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societies
Article
The Impact of Single-Family Rental REITs on
Regional Housing Markets: A Case Study of
Nashville, TN
Ken Chilton 1, Robert Mark Silverman 2, * , Rabia Chaudhry 1and Chihaungji Wang 2
1Department of Public Administration; Tennessee State University, Nashville, TN 37209, USA;
kchilton@Tnstate.edu (K.C.); rabia.m.chaudhry@gmail.com (R.C.)
2Department of Urban and Regional Planning; University at Buffalo; Buffalo, NY 14214, USA;
chihuang@buffalo.edu
*Correspondence: rms35@buffalo.edu; Tel.: +1-716-829-5882
Received: 16 July 2018; Accepted: 18 September 2018; Published: 20 September 2018
Abstract:
The U.S. Congress authorized the creation of real estate investment trusts (REITs) in 1960
so companies could develop publically traded real estate investment portfolios. REITs focus on
commercial property, retail property, and rental property. During the last decade, REITs became
more active in regional housing markets across the U.S. Single-family rental (SFR) REITs have grown
tremendously, buying up residential properties across the country. In some regional housing markets,
SFR REITs own noticeable shares of single-family homes. In those settings, SFR REITs take large
numbers of housing units off of real estate markets where homeownership transactions occur and
manage these properties as part of commercial rental inventories. This has resulted in a new category
of multiple property owners, composed of institutional investors as opposed to individual investors,
which further exacerbates property wealth concentration and polarization. This study examines the
socio–spatial distribution of properties in SFR REIT portfolios to determine if SFR REIT properties
tend to cluster in distinct areas. This study will focus on the regional housing market in Nashville,
TN. Nashville has one of the most active SFR REIT sectors in the country. County tax assessor
records were used to identify SFR REIT properties. These data were joined with U.S. Census data
to create a profile of communities. The data were analyzed using SPSS statistical software and GIS
software. Our analysis suggests that neighborhoods with clusters of SFR REITs fit the SFR REIT
business model. Clusters occur in communities with newer homes, residents with higher levels of
educational attainment, and middle to upper-middle incomes. The paper concludes with several
recommendations for future research on SFR REITs.
Keywords:
real estate investment trusts (REITs); single-family rental real estate investment trusts
(SFR REITs); institutional housing investors; real estate speculation
1. Introduction
1.1. The Emergence of Real Estate Investment Trusts
Congress authorized the creation of real estate investment trusts (REITs) in 1960 so companies
could develop publically traded real estate investment portfolios [
1
]. REITs have historically focused on
commercial property, retail property, and rental property. During the last decade, REITs became more
active in regional housing markets across the country [
2
–
5
]. Growth in single-family rental (SFR) REITS
was initiated during the 2007–2009 housing crisis [
2
] when institutional investors began acquiring
foreclosed properties and converting them from owner-occupied units to rentals. The conversion of
owner-occupied housing into rental property held in portfolios of institutional investors grew out
Societies 2018,8, 93; doi:10.3390/soc8040093 www.mdpi.com/journal/societies
Societies 2018,8, 93 2 of 11
of the global financial crisis and is part of a broader trend toward what has been referred to as the
financialization of real estate and housing markets [6–11].
Financialization encompasses a shift from a mortgage finance system that is localized in nature
and relatively protected from market speculation by the public sector to one that is integrated into
the global system of finance and investment. This shift had several implications for real estate and
housing markets. First, income stagnation and growth in the risk of borrower default associated with
mortgage lending has diminished the role of homeownership as a mechanism for household wealth
accumulation. Heightened risk of default and foreclosure has facilitated the expansion of secondary
mortgage markets where loans are purchased and pooled to shield investors. Second, housing has
increasingly been used to leverage investment and bolster global financial markets. This has been
enabled by the creation of securitized real estate products on the secondary market allowing private
equity investors, pension funds, hedge funds, banks, and other large institutional investors to purchase
shares of real estate portfolios on global markets. Securitization has shifted the emphasis on real estate
investment from a focus on the appreciation of individual property values to an emphasis on overall
portfolio performance and investment yields. In essence, securitization has created a more liquid real
estate investment product that can be scaled up, providing institutional investors at the national and
global level with more predictable and stable investments. Finally, the shift to an emphasis on investing
in real estate securities as opposed to individual properties has created a new class of institutional
owners, SFR REITs, who compete directly with individuals engaged in traditional homeownership
and locally based “mom and pop” landlords. These institutional owners are better capitalized and able
to build real estate portfolios that attract global investment to housing markets that were previously
more responsive to local economic conditions. The entrance of SFR REITs backed by securitized assets
inflates housing prices in local markets and depress traditional mortgage activity.
In the wake of the global financial crisis, conditions have been ripe for the financialization of
real estate and the expansion of SFR REITs. Large-scale property market devaluation created large
inventories of distressed assets that investors could purchase at discounted prices. Securitizing and
pooling these properties into single portfolios allowed institutional investors to reduce their financial
risk and generate more predictable yields from their investments. Moreover, there was a growing
market for rental properties in this segment of the housing market, since indebtedness and the lack of
creditworthiness among former homeowners and young families had become more acute.
The SFR REIT sector has grown tremendously since that time, both internationally and in the
U.S. Although the latter, particularly the Nashville metropolitan area, is the focus of the analysis
in this article, research on SFR REITs has emerged in Ireland, Spain, Greece, and across Europe in
response to the same structural shifts brought about by the global financial crisis [
12
,
13
]. In the U.S.
context, from the onset of the global financial crisis to 2007 over $33 billion had been invested in over
200,000 properties owned by REITs [
4
]. Although SFR REITs account for less than 1% of all single-family
housing units across the U.S., their presence in some markets is more pronounced. SFR REIT holdings
cluster in suburban Sunbelt locations, metropolitan areas in the south and southwestern U.S. that
began a prolonged period of expansion following the Second World War. These locations were heavily
impacted by the 2007–2009 housing crisis and where the housing stock is relatively new [
3
]. According
to Attom Data Solutions, 8,027,048 homes were foreclosed on from 2008–2010. In 2010, RealtyTrac
reported 124,720 foreclosure filings in metropolitan Phoenix, AZ, 61,674 in metropolitan Tampa,
and 38,355 bank repossessions in metropolitan Atlanta [14].
Some of the metropolitan areas with the largest concentrations of SFR REITs are Phoenix, Atlanta,
Tampa, and Dallas. Within these regional housing markets, SFR REIT holdings cluster geographically.
This clustering allows for institutional investors to take advantage of technology, similarities in
construction materials, and build economies of scale based on standardized management practices [
5
].
The concentration of SFR REIT properties and the movement of them into commercial rental
inventories removes large numbers of housing units from real estate markets where homeownership
transactions occur. In addition to their impact on inventories of units available for homeownership,
Societies 2018,8, 93 3 of 11
SFR REIT properties tend to be marketed to middle and upper-middle class households and are
inaccessible to households seeking affordable rentals. For example, 1.14% of SFR REIT properties
are rented to tenants receiving rent subsidies under the federal housing choice voucher (HCV)
program, [
3
]. Where SFR REITs cluster, there is concern about tightening markets for homeowner
occupied units, rising rents, and an absence of units available to households seeking affordable
housing. A recent report concluded, “When houses are sold to cash-carrying investors for conversion
into rentals, prospective homeowners and “mom and pop” landlords are crowded out of the market,
and communities suffer—particularly communities of color [
15
]. This conclusion is contextual and
requires further discussion.
A critical variable in determining the outcome of foreclosure properties is the health of the regional
housing market. In cities that have not recovered from the most recent recession or in cities with
long histories of concentrated poverty and derelict properties, foreclosures tend to aggravate existing
community reinvestment. A 2010 publication by the Boston and Cleveland Federal Reserve Banks
includes case studies of neighborhoods in rust belt cities, mill towns, and suburbs that had large
portfolios of real estate-owned (REO) properties [
16
]. These communities were seeking new uses for
REO properties in areas lacking market demand after the housing market crashed.
Reid [
17
] found a tremendous increase in suburban foreclosures in many fast-growing suburbs
primarily in California, Nevada, and Arizona. Many of these properties were being purchased by
investors, both individuals and institutions. Immergluck [
18
] analyzed REO-purchases in Atlanta
prior the emergence of SFR REITs and found high percentages of investors buying up low-income
housing in the city. This trend is not unique to the U.S. For example, Donner [
19
] found institutional
investors rather than individual homeowners tend to buy foreclosed properties in Stockholm, Sweden.
Because of their ability to gain access to investment capital, institutional investors had a greater ability
to take advantage of property discounts.
In general, homeownership rates in the U.S. have declined since the great recession. The shift to
what some scholars refer to as a “rentership society” [
15
] or the “generation rent” [
20
,
21
] phenomenon
is found in a transnational context as a result of the global financial crisis. Consequently, single-family
rentals are the fastest growing segment of the housing market; and the bulk of landlords remain small
property entrepreneurs [
22
]. But, some analysts expect large institutional investors to grow in market
presence because they have learned how to leverage rental properties. Gary Beasley, the former co-CEO
of Starwood Waypoint Residential Trust now part of Colony Starwood Homes, one of the largest
SFR REITs in the US, attributed the emergence of institutional investors in the residential market,
in part, to, “cloud and mobile computing, [which] fundamentally changed the way distributed assets
could be managed, allowing large buyers of single-family rentals to build killer platforms in the cloud
that allowed us to run margins that rivaled apartments” [
23
]. The adaptation of new technologies
and access to large blocks of capital have allowed institutional investors to scale up and emerge as a
new category of multiple property owners distinct from individual investors who have traditionally
occupied this niche in the housing market. The growing influence of institutional investors in the
single-family rental market has exacerbated property wealth concentration and polarization.
1.2. A Shifting Business Model
As the SFR REIT sector has developed, there have been two noticeable shifts in the business
model that institutional investors follow. First, the sale of rent-backed securities has become the
primary tool used by SFR REITs to raise capital for home purchases [
15
,
24
]. This practice began
in 2013 when one of the larger SFR REITs at the time, Blackstone, backed a $479 million loan with
anticipated rents from 3000 single-family rental properties [
24
]. The loan was then securitized and
sold to investors who receive monthly dividends from rental income generated by the properties.
The ability to securitize their portfolios allows SFR REITs to raise capital that can be used for cash
purchases of new properties. By 2016, SFR REITs and other large institutional investors had moved to
an almost 100% cash buying rate for new properties, compared to smaller, individual investors who
Societies 2018,8, 93 4 of 11
continued to purchase new properties with cash less than 50% of the time [
25
]. Greater access to cash
purchasing for SFR REITs reduced their reliance on mortgage financing and other forms of borrowing
to acquire properties. This, in turn, lowered their costs, allowed them to make more competitive
offers for properties, and accumulate a larger proportion of available units in targeted real estate
markets. This business model gave SFR REITs the ability to expand their portfolios and gain greater
control of the local rental markets where they operated. However, securitization also increased the
pressure on SFR REITs to deliver returns to investors, which resulted in upward pressure on rents [
26
].
Ironically, the business model adopted by SDR REITs is strikingly similar to the business model used
by financial institutions before the 2007–2009 financial crisis built on mortgage-backed securities. Thus,
SFR REITs’ portfolios are exposed to any volatility in local housing markets where their investments
are concentrated.
In addition to a shift toward the use of rent-backed securities to raise capital for cash purchases of
properties, SFR REITs also shifted toward increased standardization and automation of their property
management systems. Unlike traditional mom and pop landlords who are locally-based and own a
small number of properties, SFR REITs include properties from across the country in their portfolios.
Table 1summarizes the portfolios of some of the largest SFR REITs. Many of the largest REITs are
absentee landlords, headquartered in places far from their tenants. For example, American Homes 4
Rent is headquartered in Agora Hills, CA; the Blackstone Group, is headquartered in Brooklyn, NY,
and Colony Starwood Homes is headquartered in Phoenix, AZ. The ability to manage large portfolios
of properties remotely is made possible by internet-based leasing and management systems driven by
real-time data analytics [
5
,
20
,
25
]. Coupled with these technology platforms are standardized leases,
and property management practices focused on maximizing profits. The business model adopted
by SFR REITs has been critiqued for lease terms, fee structures, annual rent increases, and eviction
practices that work to the disadvantage of tenants [15,25].
Table 1. Summary of Major SFR REITs Portfolios.
Company Number of Homes Investor Investment
Invitation Homes * 48,038 Blackstone $8.9 billion
American Homes 4 Rent 48,000 Alaska Permanent Fund $9.6 billion
Colony Starwood 30,844
Colony Capital; Starwood Capital
$5.9 billion
Progress Residential 17,333 Goldman Sachs $3.0 billion
Tricon 17,249 Tricon Capital $1.4 billion
* Colony Starwood merged with Invitation Source: Adapted from Abood, 2018.
1.3. The Need for More Local Research
Although there has been some analysis of national trends related SFR REITs by industry groups,
policy think tanks, and journalists, there remains a need for scholars to conduct empirical research
on this sub-sector of the housing market. In particular, there is a need for scholarly analysis of the
degree to which SFR REIT properties cluster in local markets. This study moves in that direction
by conducting an exploratory analysis of SFR REIT clusters to generate questions for future inquiry.
It focuses on the regional housing market in Nashville, TN. This market has one of the most active
SFR REIT sectors in the country. This study examines the socio–spatial distribution of properties in
SFR REIT portfolios to determine the degree to which SFR REIT properties cluster in distinct areas.
In particular, we examine the degree to which attributes of middle-class areas, such as higher levels of
educational attainment, larger household size, and higher household income are correlated with SFR
REIT clustering. We also scrutinize disparities in SFR REIT clustering based on neighborhood racial
and ethnic composition. Moreover, we examine the degree to which characteristics of the housing
stock, such as the age of the housing stock and housing costs correlate with SFR REIT clustering.
A better understanding of how these community characteristics relate to SFR REIT clustering will
inform and assist in refining future research questions.
Societies 2018,8, 93 5 of 11
2. Methods
This study focuses on the regional housing market in Nashville, TN. Data were collected from the
following six counties: Davidson, Maury, Rutherford, Sumner, Williamson, and Wilson. Tax assessor
records for 2017 were used to identify addresses and purchase prices for 2258 SFR REIT properties in
greater Nashville. These data were aggregated at the census tract level and joined with 2015 five-year
estimates from the American Community Survey (ACS) to create a profile of communities. In total,
325 census tracts were included in the analysis. Data were aggregated at the tract level to identify
clusters of SFR REIT properties and compare population and housing characteristics across those
clusters. The data were analyzed using SPSS statistical software and geocodes for analysis with GIS
software. This analysis was descriptive and exploratory in nature. It was used to gain insights into
distinct demographic patterns where SFR REITs cluster which can inform future research.
Nashville Overview
The Nashville, TN region is one of the fastest growing regions in the country. The housing industry
has rebounded from the crash, and the number of new building permits applied for by developers in
2017 (19,292) surpassed the previous high in 2005 (16,654). Home prices have appreciated considerably
over the last five years. In 2017, the average sales price of housing rose by 8% to $275,000 [
27
],
this continued a growth trend that began in the previous two years. Data from the U.S. Federal
Housing Finance Agency shows that the housing price index for the Nashville region has steadily
increased over time without a major drop during the recession. In contrast, the Tampa housing price
index peaked in the fourth quarter of 2006 and experienced a 44% decline between 2006 and 2012.
Unlike Tampa, housing prices in Nashville were relatively low before the recession. The swing in
market conditions was not as volatile in Nashville as in Tampa.
The major SFR REITs active in Nashville are American Homes 4 Rent, Invitation Homes,
Colony Starwood, and Progress Residential. Table 2shows the total number of homes owned by
county in the Nashville region in 2015. At that time, SFR REITs owned approximately 2970 homes
in the Nashville region—0.68% of the single-family detached housing stock. The companies owned
larger shares of the single-family detached housing stock in Rutherford (0.91%), Williamson (0.83%),
and Wilson (1.17%) counties. Each of these counties is middle-income, working-class suburbs outside
of Nashville proper (Davidson County).
Table 2. SFR REIT Activity in Metropolitan Nashville by County (2015 ACS 5yr Estimates).
County SFR REIT Properties Total Single Family Detached Units Percent REIT-Owned
Davidson 825 176,579 0.47%
Rutherford 733 80,387 0.91%
Williamson 512 61,511 0.83%
Wilson 454 38,818 1.17%
Sumner 285 53,174 0.54%
Maury 161 26,921 0.60%
TOTAL 2970 437,390 0.68%
3. Results and Interpretation
Table 3summarizes the census data for metropolitan Nashville. In addition to overall
characteristics for the metropolitan area, census tracts are aggregates for: tracts with no SFR REITs;
tracts where there was at least one SFR REIT, and in tracts where at least 1% of single-family units were
SFR REITs which is roughly the national average for the share of single-family housing units that are
SFR REITs [
5
]. Thus, the latter group of tracts represented tracts with clusters of SFR REIT properties.
Societies 2018,8, 93 6 of 11
Table 3. Metropolitan Nashville Population and Housing Characteristics (2015 ACS 5yr Estimates).
Metro-Area
(N= 325)
Non-REIT Tracts
(N= 156)
REIT Tracts
(N= 169)
REIT Clusters
(N= 45)
Percent of Population White 74 72 76 77
Percent of Population African American 18 21 16 15
Percent of Population Hispanic/Latino 7 7 7 6
Median Age 37.02 36.71 37.3 36.52
Percent Less than High School 12 13 10 7
Percent Bachelor’s Degree or Higher 32 31 32 35
Average Household Size 2.59 2.47 2.7 2.82
Median Household Income $60,579 $56,277 $64,499 $72,507
Percent Below Poverty 15 19 11 7
Percent Unemployed 7 8 6 5
Median Year Built 1982 1975 1988 1997
Median Housing Value $209,770 $221,938 $198,826 $208,829
Median Rent $987 $929 $1039 $1150
Percent of Owner Occupied Units Paying 30%
or more of Income on Housing 24 25 23 22
Percent of Renter Occupied Units Paying 30% or
more of Income on Housing 43 44 42 37
Percent of Single Family Units Owner Occupied 60 52 67 75
Percent of Single Family Units Renter Occupied 12 14 12 11
Percent of Single Family Units Vacant 28 34 21 14
Percent of Single Family Units REITs 0.46 0 0.87 2.35
Table 3suggests that SFR REITs clusters were distinct from other areas in metropolitan Nashville.
In terms of population demographics, SFR REIT clusters: were somewhat less diverse, had higher
levels of educational attainment, had somewhat larger households, had higher median household
incomes, and lower poverty and unemployment rates. The housing stock in SFR REIT clusters was
built more recently and had higher median housing values and rents. These characteristics were
consistent with the literature on SFR REITs [
3
]. However, a closer examination of single-family units in
SFR REIT clusters suggested that some characteristics diverged from the literature. When tenure and
vacancy data for single-family units were examined the data suggested that: owner occupancy rates
were higher in SFR REIT clusters, renter occupancy rates were lower in SFR REIT clusters, and vacancy
rates were lower in SFR REIT clusters. In contrast to some of the literature [
15
], the data suggested that
SFR REIT clusters were located in areas where the overall rental activity of single-family units was
lower than the rest of the metropolitan area and vacancy rates among single-family units were lower.
This suggests that SFR REITs clustered in areas where other types of multiple property owners were
not actively engaged in the housing submarket, making institutional investors more visible.
Table 4presents t-test results comparing non-SFR REIT tracts to SFR REIT tracts and comparing
unclustered SFR REITs to SFR REIT clusters. The first three columns of Table 4identify characteristics
that were significantly different between non-SFR REIT and SFR REIT tracts. These results suggest
that SFR REITs were more likely to appear in tracts where: there were fewer residents without a
high school diploma, average household sizes were higher, median household incomes were higher,
and poverty and unemployment rates were lower. SFR REITs were also more likely to appear in areas
with newer housing stock, higher median rents, and where owner-occupied units were less likely to
be cost burdened. These findings were consistent with other literature [
3
]. In contrast to some of the
literature [
15
], the t-test results suggested that SFR REITs were more likely to appear in areas with
higher owner-occupancy rates in single-family homes, and lower renter occupancy and vacancy rates
in single-family homes. In essence, SFR REITs were more likely to appear in relatively stable housing
markets, and SFR REITs were more visible in this segment of the market where rental activity was
less pronounced.
Societies 2018,8, 93 7 of 11
Table 4. T-Test Results for Non-REIT, REIT, and REIT Clusters (2015 ACS 5yr Estimates).
Non-REIT Tracts
(N= 156)
REIT Tracts
(N= 169) α< 0.05 UnclusteredREITs
(N= 124)
REIT Clusters
(N= 45) α< 0.05
Percent of Population White 72 76 76 77
Percent of Population
African American 21 16 17 15
Percent of Population
Hispanic/Latino 7 7 8 6 *
Median Age 36.71 37.3 37.59 36.52
Percent Less than
High School 13 10 * 11 7 *
Percent Bachelor’s Degree
or Higher 31 32 31 35
Average Household Size 2.47 2.7 * 2.65 2.82 *
Median Household Income $56,277 $64,499 * $61,592 $72,507 *
Percent Below Poverty 19 11 * 12 7 *
Percent Unemployed 8 6 * 6 5 *
Median Year Built 1975 1988 * 1984 1997 *
Median Housing Value $221,938 $198,826 $195,196 $208,829
Median Rent $929 $1039 * $999 $1150 *
Percent of Owner Occupied
Units Paying 30% or more
of Income on Housing
25 23 * 24 22
Percent of Renter Occupied
Units Paying 30% or more
of Income on Housing,
44 42 44 37 *
Percent of Single Family
Units Owner Occupied 52 67 * 64 75 *
Percent of Single Family
Units Renter Occupied 14 12 * 12 11
Percent of Single Family
Units Vacant 34 21 * 24 14 *
The last three columns of Table 4identify characteristics that were significantly different between
unclustered SFR REIT properties and SFR REIT clusters. These results suggest that SFR REITs were
more likely to cluster in tracts: with smaller Latino populations, were there were fewer residents
without a high school diploma, where household sizes were larger, where median household incomes
were higher, and where poverty and unemployment rates were lower. SFR REITs were also more likely
to cluster in areas with newer housing stock, higher median rents, and fewer renters that were cost
burdened. These findings were consistent with the literature cited earlier in this article [
3
]. In contrast
to some of the literature cited above, the t-test results suggested that SFR REITs were more likely to
cluster in areas with higher owner-occupancy rates in single-family homes and lower vacancy rates in
single-family homes. In essence, SFR REITs were more likely to cluster in areas with even more stable
housing markets, and SFR REITs were most visible in this segment of the market where they crowded
out non-institutional landlords.
Figure 1visualizes the clusters of SFR REIT properties, highlighting the distinct geographies
where census tracts had relatively large percentages (>1%) of single-family units that were REITs.
These clusters were mapped using GIS software. The map highlights some of the same tendencies
noted above. There were 2318 properties identified in the 45 census tracts where SFR REITs
clustered, representing 78% of all SFR REIT properties in Metropolitan Nashville. Spatially, SFR REIT
properties clustered in the relatively newer suburban area of Nashville, on the boundaries of
Davidson County where the City of Nashville is located and other counties. Figure 1also includes a
density analysis which highlights hot spots where SDR REITs clustered. Although the scope of this
analysis is exploratory in nature, it suggests distinct demographic patterns where SFR REITs cluster.
Societies 2018,8, 93 8 of 11
Future analysis should include dimensions, such as more rigorous multivariate tests and statistical
controls, time-series analysis, and more discrete parcel-level analysis.
Societies 2018, 8, x FOR PEER REVIEW 8 of 11
Percent of Single Family
Units Renter Occupied
14 12 * 12 11
Percent of Single Family
Units Vacant
34 21 * 24 14 *
Figure 1. Single-family rental (SFR) real estate investment trusts (REIT) clusters in metropolitan
Nashville, TN.
4. Discussion and Conclusions
The academic literature has not adequately analyzed the impacts of SFR REITs and other
expressions of the increased financialization of regional housing markets, particularly in the U.S.
context. An exception to this is found in Waldron’s analysis of Irish REITs, where he cautions that the
financialization of housing markets adds to the cost burden of homebuyers and renters at the local
level while siphoning off the profits from real estate speculation to global investors [11]. These
Figure 1.
Single-family rental (SFR) real estate investment trusts (REIT) clusters in metropolitan
Nashville, TN.
4. Discussion and Conclusions
The academic literature has not adequately analyzed the impacts of SFR REITs and other
expressions of the increased financialization of regional housing markets, particularly in the U.S.
context. An exception to this is found in Waldron’s analysis of Irish REITs, where he cautions that the
financialization of housing markets adds to the cost burden of homebuyers and renters at the local level
while siphoning off the profits from real estate speculation to global investors [
11
]. These insights from
the Irish context suggest that the potential impacts of the mass conversion of single-family housing
Societies 2018,8, 93 9 of 11
to rental housing by institutional investors are immense and likely as important as gentrification
and displacement in the urban core. The results from this analysis support the assertion that the
financialization of local housing markets affects the supply of single-family housing and workforce
housing. For example, one area where SFR REITs clusters were located in Nashville was in two census
tracts bordering Williamson and Maury counties near General Motors former Saturn factory that
currently produces other GM vehicles. Many of the workers in this facility earned competitive wages
and sought viable housing options near the plant. The SFR REIT business model targets property in
proximity to this cohort of potential homeowners. By purposely purchasing affordable homes with
yards in communities with good schools and relatively safe profiles better resourced SFR REITs directly
compete with potential homebuyer and expand the renter society. Other REIT clusters in Figure 1have
similar characteristics.
The Nashville metropolitan area has experienced tremendous population growth. In fact,
the number of building permits issued in 2017 was higher than in the years before the Great Recession.
Housing prices have increased tremendously in the region. Although development and growth have
dominated the local agenda, particularly in relation to development within the city of Nashville proper,
scant attention has been paid to the emergence of SFR REITs. The main newspaper, The Tennessean,
has devoted considerable space to covering affordable housing issues, gentrification, and displacement.
For example, in December of 2017, the Tennessean hosted a community meeting on gentrification that
brought together housing advocates, developers, Airbnb owners, and community groups. None of
those speakers talked about the impact of SFR REITs on local property markets. The discussion of
affordable housing remained centered on the issue in the urban core along the lines of Kotler’s [
28
]
imperial city framework. The transformation of multiple property ownership in the suburbs and the
growing influence of institutional investors as opposed to individual investors remains obfuscated.
Insights from this analysis and the broader implications of financialization of real estate expand our
understanding of the transformation that is underway in regional housing markets.
Our research suggests that the degree to which SFR REITs are major players in several metropolitan
areas hard hit by the foreclosure crisis in 2008–2010 requires further scrutiny. Prior analysis of SFR
REITs in the U.S. has not explored their impact on regional housing markets and their integration into
the global financial system. For example, Abood [
15
] blames SFR REITs for promoting a rentership
society, but the lack of empirical, statistical analysis of the impact of SFR REITs on home prices,
appreciation, or ownership rates is too scarce at present to substantiate that claim. We also do not know
enough about the impact of SFR REITs on smaller, locally-owned landlords. In Nashville, some smaller
property owners have sold moderately sized portfolios of rental houses to SFR REITs. In addition,
a local developer has teamed with American Homes 4 Rent to build a small subdivision of rental
single-family housing. To date, we have found very little literature on this trend or its impact on
housing markets.
A growing number of observers raise troubling questions about tenant rights and the quality
of SFR REIT landlords [
15
,
29
]. A recent article by the Capital Forum found multiple problems with
one of the largest SFR REITs, Invitation Homes. The Capital Forum maintains that Invitation Homes
has engaged in deceptive practices that exploit tenants [
30
]. They contend that Invitation Homes
buildings are poorly maintained, violate local codes and that the company is very slow in responding
to tenant complaints and needs. A quick perusal of Landlord Forums on various internet platforms
finds a number of customers who complain about the same issues as identified by the Capital Forum.
A private Facebook group, Tenants of Invitation Waypoint Homes, unites dissatisfied customers across
the country; the group discusses poor maintenance, problems with online payments, arbitrary rent
increase, and the difficulty of getting deposit fees back when leases are broken. Yet, there has been
little, if any, scholarly research on the topic. Moving forward, scholars need to conduct case studies of
individual markets where SFR REIT landlords own large portfolios of housing.
We found no research on the impact of SFR REITs on single-family ownership opportunities in
the scholarly research. The impacts will likely vary by individual markets based upon how robust
Societies 2018,8, 93 10 of 11
the local housing market has rebounded from the 2008 crash. It will be difficult to disaggregate the
multiple factors associated with home ownership that are not related to SFR REITs.
Finally, little is known about the impacts of SFR REITs on the local quality of life or how the growth
of single-family rental housing in traditionally owner-occupied neighborhoods effects individual
owners. Researchers have written about biases against rental housing in the past, but less is known
about how SFR REIT clusters affect individual homeowner’s perspectives about long-term equity,
community safety, and community standards. In Nashville, many of the SFR REIT properties are
located in subdivisions with home owners’ associations (HOAs). There is evidence that some Nashville
HOAs are aggressively trying to implement policies to limit the number of rental properties permitted
in their communities. Future research should focus on ways that HOAs and individual homeowners
are mobilizing to combat what many residents see as a negative trend. Finally, we reiterate the
importance of expanding the scope of future analysis to include: more rigorous multivariate tests
and statistical controls, time-series analysis, and more discrete parcel-level analysis. These types of
analyses need to be applied to individual cases as well as in comparative contexts. Although the
analysis used in this article is exploratory in nature, future analysis should include cross-national
research that allows for a more dimensional examination of the financialization of housing markets
following the global financial crisis.
Author Contributions:
Conceptualization, K.C. and R.M.S.; Data curation, R.C. and C.W.; Formal analysis, K.C.,
R.M.S., R.C. and C.W.; Methodology, K.C. and R.M.S; Writing–original draft, K.C. and R.M.S.; Writing–review &
editing, K.C. and R.M.S.
Funding: University at Buffalo, Baldy Center for Law & Social Policy, n/a.
Acknowledgments:
Work that provided the basis for this publication was supported by a research grant from the
Baldy Center for Law & Social Policy at the University at Buffalo. We also thank the three anonymous reviewers
for comments on earlier versions of this article.
Conflicts of Interest: The authors declare no conflict of interest.
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