A booming rental market is tapering down decades of emphasis on home ownership in the United States, and Wall Street is cashing in on the trend with new securities.
The Wall Street Journal is reporting that rental units now account for the highest proportion of new construction in the U.S. in 40 years. This trend is being attributed to higher lending standards - it’s easier for corporations to obtain loans than families. The millennial generation is also more inclined to rent homes than put down roots.
There’s also been a flattening of wages, even as productivity has soared and many household expenses have risen. The millennial generation is saddled with student loan debt, and there’s more global competition that will inevitably smooth salaries.
Those facts are not lost on Wall Street. Blackstone Group has invested billions into single-family rentals over the past several years. It’s selling securities backed by those mortgages, which received the coveted AAA rating from agencies (Moody’s, S&P) last year. However, tenants have been moving out and revenues are down.
The positives have included a resurgence of the housing market in distressed areas.
Blackstone’s fitness as a property management company and the implications on lower income Americans remain uncertain. The U.S. Federal Reserve is monitoring, as some pundits have made comparisons with the sub-prime lending crisis. However, the risk is very different on these rental securities from subprime loans.
The U.S. has gone from an “ownership society” to one of fewer owners and more renters. This trend will likely continue, and ripple into other aspects of the culture.