NASHVILLE, Tenn. (WTVF) — The demand for single family rental homes in Middle Tennessee is booming - despite the pandemic.
It has led to large rental companies, or Real Estate Investment Trusts, buying homes and turning them into rentals.
Many of the companies operate nationally. They have large amounts of cash, and are publicly traded on the stock exchange. NewsChannel 5 Investigates has followed the trend of "Wall Street" firms buying single family homes in middle Tennessee for years.
Now some firms are taking a new approach.
Instead of buying homes one at a time, they are buying large tracts of land and building entire rental home communities.
Critics are concerned the practice lowers the availability of affordable housing and prevents first time home buyers from buying a home and building equity.
American Homes 4 Rent recently built a large rental home community in the Antioch area. It boasts brand new homes with two car garages and yard maintenance. Three bedroom homes are advertised for around $1700 a month. It also advertises four and five bedroom homes.
But this large rental home community concerns the area's council member, Joy Styles. "I don't want this to be the new thing we are seeing," Styles said.
"We need more people committed to building single family homes for purchase," Styles said.
We first met Joy Styles two years ago, before she was elected to the Metro Council, when she was frustrated she could not buy a home. She was constantly outbid by Wall Street Companies buying homes with cash and turning them into rental properties.
"They would say, 'we can't sell you the house, just got a cash offer.' It happened the time, the worst," Styles said during our interview two years ago.
Now as the Metro Council Member representing Antioch, Styles is concerned about large rental home communities like the one in her district.
"Now we have a whole community of rental units and we currently have a dearth of single family homes for sale. This is a waste of land," Styles said as she stood outside the American Homes 4 Rent community.
American Homes 4 Rent's tenant base is often made up of those who earn $100,000 or more per household, according to Tennessee State University Professor Ken Chilton, who studies these firms.
"The target market for American Homes 4 Rent is white collar professionals, mostly dual income," Chilton said.
There are several large rental home firms in the Nashville area.
Chilton said the top four Wall Street firms own nearly 8000 homes in middle Tennessee with the highest concentration "following the I-24 corridor from Antioch through Smyrna to LaVergne and Murfreesboro."
He said many younger families have moved toward renting instead of owning homes, but he's concerned about the long-term financial impact for families. "It's another example of where equity is going away from individuals to institutional investors," Chilton said.
Bruce McNeilage is a developer who has sold homes to the corporate investors. His company, Kinloch Partners, built an entire rental community in Spring Hill. It has 34 homes, but hopes to grow to 100.
"Renting the American Dream, if you can't own it, this is about as good as it gets," McNeilage said.
"You've got so many people looking for rental houses because of COVID, because they don't want to make financial decisions during an economic period they are worried about," McNeilage said.
National companies like Invitation Homes reported a 98% occupancy rate last month. McNeilage said the Wall Street companies are flush with cash and looking to expand.
"There's really a land rush right now. Everyone is trying to buy land," McNeilage said.
But Council Member Styles said she wants to see land go to affordable housing, so people can buy homes, not to Wall Street Companies building rentals. "If there's an opportunity where one of these companies is looking to get land re-zoned, it will be a no before they get a chance to finish the question," Styles said.
"What if this land had been committed to have some affordable housing?" Styles asked as she pointed to the American Homes 4 Rent community.
McNeilage said the move to rental homes was happening before COVID, but the demand has only grown - especially in the Nashville area - as people leave larger cities like New York.
A spokesman for the National Rental Home Council, which represents the single-family rental home industry, said companies are just responding to demand.
David Howard disagreed that large communities of rental homes hurt affordable housing, and called them an innovative move by the industry to address the housing shortage many communities are facing.
He said it's cheaper to rent in many cases because of lower up front costs and many families prefer to rent right now.
He expects to see more rental home communities across the country and in places like Nashville.
The only thing holding them back is finding the land.