Thread by @afmessamore

Are large, corporate landlords taking over the rental market?

This question is hard to answer: landlords can hide ownership with many tools. In a new working paper, I resolve this problem. What do I find?

In short, rental landlording is becoming an institution. A 🧵 (1/N)

For background: anxiety about acquisitions by large, private equity and institutional investors is high. Private equity investment was a subject of recent Senate hearings. (2/N) banking.senate.gov/hearings/how-p…

Often, institutional landlords are blamed for rising housing insecurity and extraordinary housing costs, particularly in single family housing. This anxiety has also led to a spree of new reporting, such as @francescamari, @rmc031, and @emilymbadger. (3/N)

More background: As @Shelterforce points out, there are many tools that property owners have to hide holdings. We’ve heard a lot about LLCs or layered LLCs. But there’s also so many other traditional and other techniques a landlord could use. (4/N)

For example, you can put a property in an employee or family member's name. You can add an additional address. You can split holdings across several companies. Etc. (5/N)

shelterforce.org/2022/08/23/whe…

In my research, I resolve this issue by linking ten years of property data to business filings I then construct a massive network of people, addresses, properties, companies, subsidiaries, and other entities to link all of the entities that appear together. (6/N)

This network spans more than 57.6 million relationships among 36.9 million entities. I then develop an algorithm for crawling this network, to figure out which OWNER sits at the end of all of these ties. (7/N)

These methods are described in the (publicly available) working paper here: (8/N)papers.ssrn.com/sol3/papers.cf…

The big finding? Yes, large landlords did increase their shares. The largest property owner in central Texas is now American Homes 4 Rent, who only entered in about 2017, and the hundred largest landlords doubled their market share, from 10 percent, to 20 percent (!) (9/N)

However, this DID NOT displace small landlords. In fact, small landlords now own about the same share of the rental market that they did right after the Great Recession. (10/N)

How did this happen? Well, the answer is simple. Rental real estate is POPULAR for ALL kinds of investors, particularly amateurs! Between 2010 and 2021, the actual number of small landlords increased by 41 percent in Austin (!) (11/N)

In fact, any growth in SFRs in Austin is largely attributable to increasing acquisitions by locally based small landlords and investors. It’s Austinites, not Californians or Wall Street, who are buying up all those second homes. (12/N)

But here’s the kicker. Not only is landlording popular, it's also increasingly formalized. Very formalized. Talk about having an LLC. What about having three LLCs? Or 50? In Austin, I find dramatic increases in organizational complexity among landlords OF ALL SIZES. (13/N)

This suggests that small “mom and pop” landlords are increasingly acting like small amateur property investors. And large landlords are just getting more complex and sophisticated and remote across the board. (14/N)

There’s also a trend towards property investing becoming hidden, like other forms of wealth, e.g. @gabriel_zucman. If you trace how hard it is to identify the landlord, across the network, it became twice as hard over the last decade, including among the smallest owners. (15/N)

What does this all mean? No, institutional landlords are not taking over the rental market. However, landlording is becoming an institution, at least in central Texas. Landlording is enduringly popular for everyone. (16/N)

The tenant-landlord relationship is also becoming more mediated and obscured through a process of formalization that has streamlined property ownership and reduced public scrutiny of landlords. Which obviously increases the potential for moral hazard (17/N)

The full paper is here.

And please, I’m not the only one working on property ownership! There’s a whole new generation of scholars (also on the job market) on these questions, including @henry_gomory and @forresthangen. Go follow them too!! (THREAD DONE)papers.ssrn.com/sol3/papers.cf…

@henry_gomory @forresthangen IMPORTANT NOTE: thanks @KyleNelsonLA, one of the earlier tweets on Austin-specificity got dropped.

This is a study of Austin's "very hot market", not all of the U.S., and this dynamic may not apply everywhere.

However, as I discuss in the paper, these dynamics likely exist in… twitter.com/i/web/status/1…