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Examining real estate investment impacts on housing affordability and equity

Research led by Robert Silverman in Center for Urban Studies looks at effects of REIT buy-ups in Nashville, TN

Nashville, TN, is in the midst of a housing boom, but affordability is a growing challenge. Photo courtesy of Metropolitan Development and Housing Agency, Nashville.

by Stephanie Bucalo

Release Date December 1, 2017

Access to affordable housing is a topic of intense debate among municipal planners, community stakeholders and residents as the housing boom threatens displacement due to increased rental and housing prices across the country. Yet the forces behind displacement are complex, and sometimes far removed from affected communities. 

Urban planning professor Robert Silverman, in collaboration with Kenneth Chilton of the Department of Public Administration, Tennessee State University, are investigating the specific effects of real estate investment groups that agglomerate single-family homes for public trade - also called single-family rental housing real estate investment trusts (SFR REITs). The pair will focus their assessement on Nashville, TN, where these types of investment trusts are particularly active.  

“First, this study examines the socio-spatial distribution of properties in SFR REIT portfolios to determine if these properties tend to cluster in areas that are segregated by race and/or income,” says Silverman, whose research focuses on the shrinking cities and inequality in inner-city housing markets. “Second, this study examines the impact of SFR REITs on the price of housing to potential homeowners and renters in the local housing sub-markets where they are most active.”

Congress authorized companies to develop real estate investment portfolios for public trade in 1960. REITs may address commercial, retail or rental property, giving them a far reaching influence on regional housing markets. SFR REITs proliferated in the early 2000s in the wake of the housing foreclosure crisis. The study analyzes trends in real estate investment trusts beginning with that expansion.

As current trends in the regional housing markets, single-family rental property REITs are increasing tremendously and investors are buying up these properties across the country. By taking these single-family properties off of real estate markets and managing them as a part of commercial rental inventories, the available housing stock for low- to middle-income families and the opportunity for affordable homeownership or rental drastically decreases.

According to Silverman, “This is a growing topic of interests since the commercialization of the rental housing market represents a shift from small local landlords in this sub-market to national corporations having a bigger role in buying and managing these properties. In some cities, REITS own more than 10% of the single-family homes in targeted neighborhoods. This tends to drive up rents faster and take housing off the market that would normally be marketed for owner-occupancy.”

Silverman and Chitton are focusing their analysis on Nashville, TN, where the SFR REIT sector is one of the most active in the country. Over 6 percent of the region’s single-family housing stock is owned by REITs in Nashville. 

Tax assessor records including information regarding the property sales date, sale prices for both the prior owner and REIT owner, assessed value, and other parcel information, will be used as primary data to create a profile of communities or SFR REIT properties, along with US Census data. Once all of the data is collected, they will then be analyzed using SPSS statistical software and the clusters of properties will be mapped using GIS software.

Once phase I of the project is complete, the research team plans to apply for further grant funding. Future steps for the research include developing a qualitative study of residents of neighborhoods with clusters of REITs and people from companies that manage the REIT properties. Another approach would examine cities with a variety of mixes of SFR-REIT properties, largely in inner-ring suburbs, where the properties are purchased and marketed to renters with Section 8 and other renter subsidies.

Silverman and Chilton have worked with urban planning doctoral student Chihuangj Wang from UB, and Rabia Chaudhry from Tennessee State University. The project was funded through the 2017 Baldy Center Research Grant program.