Raleigh leads nation in percentage of apartments owned by private equity

Driving the news: Nearly 35% of apartments in the Raleigh-Cary metro area are owned by private equity companies, the highest percentage in the country, per the report from the Private Equity Stakeholder Project, a nonprofit that tracks the industry.

The big picture: Raleigh has experienced one of the biggest apartment construction booms in the country, with large apartment buildings proliferating everywhere from downtown Raleigh and Durham to the suburbs of Cary and Morrisville.

• The apartment buildings are bringing much-needed supply to the region, but their large-scale nature often means only the country's largest apartment developers, often backed by private-equity firms, are able to own them.

Case in point: The Peace Street apartments in Raleigh, built by local developer Kane Realty, were recently bought by the apartment landlord Cortland for $152 million and rebranded as Cortland Glenwood South.

• Cortland — the fifth largest private equity-backed apartment owner, according to the report — now owns 10 apartment buildings across the Triangle.

State of play: Relatedly, then-N.C. Attorney General Josh Stein, who is now governor, last year joined several other states in suing many of the country's largest landlords, saying they colluded with RealPage, the maker of a rent-setting software, to raise rents.

• The lawsuit is still in progress, though it is now led by Stein's successor as attorney general, Jeff Jackson, who filed an amended complaint in January.
• Jackson's office said on Tuesday it will announce that Cortland had settled its lawsuit with the state, agreeing to stop using price-setting software and non-public data from other landlords to set its rents. Jackson's office described it as one of the first settlements to restrict a landlord's use of RealPage.

The landlords and RealPage have pushed back, saying inflation, high interest rates and housing supply shortages have pushed up rents.

• And many of the cities with high concentrations of large apartment owners, including Raleigh and Charlotte, have been the fastest-growing in the country since the pandemic.

Zoom in: Rents have increased significantly in the Triangle since the pandemic.

• Still, the share of Raleigh renters (46.7%) who are cost-burdened (spending more than 30% of their incomes on rent) is still below the national average of 51.9%, according to data from Apartment List.
• In Durham, however, the share (55.2%) is higher than the national average.

What's next: Local governments across the Triangle continue to look for ways to promote more diverse housing options — including making it easier for smaller landlords to build multifamily housing, like duplexes and townhomes.

• Raleigh Mayor Janet Cowell recently said Raleigh has a 37,000-unit shortage of housing and that a priority of her first term will be to increase housing supply in the city.
• She noted last month that her council has already approved a potential 3,000 new units across 13 projects — five of which had elements of affordable housing.

Editor's note:  This story has been updated to reflect that Jackson filed an amended complaint in January.