A single-family landlord firm owned by the private investment company, Blackstone, will end it purchases of homes in 38 American cities, as the U.S. housing market begins to slow down dramatically.
The residential property company, Home Partners of America, (HPA) was acquired by Blackstone in June 2021 for $6 billion at the height of the COVID-19 pandemic housing purchasing boom.
At the time, the company controlled more than 17,000 units of housing stock.
Blackstone is the latest institutional investor to pull back from the once overheated housing market.
The Blackstone Real Estate Income Trust, a non-listed real estate fund worth $97 billion, is the holding company for the private equity firm’s real estate company acquisitions.
HPA, which operates in more than 80 markets, unlike other large single-family landlord companies offers a rent-to-own program that gives tenants the chance to buy their homes at a predetermined price.
The major landlord had also received financial backing from other private investment firms like KKR & Co. and BlackRock.
HPA told its customers that as of Sept. 1, it would halt all applications and property submissions in Boise, Idaho, Fresno, California, Memphis, Tennessee, and 25 other locations that are seeing business decline.
The landlord said it will suspend operations in 10 other U.S. cities on Oct. 1.
“We hope to resume purchasing homes in these markets in the future.”
The landlord also implemented a new policy, in which pre-approved customers who fail to submit a home purchase application by the cutoff date, will be removed from the program and will have their application fee refunded.
Impact on Housing Market
Like other investment firms in the pandemic, Blackstone made an ambitious dive into the housing market to buy up housing properties of all kinds.The move by private equity into the housing market has created much controversy, as more scrutiny has been applied towards their acquisitions of tens of thousands private homes throughout the country.
Many politicians and property analysts were critical about the influence that Wall Street firms had on the housing market during the health emergency, as there was already a shortages of homes.
Rising rents and low home inventory made these acquisitions an issue across the political spectrum, as the financial firms were accused of exasperating the problem.
HPA, like other private equity-backed landlords such as Invitation Homes, American Homes 4 Rent, and KKR & Co.’s My Community Homes, have also been accused of slowing down home purchases for individual buyers in a period of skyrocketing home prices and rising mortgage rates.
Single-family rentals were seen by big financial firms at the time as a great place to invest during the pandemic, when millions of Americans made a rush to quieter locations for more space and to work from home.
Investment capital had also moved into the rental property market as well.
The Federal Reserve’s interest-rate hikes since the beginning of the year have been driving the slow down in the housing market by raising mortgage rates.
“We are pausing in markets that represent less than 5 percent of our recent activity.”
However, home rental prices still remain high, as landlords try to ensure they can charge enough rent to justify the rising purchase prices.
Meanwhile, buyer demand for homes has slackened in recent weeks, which normally opens up an opportunity for the big landlord firms to buy up available units. But they have not taken advantage of the slowdown.
The higher borrowing costs due to the rise in mortgage rates are delaying such purchases for now.
