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Fishers housing market changes as investors buy homes to rent


Mayor Scott Fadness is calling for a review of housing trend that has taken hold in Fishers: large out-of-state investors who buy single-family homes to rent them.

Fadness said he’s concerned about the commitment the absentee corporate landlords have to the properties and how the rentals affect the balance of neighborhoods dominated by homeowners.

The mayor and the City Council were caught off-guard about the prevalence of single-family rentals in Fishers during a recent presentation on the city’s housing needs, Fadness said.

Researchers for Urban Partners, of Philadelphia, said 939 homes were bought by investment firms in a five-year period ending in 2021, which was more than 90% of the non-occupant home purchases in the city.

Of those, 565 homes were bought by investors outside of Fishers and most of them were sold to five large companies, according to Urban Planners, which the city hired to study future housing demand.

A stingy housing supply and rocketing home prices have encouraged a robust middle market of homes for rent. In many parts of the country, mostly suburban, a couple dozen large investment firms are gobbling up homes and managing them. Some developers are building entire communities of single-family homes for rent, or selling pockets of new subdivisions for the investors, Urban Planners found.

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“A lot of neighborhoods tell you to move there because it is an owner-occupied community and then when the homeowners start seeing these investor rentals it is not what they signed up for,” Fadness said.

The National Association of Homebuilders reported that investor-owned single family homes and build-to-rent houses have trended upward since the Great Recession of 2008 when companies began swooping in to acquire foreclosed properties and the public soured on home ownership.

 In the third quarter of 2021, large investors bought more than 25% of homes on the market nationwide, according to CoreLogic, a property sales analytics firm.

Filling a need

The institutional investors contend they are filling a void for people who can’t afford to buy a home but want more space and privacy than apartments in dense areas provide.

“These are people who have an interest in moving into a home but can’t afford it,” said Steve Lains, chief executive officer of the Builders Association of Greater Indianapolis. “They have a family or a dog and they want a yard. They want the space and the luxury and their landlord takes care of the maintenance.”

Lains said most communities are grappling with ways to make housing more affordable so workers can live nearby — and renting homes is a sensible alternative.

“We’ve got to find solutions. We can’t say ‘no, no, no,’ to everything except $300,000 homes and price people out of the market,” Lains said. “This is providing inventory on the rental market.”

But critics said of investor-owned rentals assert it drives up the price of homes and rents and makes it more difficult for first time homebuyers to enter the market because they can’t compete with the cash offers the corporations are making.

“The scale that a Wall Street investment firm can buy is a point of concern,” Fadness said. “It is much different than a single homeowner renting out a house.”

In addition, critics say, sending rent payments or maintenance requests to a faceless out-of-town corporation might not get the immediate attention that calling a mom-and-pop homeowner who is renting a house would.

“In most neighborhoods if I see a problem on a property I can go find the manager in a couple of minutes,” Fadness said.

National concern

The U.S. Senate Committee on Banking, Housing, and Urban Affairs recently held hearings on the trend, taking testimony from renters who said the houses were poorly managed,

“More and more deep-pocketed investors are buying up the homes that serve as the foundation for families’ lives,” Sen. Sherrod Brown D-Ohio said before the hearing. “They see these buildings as nothing more than annual return on equity. “

And the Biden Administration last fall took action to level the buying field for individual homeowners. It directed the Department of Housing and Urban Development to give families and nonprofit organizations more time to bid on foreclosed FHA-insured or HUD-owned properties that come up for sale before offering them to investors. HUD will work toward creating exclusivity periods in which investors would be unable to put in offers for the homes.

Frank Nothaft, chief economist at CoreLogic, said lopsided purchasing competition is a valid concern.

“The first-time homebuyer is going to be competing with capital market investors who buy thousands of homes and don’t need a mortgage,” he said.

Nothaft said the home rental market only accelerated during the pandemic when people began working and schooling from home, and subsequently sought more space.

“They began working remotely and their kids were learning remotely so this made sense because the average size of the homes is about twice what they would get in an apartment building,” he said.

Fadness said homeowners are often concerned that renters don’t take the same pride in their properties as those who live in the homes they own and some fear out-of-state owners increases the likelihood that maintenance will be neglected.

“It’s not like these companies are coming in here and buying distressed homes and fixing them up,” Fadness said. “They are in the market like everyone else.”

The city’s legal department will investigate whether it can curtail the number of investor-owned homes for rent. Homeowners associations have the ability to limit rental units but because the homes are spread out across the city but  Fadness was unsure whether anything could be done on a city-wide scale.

Rise of the renters

Yet, about half the single-family homes in the United States and Fishers are rentals, a number that’s increased in the last 15 years.

“Home building has not kept up with demand and consumers are looking for another option,” said David Howard, executive director of the National Rental Home Council in Washington, D.C.

The trade group represents large investors and small, but more than 95% of its membership are the institutional investors, defined as those that own more than 100 properties.

Though some critics of large investors have sounded alarms about the trend, Howard said the percentage of properties they own is relatively miniscule, less than 260, 000 out of 220 million nationwide and 6,400 out of 850,000 homes in Indiana. 

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The companies seized on the need after the recession and housing collapse when demand for new homes declined, contractors went out of businesses and consumers were hesitant to enter the market.

“It’s been difficult to ramp back up and a lot of people re-evaluated the need for homeownership,” he said.

Howard said many of the investors have addressed worries about out-of-state landlords by opening district officers when they have purchased a certain amount of homes in an area. That way the company can respond promptly to complaints.

Of the five companies owning the most homes in Fishers, three have local offices in Indianapolis:

  • First Key Residential, of Georgia, which owns 97 Fishers homes.
  • Progress Residential, of Arizona, which owns 22 homes.
  • American Homes 4 Rent of California, 11 homes.

The other two companies have no local offices:

  • KKR/My Community Homes SFR of New York City and Florida: 29 homes.
  • Tricon Residential of Toronto, Canada: 8 homes.

Local response

Progress Residential and American Homes 4 Rent did not respond to IndyStar’s requests for comment.

First Key Homes spokesman Michael Torres said despite the worry in Fishers that institutional investors are swooping up large numbers of homes, FirstKey owns under four-tenths of one percent of the total single-family houses and all cooperate investors own 9%.

He asserted the company is not an absentee landlord. FirstKey has local offices with leasing coordinators, property managers, field managers and superintendents and maintenance workers, Torres said.

Renters can send checks to the local office, make payments and register complaints at an online payment portal, pay by phone and make walk-in payments at several retailers, including Walmarts, Torres said.

Call IndyStar reporter John Tuohy at 317-444-6418. Email at john.tuohy@indystar.com and follow on Twitter and Facebook.

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