Strangely enough, it began with vacant lawns. Driving through specific neighborhoods in Phoenix, Atlanta, or the outer suburbs of Tampa in 2010 would reveal the same scene block after block: knee-high grass, drawn shades, and a stray election sign that was still leaning against a fence two years after the vote. Entire streets had been cleared out by the foreclosure crisis. As they watched anxiously from Washington, the government decided they had to be filled. Wall Street was what occupied them.
A pilot program quietly opened a door at the beginning of 2012. Now, private investors could purchase Fannie Mae foreclosures in large quantities—hundreds at a time, not just one or two. On paper, the concept made sense. Maintain neighborhood stability. Put an end to the decline in housing costs. Return families to their homes, even if they will now be paying rent rather than a mortgage. In the limited sense that it was intended to, it succeeded. However, it also sparked a bigger event that no one in the room had anticipated.
The median price at which an American home is sold today is $410,800. In contrast, household income barely recovered to its 2019 level. For the majority of working families, the math no longer adds up. And with amazing patience, institutional capital has poured itself into that gap, which is wide, growing, and painful.
In 2024, AvalonBay’s chief investment officer, Matt Birenbaum, stated unequivocally that the industry was in the early stages of what he thought could become an almost new investment class. That phrase exudes a certain assurance. The kind you hear from people who have already predicted the course of the next ten years.
It’s difficult to ignore the oddity when strolling through a build-to-rent neighborhood in a Phoenix suburb. The homes appear to be homes. Driveways, mailboxes, garages, and occasionally a basketball hoop. However, none of them are available for purchase. They weren’t. Approximately 10% of all newly constructed homes in the United States now fall into this category, which is double what it was just two years ago. Developers built them with the intention of leasing them from the beginning. Pretium Partners, Invitation Homes, and Blackstone. Like a sort of liturgy, the names alternate during quarterly earnings calls, reciting growth, occupancy, and rent increases.
Of course, it’s possible that this is just capital doing what capital does, which is to create products, find scarcity, and gather yield. Owning rental property is not intrinsically evil. For centuries, people have done this. However, the scale has changed, and the conversation has changed as a result. The dynamics of a whole local market begin to shift around the decisions made by a single company that owns 80,000 homes.
Fractional-ownership models have been promoted as a way to generate rental income without the 3 a.m. phone calls about a broken freezer, and platforms have emerged to allow smaller investors to join the party. Former Goldman Sachs real estate professionals founded Mogul, which promotes offerings that sell out in less than three hours and IRRs close to 19%. There is a huge appetite.
It’s unclear yet whether this will be the pivotal tale of American housing in the 2030s or merely another chapter that is altered by a change in policy. It is evident that the nation is being methodically and gradually transformed into something it was never quite. Maybe a rentier country. or simply a country with a new landlord.
