Wall Street is selling more rental homes, as buying ban takes effect

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox.

Newly enacted housing legislation that bans institutional investors from purchasing single-family rental homes has those same investors putting up more “for sale” signs.

The number of homes owned by institutional investors listed for sale is, as of this month, more than double what it was at the start of February, according to an analysis provided exclusively to Property Play by Parcl Labs, a real estate data provider.

Listings have gone from 4,166 on Feb. 1, when Parcl launched its full research, to now 9,447 homes representing $3.1 billion in total asking price.

“The rate of for-sale change is something to keep an eye on,” said Jason Lewris, co-founder of Parcl Labs. “These numbers won’t materialize into actual dispositions for months given how long the sales cycle can be, but it’s the fastest read into institutional behavior.”

The legislation defined institutional investors as those owning 350 or more homes. That was a surprise to the industry, which traditionally set that bar at 1,000 homes. It does not force them to sell the homes they currently own, but they are barred from buying any more homes unless they fall under certain exceptions, including build-to-rent.

The charge by lawmakers was that these investors, most of whom were able to buy the homes with all cash, were inflating prices and sidelining regular owner-occupant buyers. The call for a ban was bipartisan.

Large-scale investors first entered the market during the financial crisis in 2008, when foreclosures were rampant and bulk auctions were popping up in the hardest-hit markets, like Atlanta, Las Vegas and Phoenix. Private equity firms purchased thousands of homes in a short period, converting them to rentals and creating a new single-family rental asset class.

The cohort of investors with 350 or more homes that therefore fall under the new legislation now own roughly 589,000 homes, or 3.9% of the 14 million single-family rental homes in the U.S., according to Parcl. They account for roughly 40% of the net selling year to date.

The largest landlords — Progress Residential, Invitation Homes, AMH, Tricon, FirstKey, Amherst and VineBrook — are all net sellers year to date, with 3,180 more homes sold than bought since Jan. 1. To put that in perspective, they still own about 400,000 homes, so it’s not exactly a liquidation sale, with one exception. VineBrook currently has nearly 10% of its portfolio on the market, roughly 1,900 homes with a total asking price of $285 million.

Invitation homes and AMH, the two publicly traded, single-family rental REITs, have 549 and 536 homes for sale, respectively. The largest landlord,…