Corporate homebuying booms in Nashville
Nashville is a hotbed for corporations gobbling up single-family homes.
- One in four homes sold in the first three months of this year was purchased by a corporation, according to data from Redfin. It's one of the highest rates in the nation.
Why it matters: Corporations have been making lucrative cash offers for single-family homes and then converting them into rental properties. It's another layer of complication for Nashville's stressed housing market.
State of play: The percentage of Nashville homes purchased by corporations grew from 17.3% in the first quarter of 2021 to 24.6% in the first quarter of this year.
- Investors' local market share increased even as they bought a smaller number of homes in Q1 2022 compared to the same timeframe last year, according to Redfin.
Driving the news: The issue has caught the attention of Congress. In June, the House Financial Services Committee released a bombshell report based on surveys of the five leading single-family rental (SFR) companies.
For the record: The five companies surveyed were Invitation Homes, American Homes 4 Rent, FirstKey Homes, Progress Residential and Amherst Residential.
- The report found that the companies have experienced explosive growth since 2018, adding more than 76,000 homes to their ownership roster. The companies have especially focused on the South.
- Using complicated financial mechanisms, the companies tend to make cash offers. Between 2018 and 2021, the companies offered $24.7 billion in bonds and other financial instruments to investors.
Of note: Their buying strategies zero in on neighborhoods with significantly larger Black populations than the national average, the report found.
What they're saying: "To meet investor's return expectations, SFR home landlords often prioritize maximizing profits," the congressional report concluded.
- "As a result, evidence suggests that renters in institutionally-owned SFR homes often experience higher rent increases, inflated fees, and diminishing quality of housing over time."
By the numbers: These companies are especially interested in neighborhoods with cheaper homes and higher rents.
- For instance, the average median home value of the companies' top 20 ZIP codes was $198,766 compared to the national average of $229,800. But the average rent in the companies' top 20 ZIP codes was 13% higher than the national average.
- The companies increased rental fees on tenants by 40% over the three-year stretch the survey examined. The number of tenants behind on rent increased from 11.3% in 2018 to 19.1% in 2021.
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