Wall Street-backed companies are buying thousands of single-family homes and turning them into rentals across the Charlotte region. Local officials are worried about the effects on affordability, home ownership and equity — but there isn’t much they can do to directly stop the trend.
That’s what Mecklenburg County commissioners heard this week from county staff and a panel of local experts about the shift towards more corporate ownership in a single-family rental market that's traditionally been dominated by local, mom-and-pop landlords. (Note: The author was a member of the panel, presenting the UNC Charlotte Urban Institute’s study of corporate single-family rental companies).
“Frankly, this is disgusting,” said commission member Mark Jerrell, referring to a map showing higher concentrations of single-family rental housing in minority and lower-income neighborhoods. “This is a racial justice issue, this is a social justice issue, this is a civil rights issue that we have to address.”
An Urban Institute study last year found that companies like American Homes 4 Rent and Progress Residential have purchased roughly 11,500 houses in Mecklenburg County since the Great Recession — nearly 5% of the total. A subsequent Mecklenburg County study found roughly 13,600 corporately owned single-family rental houses.
The vast majority of those — 93.5% — were purchased for less than $300,000. That’s spurring concerns that corporate single-family rental companies are buying up starter homes with all-cash offers and barring young families and first-time home buyers from getting into the property market.
The concerns are intensifying. Commission member Leigh Altman said people will “forever be locked out” of owning. Commission member Elaine Powell said she’s fielding calls from constituents worried about the companies causing gentrification. Commission member Vilma Leake said she was “burning up” and that she’s tired of people getting nonstop offers from rental companies seeking to buy their houses.
“The community is concerned about quality of life. and what can we do to protect and preserve quality of life,” said Powell.
[Read: The Urban Institute's Wall Street landlords study]
Despite their concerns, policymakers have a fairly limited set of levers they can pull.
“We’re very limited,” said Monica Allen, director of strategic planning and evaluation for Mecklenburg County. Here’s a rundown of what county staff said local governments can and can’t do, after researching local laws and options other communities are using:
Local government can’t
- Impose higher tax rates on corporate-owned single-family rental houses.
- Regulate the ownership or tenancy of private property.
- Bar corporate single-family rental companies from buying houses.
Local government can
- Expand programs that subsidize rent and home ownership
- Buy land and sell it to affordable housing developers at less than fair market prices
- Work with local homeowners associations to create caps on the amount of rental properties by changing the HOA’s bylaws. Some Charlotte communities have already started doing this, and it’s an idea some Charlotte City Council members have voiced support for.
- Support grassroots education campaigns for homeowners and renters about their rights, and increase the amount of resources to help tenants with legal representation and code enforcement.
- Seek more authority from the state legislature to disincentivize corporate-owned single-family rentals.
Other communities are trying innovative solutions. In St. John's County, Fla., neighborhoods that are built as all-rental properties must convert to home ownership within five years. Shelby County, Tenn., is encouraging HOAs to cap rentals. And Cuyahoga County, Oh., established dedicated housing courts and added code enforcement resources to better protect tenants.
County staff also warned about the possibility of unintended consequences from new regulations on the housing market. For example, encouraging HOAs to limit rentals could disproportionately benefit wealthier neighborhoods that have HOAs, while also effectively perpetuating economic segregation and locking people out of the neighborhood if they aren't homeowners. More code enforcement could cause landlords to raise rents to cover the cost of repairs.
County commission Chairman George Dunlap said he understands his colleagues' concerns, but wants to focus on the more limited ideas that are possible within the county's limited power.
"I hate leaving people with unrealistic expectations," said Dunlap. "What I don't want to do is have people believe we will do things that we can't."
