‘Security for Sale’ Grantees Discuss Reporting on Wall Street Landlords

As part of their Pulitzer Center-supported project Security for Sale, investigative journalists Tyler Dukes, Gordon Rago, and Payton Guion at The News & Observer and The Charlotte Observer investigated the growing industry of institutional investors and Wall Street hedge funds buying up single-family homes in North Carolina and transforming them into rent-backed profit generators. By using machine learning, the three journalists were able to gauge the scale of the growing number of absentee landlords in North Carolina’s real estate market. They found at least 40,000 single-family properties in the state are now held by about 20 companies.

In a recent webinar, moderated by McClatchy Southeast Investigations Editor Cathy Clabby, the three reporters discussed how this investigation came to be, and what they learned along the way. Guion provided context for how this industry emerged in the wake of the 2008 financial crisis. He explained that the subprime mortgage crisis created a new housing industry allowing institutional investors to buy up the single-family homes.

Dukes discussed the complicated nature of tracking down the companies who owned these houses, using a variety of resources, including utility records, SEC filings, and North Carolina OneMap data. To get a more accurate understanding of these companies' presence in the N.C. real estate market, Dukes said they decided to only include companies that owned more than 100 homes. (You can read more about the methodology here.)

Clabby noted that the goal of the investigation was to make what had been invisible, visible. One result of that goal was a tool that allowed people to search for corporate-owned properties in their neighborhoods. Rago highlighted the frustration many first-time homeowners are experiencing when they are competing with investors who make cash offers way above listing price. Often investors were paying more than $30,000 above asking price. People who don’t have the extra capital laying around, and can’t afford to be flexible, lose out on this opportunity.

Guion and Dukes shared that the increase in demand for family homes in the Charlotte and Raleigh area allowed for institutional investors to take advantage of a hot market. Oftentimes, tenants face challenges with proper upkeep of the rental properties owned by these investment companies. Guion shared a story about a woman he worked with, Rasheedah Harrison, who lived in a rental owned by an institutional investor. Harrison had been planning a Labor Day gathering to bring her family together for the first time since the start of the pandemic. Guion explained how quickly this gathering fell apart as Harrison’s sewage started to overflow into her backyard, and the subsequent neglect from the landlord [institutional investors] to deal with the matter. Ultimately, Guion said, Harrison ended up having to cancel the gathering, and filing a complaint with the North Carolina attorney general.

The reporters remarked about how they noticed this trend in many of the complaints filed with the attorney general, related to upkeep and property problems. Rago noted as the industry grows and the presence of institutionally owned homes rises in neighborhoods, people worry how their communities will change. Guion also remarked that standard leases look much different from institutional leases, often in ways that disregard the tenant. Both Dukes and Guion said a large part of this investigation was working to help readers better understand how the Wall Street real estate machine works, and presented their reporting with what readers should know about tenant rights in North Carolina.

Guion and Rago wrapped up the discussion with questions from the audience about what is being done, if anything, at a state level. Guion said little is being done at the state level to address this problem beyond the complaints filed with the attorney general. Rago also touched on the ways housing associations have tried to address it, with covenants, but these also present problems. The housing associations have been challenged by the industry as they try to restrict the ability of the HOAs to regulate institutionally owned properties.

All three journalists noted that their reporting was just beginning, as there is now a growing number of property development plans called “Built-to-Rent” that are owned by institutional investors from the construction stage.