where we are battling affordable housing and razor-thin inventory, there are five major investment companies hovering over our area that have purchased more than 10,000 homes collectively, nearly a fourth of last year’s inventory.
One company, Progress Residential purchased over 2,083 homes in Rutherford County and owns 1,045 homes in Davidson County.
This poses a serious problem for lower and middle-class Americans looking to achieve homeownership, a pathway long recognized as a core component of the American Dream and has multiple long-term issues that will negatively impact the people of this city and beyond.
The biggest of which is middle-class families being priced out due to the rapidly rising rates created by these investors paying over asking price with cash offers. Moreover, when the housing stock is increasingly concentrated into the ownership of a handful of companies, it then becomes less disbursed across the general population of the local area, preventing many opportunities for wealth generation of the local residents.
As a Realtor, I am a strong advocate of homeownership and a firm believer in the long-term benefits that come with it. My fellow Realtors and leading economists know that the greatest benefit of homeownership is its ability to build wealth for lower and middle-class Americans. Homeownership can change people’s lives, their families and future generations. What we are seeing with these few investment companies is a David versus Goliath scenario where many Nashvillians simply can’t compete against their deep pockets that are cornering the market.
My fear is that down the road, the inventory will continue to wither away into the hands of these companies, leaving working people behind. Long-term, not only will it dramatically affect home buyers as previously mentioned, but it will also continue to affect renters with increasing rental rates and make homeownership attainable only to the wealthy and powerful.
Furtesha Woods, Broker/Owner of Woods Realty is a native of Nashville, TN. She is currently serving as the President of the National Association of Real Estate Brokers – Nashville Chapter. Furtesha also serves on the Diversity & Inclusion Committee for the TN Realtors Association and is a member of IOTA Phi Lambda – Epsilon Psi Chapter Business Sorority.
