Wall Street investors have snapped up thousands of homes in Middle Tennessee to convert them to rentals, and observers are wondering what effect they’ll have on neighborhoods.

A professor at Tennessee State University has teamed up with another researcher to systematically study the phenomenon.

They want to figure out whether these real estate investment trusts, or REITs, drive up sales prices because of increased competition and worsen the region’s affordable housing crisis. In the neighborhoods they target, do fewer people own their own homes? Do REITs increase rents at a faster pace than others? And what type of neighborhoods do the companies pick in the first place?

“More and more there’s concern in the community that, as the homeownership rate declines, it’s no longer a poor person’s or a working poor person’s concern. It’s a crisis in general,” said Ken Chilton, associate professor in the Department of Public Administration at TSU. “We’d like to spark a larger community debate about housing and housing affordability.”

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Chilton and Robert Silverman, a professor in the Department of Urban and Regional Planning at the University at Buffalo in New York, are gathering and analyzing property records from nine counties in the Greater Nashville market. They’ve already spotted a high concentration of REIT-owned rental properties in Sumner County, Rutherford County and the Antioch area, Chilton said.

A Tennessean review of property records in August found that six out-of-state investment groups own at least 4,900 homes in Smyrna, Murfreesboro, Antioch, Spring Hill, Mt. Juliet and several other fast-growing neighborhoods. Some of the big players are American Homes 4 Rent, Progress Residential and Starwood Waypoint Homes.

“The single-family rental housing market is starting to get commercialized in ways that it hasn’t before,” Silverman said. “There’s not a lot known about the impact on the housing market in general or the impact of neighbors or homeowners. That’s what this research is all about.”

Investors targeted Sun Belt cities with inexpensive real estate

These companies purchased many homes that were low-cost casualties of the housing bubble and mortgage crisis in the late 2000s. They acquired between 5 and 9 percent of the single-family housing stock in some Sun Belt markets like Nashville; Charlotte, N.C.; Atlanta; Dallas; and Tampa, Fla., beginning around 2011.

Many of the targeted properties are newer than housing in Rust Belt states and require a relatively low amount of maintenance. For the maintenance that is needed, the companies can rely on economies of scale — to buy appliances in bulk and contract with workers in a given region, for instance.

“It’s all very sophisticated how they can control their costs,” Silverman said.

Large institutional investors target markets where they can get a return on investment around 5.5 percent net of maintenance, insurance and taxes, said Bruce McNeilage, chief executive of Franklin-based Kinloch Partners, a midsize investment fund that has sold homes to major REITs.

Like typical buyers, they’re aiming for neighborhoods with low crime, good schools and affordable homes. Some Nashville-area neighborhoods are increasingly out of their sweet spot, which, according to one of the company’s public filings, is under $200,000 for a 2,000-square-foot home.

REITs make it harder for typical buyers to enter the home market

Their competition appears to drive up prices and make it harder for first-time homebuyers to enter the market, McNeilage said. He’s watched young couples get squeezed out by the REITs.

“They are paying cash and can close in five days,” McNeilage said of the investment groups. “Every single time it’s going to be sold to the fund. If you’re trying to get into the market it’s impossible.”

Once they’ve studied the effect on housing prices, the researchers want to interview neighbors to find out how the increase in rental homes affects their quality of life and their home equity, Chilton said.

“You have all these out-of-town companies who own a disproportionate share of the housing market,” Chilton said. “Are they vested in local issues? If Nashville is simply a profit base, how interested are they in the quality of life?”

In Southern California, some neighborhoods deteriorated after investors bought blocks full of single-family homes post-crisis and rented them out, said John Husing, owner of Economics & Politics Inc. After making initial investments in the properties, companies became absentee landlords. These communities had the highest rates of police and fire department calls for service, and the most code enforcement property violations, Husing said.

"What you have are neighborhoods that are essentially unregulated apartment houses," he said. "It could be disastrous for the city."

Reach Mike Reicher at mreicher@tennessean.com or 615-259-8228 and on Twitter @mreicher.