House flipping or investing in rental properties was around before the Great Recession, but, with the entry of private equity firms into the single-family market, the scale it reached during the Great Recession was unprecedented. Before 2010, corporate landlords didn’t exist in the single-family market; by March of this year, Wall Street had acquired $60 billion worth of distressed or foreclosed properties across the country, representing hundreds of thousands of homes.
Most of those properties became rentals. Between 2006 and 2012, the number of owner-occupied housing units in California declined by more than 320,000, while the number of renter-occupied housing units increased by more than 720,000, according to the Public Policy Institute of California. In 2006, only 21 percent of occupied single-family houses in California were rented; by 2012, the share of houses occupied by renters had increased to 26.0 percent.
And now, in the wake of the COVID-19 pandemic and recession, big-money real-estate investors are poised to launch a “once in a generation” wave of investment for the second time in a generation. 1
“I wouldn’t say it’s quite leveling the playing field,” Ferrin says, but, “It’s giving [our clients] a chance.”
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- 1. But cities and states have learned from the Great Recession, too. In California, Governor Gavin Newsom just signed SB 1079, intended to make it more difficult for big-money investors to buy up foreclosed properties en masse. Among other changes, the bill prohibits the bulk sale of foreclosed properties. Bulk sales are more attractive to investors, instead of negotiating property-by-property they can buy dozens, sometimes hundreds or even thousands of properties at a time. It works better for the lenders, too — after foreclosing on a bunch of homes, they can shove the properties off their balance sheets more efficiently in bulk.