Calabria is wrong on GSE support of single-family rentals

To the editor:

Comments by former Federal Housing Finance Agency Director Mark Calabria, in the recent American Banker article “Calabria: FHFA is making housing less affordable by backing investors,” reflect an incomplete understanding of the role single-family rental homes play in today’s housing market.

Much of the data Calabria cites in suggesting investors are somehow contributing to a “spiraling housing affordability crisis” is either out of context or factually incorrect. Freddie Mac research has shown investor activity in the housing market has had, at most, only a nominal impact on the cost of housing, and that the real drivers of home price appreciation have significantly more to do with a supply-demand imbalance of nearly historical proportions. Freddie’s research makes clear investor purchases “are only modestly elevated and are of secondary importance to first-time homebuyers.” This may be because, per the research, “institutional and small investors both heavily target under-market-value homes that need more repair than what most first-time homebuyers are willing to invest.”

Calabria’s references to the outsize impact of institutional owners in the housing market are also not supported by any reasonable view of the data. Rather, large companies own less than 1.5% of the 23 million properties that make up the market for single-family rental homes and only 0.2% of the nation’s total housing inventory. Further, according to National Rental Home Council (NRHC) data, member companies do not own more than 1% of the housing in any individual state, a point contained in the Freddie study which concluded that corporate owners “remain so small that their market share only has a modest impact on the overall percentage of investors.”

Regarding the impact of investors on first-time homebuyers and homeownership, the National Association of Realtors (NAR) found in a 2022 report: “Millennials now make up 43% of homebuyers — the most of any generation — an increase from 37% over the previous year.” The report also found homebuying among younger generations is on the rise, with 4 out of 5 younger millennial homebuyers purchasing for the first time. This has no doubt contributed to increasing rates of homeownership in many markets where NRHC member companies have higher concentrations of properties. Charlotte, North Carolina, for example, has seen the rate of homeownership across the metro area increase from 65% to 75.5% between the first quarters of 2017 and 2022; the rate in Atlanta during that period has increased from 64.4% to 67.6%; Nashville from 71.1% to 75.2%; and Phoenix from 62.7% to 67.2%.

Finally, Calabria and others who see investors as simply indiscriminate buyers of properties far and wide miss the many benefits that owners, particularly institutions, contribute to the rental housing market. Single-family rental home companies are investing in local staff, hiring local contractors and business partners, and bringing property management expertise to local housing markets all to ensure a positive experience for residents and families who choose a single-family rental home lifestyle. NRHC member companies invested nearly $2 billion in home renovations, upgrades and other property-level operations in 2021, and each of NRHC’s five largest member companies maintain an A+ rating from the Better Business Bureau. Many NRHC member companies support residents pursuing homeownership opportunities by reporting on-time rent payments to credit agencies and providing access to financial literacy programs. For many residents who choose a single-family rental home experience, renting is merely a step along the pathway to homeownership. By supporting residents on that journey, the agencies overseen by the FHFA are opening the opportunities of homeownership to untold numbers of American families.