Wall Street Could Control 40% of Rentals by 2030. Here’s Why That’s a Problem

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Investors are scooping up rental properties, and that could leave tenants paying more. 

The housing market has been extremely tight over the past few years. Prospective home buyers have been forced to grapple with not just high mortgage rates and home values, but also, competition from investors with deep pockets.

But new data from MetLife Investment Management shows that Wall Street investors might control as much as 40% of single-family rental homes by 2030. And that’s a bad thing for a couple of reasons.

Regular buyers could get squeezed out, and tenants could end up paying more

The problem with Wall Street taking an interest in the rental market is twofold. The first issue is that the more properties that are scooped up by investors, the fewer that will be available to everyday buyers who may want those homes for their own use, or to rent out for income.

The second issue is that if investors take over the rental market, they might hike rental prices and spur a major affordability crunch for those needing a roof over their heads.

Over the past three years, a good 15% of U.S. households have fallen behind on rent payments, according to MyEListing. That’s roughly 6 million households all in. If rent prices climb even further in the coming years, it could drive a major eviction crisis and leave lots of renters struggling to find a place to live.

Will lawmakers help reverse the trend?

Having Wall Street own a large chunk of the broad rental market isn’t wonderful. And some lawmakers are pushing investors to back away from the market.

Of course, investors will argue that they don’t control enough of a share of rentals to determine prices in any specific market. But that could change if investors buy up more rentals. And seeing as how investors might hold a whopping 7.6 million rental homes by 2030, it’s easy to see why housing advocates may be nervous.

Does it really matter to tenants who their landlords are?

To an extent, yes. Landlords dictate prices, and if those go up, homes become harder to afford.

Also, investors aren’t going to be the ones overseeing daily operations and issues at rental homes. Rather, they’re apt to outsource that to property managers. And that could be a mixed bag.

On the one hand, in some cases, working with a property manager can be a more positive experience than working with a landlord directly, especially if that landlord tends to take a hands-off approach. On the other hand, mom and pop landlords often do a better job of addressing tenant issues than property managers.

Also, mom and pop landlords are often more sympathetic to financial issues that arise among tenants. So if a tenant runs into hard times and can’t make rent, they may get more leeway from a mom and pop landlord than a property manager who can’t even match a name to a face.

It’s one thing for investors to buy up stocks. It’s another for them to buy up rentals. And if they ramp up on the latter, it really has the potential to negatively impact the housing market.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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