Blackstone-Starwood Merger Creates Largest Rental Home Company In U.S.

NPR's Audie Cornish speaks with Ryan Dezember, reporter for The Wall Street Journal, about the merger between rental-home businesses Blackstone and Starwood, which makes the company America's biggest home landlord.

AUDIE CORNISH, HOST:

Many renters around the country are about to get a new landlord. Two publicly traded companies in the rental home business are planning to merge. Together, the Blackstone Group and Starwood Waypoint Homes own more than 80,000 homes. They were part of a wave of investors who saw business take off when they bought up foreclosed homes and turned them into rental properties. Now, to talk more about this merger and the rental industry is Ryan Dezember. He's a reporter for The Wall Street Journal. Welcome to the program.

RYAN DEZEMBER: Thank you.

CORNISH: So to begin, I understand this business really grew out of the housing crisis 10 years ago when these companies started buying up foreclosed homes. What were they looking for? And how fast did the business grow?

DEZEMBER: Well, they bought very quickly. And they bought sometimes often sight unseen. They were looking for houses often that could accommodate families, so they bought, you know, usually three bedrooms or larger, two bathrooms or more, attached garages. They want good school systems, low crime rates and often a homeowner's association to help keep an eye on the properties because they're not in the neighborhood like a traditional sort of mom-and-pop landlord who would live in the neighborhood.

CORNISH: So where did they end up buying these homes? I mean, can you overlay a map of the foreclosure crisis with a map of where investors flocked to buy?

DEZEMBER: Yeah, you sort of can, although they tend to - you know, they're not really in Detroit, but they're heavy in Atlanta and Phoenix. It's a very Sunbelt-West Coast sort of thing with a few of the sort of boom towns in between. They have their big footholds in Florida, Atlanta, Phoenix, Las Vegas, parts of Texas.

CORNISH: So there are two communities that are going to be affected by this. One, the home buyer - right? - who's out there...

DEZEMBER: Correct.

CORNISH: ...Trying to buy a home right now, and one, the renter. Can you talk about, to start, how this has affected rental markets?

DEZEMBER: Well, this spring we went to a town - a suburb of Nashville called Spring Hill. There's a big GM plant there. It's a big industry town, very good schools, relatively affordable homes relative to other suburbs there that share the school district. And investors have flocked there. And they're really going head-to-head in bidding wars for single-family homes one at a time. These buyers are dispassionate. They don't care about the carpet or the paint color. They have a model and a formula. And if the numbers work, they'll buy it. And they'll buy all cash. And they'll usually win.

For renters, you know, it's significantly more to rent these homes than it would have been to buy the same homes for the same price as these firms have bought. But they make no bones about it, that they're in the business of getting as much rent as they can, so they tend to be in areas where rents are going up. And therefore, they're charging more.

CORNISH: In the end, for you, does - did this feel like a kind of curious legacy or coda to the housing crisis?

DEZEMBER: It did. It did because, you know, there were all these homes that were foreclosed. They were on the courthouse steps. These guys really came in and mopped it up and bought a lot of houses. Now, they didn't do that everywhere. They picked their spots. They picked the desirable neighborhoods and desirable properties. But this business probably wouldn't exist without that shock to the system that made tens of thousands or hundreds of thousands of homes available for cheap and available to buy en masse.

CORNISH: So with this merger, what is the wager that these companies are making about the direction of the housing market or our interest in being homeowners?

DEZEMBER: In the short term, it's really about a lack of homes. You know, home builders have yet to catch up to demand. And a lot of would-be buyers can't because tight lending, little savings and, you know, possibly poor credit from the financial crisis or from student loans. Longer term, this is sort of a bet on, you know, homeownership not being a key ingredient or a key component to the American dream as it has been in the last couple decades.

CORNISH: Ryan Dezember of The Wall Street Journal. Thank you so much for speaking with us.

DEZEMBER: Thank you.

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