By Eric Seymour
Corporate housing investors have been the subject of much reporting and even recent legislation aimed at curbing corporations from crowding out homebuyers. In October, U.S. Representatives Ro Khanna, Katie Porter, and Mark Takano reintroduced the Stop Wall Street Landlords Act, which, among other things, would end the ability of large institutional investors to benefit from tax breaks reserved for homeowners. This bill makes exceptions for “mom-and-pop” landlords, nonprofits, and socially motivated developers. The press release for this bill says its purpose is to “rein in corporate landlords” – but what exactly does this term mean and how do we identify them in a research setting?
The phrase “corporate landlord” is often used interchangeably with “institutional investor,” with most people taking these terms to refer to large corporate entities backed by private equity funds, Real Estate Investment Trusts (REITs), or other major sources of capital. The paradigmatic case is Invitation Homes, which was created by Blackstone in the wake of the foreclosure crisis to acquire and manage tens of thousands of homes across the Sun Belt. In other cases, “corporate ownership” is taken to refer to ownership by any owner with a corporate identifier in their name (e.g., “Corp.,” “Inc.”), including Limited Liability Companies (LLCs). However, “mom-and-pop” landlords increasingly use LLCs, as this has become a widely adopted practice to protect even small proprietors from legal liability.
In our research on corporate home ownership in seven New Jersey municipalities including New Brunswick, we found that some places exhibited high and increasing levels of corporate ownership, broadly defined, but most corporate entities owned just a few properties and most of these appeared to be locally based. As we expand our research on corporate investors to the state, we are interested to learn more about corporate owners in NJ, how they vary across geography and housing market type, and what the implications are for tenants and prospective homebuyers. In some instances, increasing corporate ownership over time could reflect existing investors transferring ownership to an LLC. In other instances, it might correspond with spatially concentrated transitions in tenure from ownership to rentership, such as the shifts that occurred following the foreclosure crisis. In yet other cases, it could represent the transfer of ownership from small proprietors exiting their business and selling to new owners, which may or may not be “institutional” investors.
Given the nuances of corporate ownership and what it represents, we aim to be careful in how we identify and portray “corporate” owners of small residential properties. For instance, the single largest owner of one- to four-unit properties in NJ (based on the name in the tax parcel data alone) is the Winfield Mutual Housing Corporation, founded during World War II to provide housing to defense workers. Though technically a corporate owner, this entity rents homes far below market prices, and the corporation refers to itself as “The Most Progressive Community in the State.” While it was easy to inspect the information for this large owner, our goal is to extend similar nuance in identifying and describing corporate ownership statewide.