Page 11 GAO-24-106643 Rental Housing
1–2 percent of the single-family rental housing stock), according to some
studies we reviewed.
19
Access to Capital and Mortgage Credit. The majority of buyers at
foreclosure auctions purchased homes in cash, which gave larger
investors an advantage over smaller investors and individual buyers.
Large investors were able to leverage funding sources such as private
equity funds, public equity and debt securities, securitization of rental
income, and government-backed loans.
20
At the same time, mortgage
lenders were tightening standards (e.g., requiring higher credit scores)
and generally reducing lending. As a result, fewer potential homebuyers
were able to qualify for mortgages in the years following the financial
crisis, and sellers often preferred cash offers over those that relied on
mortgage approval.
Technological Advancements. Advancements in technology also aided
the emergence of institutional investors in single-family housing by
making it easier for companies to acquire and manage portfolios. In its
2018 annual report, American Homes 4 Rent stated that the challenge of
efficiently scaling the acquisition and management of many individual
homes was the primary reason large-scale investment in single-family
housing did not develop sooner.
21
Further, in its 2022 annual report,
American Homes 4 Rent stated that in-house property management
19
This range is based on data reported in Desiree Fields, Rajkumar Kohli, and Alex
Schafran, The Emerging Economic Geography of Single-Family Rental Securitization,
Federal Reserve Bank of San Francisco Working Paper Series 2016-02 (San Francisco,
Calif.: 2016) and Laurie Goodman and Robert Abare, Why the Single-Family Rental
Merger Won’t Hurt Homebuyers or Renters (Washington, D.C.: Urban Institute, 2017).
Differences in estimates are a result of differences in how each study defined institutional
investor and the number of estimated single-family rental units in the U.S. at the time each
study was conducted.
20
Private equity is a type of private fund that generally pools money from institutional and
individual investors and invests in companies that are often not publicly traded. Equity
securities are financial assets that represent shares of ownership in a company, such as
common stock. Debt securities, such as bonds, are financial assets that define the terms
of a loan between an issuer (the borrower) and an investor (the lender). Asset
securitization is the structured process whereby streams of income are packaged,
underwritten, and sold in the form of asset-backed securities. Specifically, single-family
rental securitizations use residential properties as collateral for the securities, but the
underlying bond payments are backed by rental cash flows. As discussed earlier, Fannie
Mae and Freddie Mac operated programs from 2017 to 2018 to provide loans to single-
family rental investors. Through these programs, Fannie Mae made one $1 billion loan to
a single institutional investor, and Freddie Mac made a total of $1.3 billion in loans to
multiple investors, generally with portfolios of 2,000 or fewer properties.
21
American Homes 4 Rent, 2018 Annual Report (Agoura Hills, Calif.: 2019).