FTC Eyes Probe Of Large Single-Family Rental Owners

Federal Trade Commission Chair Lina Khan turned the regulator’s attention toward single-family rental firms in the waning days of President Joe Biden’s administration. 

The FTC issued a request for public comment last week seeking input on how to probe single-family rental owner-operators' impacts on the housing market. The probe would target more than 30 firms that each own at least 1,000 rental units, the FTC said Wednesday, although it didn't name the companies. 

“As Americans face a housing shortage and pay soaring rents, it’s vital to understand the role played by large institutional investors,” Khan said in a statement. “This proposed study would shed much-needed light on the mega-investors that have amassed huge portfolios of single-family rental units and potentially contributed to the housing challenges that Americans face.”

The notice, approved unanimously by commissioners, will give 60 days for public comment once it is officially published in the Federal Register, Multifamily Dive reported. 

It remains to be seen whether the proposal survives the ascendance of President Donald Trump to the Oval Office. Trump has nominated FTC Commissioner Andrew Ferguson to replace Khan as the agency’s head. 

The FTC pointed to the Global Financial Crisis as a pivot point when large investors began amassing single-family homes, saying that the companies now own an estimated 446,000 homes nationwide. 

Part of the proposed study would include the creation of a comprehensive catalog of all the properties owned by large operators, a move that the FTC said is necessary to cut through the shell companies that single-family rental firms often use to buy homes. 

“The rise in mega corporate landlords has deeply troubling implications for renters,” Hannah Garden-Monheit, the FTC’s director of the office of policy planning, said in the request for public comment. “The FTC is committed to uncovering the scope of these large corporations’ holdings and their effects on housing costs.”

Just as the FTC is gearing up to potentially probe how the single-family rental business has driven up home prices, investors are pulling back from the firms over fears that a price correction is ahead. 

Shares of single-family landlords Invitation Homes and American Homes 4 Rent are trading at 20% to 35% discounts to their net asset values, and the gap continues to widen, The Wall Street Journal reported. 

It is a sign investors think single-family homes have become broadly overpriced, and there are signals that single-family home operators feel the same way. 

Operators with more than 1,000 homes were responsible for 0.3% of home purchases in the third quarter, a historic low when excluding pandemic lockdown-era data, according to John Burns Research and Consulting. 

High borrowing costs and flattening rent growth have made the sector less attractive to investors, with home prices needing to fall by at least 10% before large operators become active buyers again, according to the WSJ.