No Stupid Questions

I work for a huge bank that's investing a non-trivial amount of money (billions) in single family homes. They don't plan to rent them out. They just want to own them.

Now why would a huge, rich bank invest in something like that? Because they're pretty sure they're going beat inflation when they resell those properties later. It's a very safe (if spread across the entire US and Canada) place to park money.

It's not a big deal if one or two banks do this or even a handful of private equity firms. However, when all of them do it at once (like they are now) it can have a major impact on the prices of single family homes. It also creates something called a, "systemic risk" but that's a very large topic that I'm not going to cover here.

The point is that yes: The big banks and big private equity firms (and 401ks!) all own way too much non-commercial real estate in general right now and their expansion into single family homes is a great big societal problem.

...but why now‽ Why haven't they been investing in huge swaths of single family homes since forever? I mean, they've been appreciating faster than inflation since forever with only a few minor hiccups (e.g. 2008). The answer is: It used to be much more expensive to maintain homes that don't have anyone living in them.

Back in the day most homes were unique. In any given neighborhood some homes might have gas heat while others had electric and some others used oil or coal! There were also more fire and flood hazards with more flammable furnishings/building materials and things like washing machine hoses would often just break after a certain amount of time (the seals were only good for like ten years).

These days you have endless amounts of cookie cutter homes in enormous neighborhoods all over the damned place. They're also built to vastly superior building standards and come with appliances and AC that are orders of magnitude more efficient than in decades past.

This means a big bank or private equity firm can buy hundreds of houses in a region and (cheaply) hire a 3rd party to look after them. They just don't need as much maintenance as they used to. They're so much cheaper to maintain en mass.

So how do we fix this problem? There's all sorts of things you can do but some quick and perhaps unexpected things are:

• Raise minimum wage and crack down on businesses hiring illegal workers doing house maintenance work (let them do construction 👍).
• Raise property taxes in general. You could try to raise them for homes without people living in them but then you just end up creating other unintended consequences/problems (which I won't get into to stay brief)
• Force upgrades on unoccupied homes. Air conditioning system is 10 years old? You have to get a new one with improved efficiency. House has gas stoves? You have to replace those.
• Force inspections of unoccupied homes and come down hard in regards to code enforcement (every unoccupied home poses a nonzero fire risk to every neighborhood).

Basically, you have to turn unoccupied homes into expenses again. When that happens the banks and private equity will get the hell out.

There's lots of private equity that will just convert to being slumlords but the big banks do not want to be renting out anything. It's a huge risk for them and looks real bad on their balance sheets from a banking perspective. Also, if a bank is big enough they're straight up forbidden (by law) from renting out properties (though there's various loopholes which I won't get into).