Why is BlackRock Buying Up Single-Family Homes? A Look At the Hidden Truth

In an article published in April of 2021, the Wall Street Journal took a deep look at the institutional investors, large-scale corporations hyperfocused on profits, actively purchasing residential real estate in major markets across the United States. 

The backlash was quick and severe, but the backlash was strongest against BlackRock, the multinational investment management company. 

The Wall Street Journal had only mentioned BlackRock in passing, but it was enough for people to turn against the entire organization and point the blame entirely at them. Newspapers and real estate websites picked up on the story, and they also began writing smear pieces about BlackRock. 

Many people had the same question: Why is BlackRock buying up single-family homes? 

The answer, it turns out, is a complicated one.

Why BlackRock Is Buying Up Single-Family Homes

The short answer: It’s not. In fact, the Wall Street Journal never actually pointed the finger at BlackRock. It was just a name that came up in the course of the article. 

BlackRock became a scapegoat.

In the face of the public fallout following the article, BlackRock published a new page on its website explaining that it doesn’t engage in buying single-family homes.

According to that page, BlackRock is involved in:

• Providing capital for mortgages

• Providing capital for new housing construction

• Other real estate investments, including multi-family properties, apartment complexes, and “other residential real estate”

BlackRock is very clear about its goals and responsibilities: The company is a fiduciary asset manager that invests and manages capital on behalf of its clients, but it does not buy individual homes. 

Still, its involvement in the real estate industry isn’t exactly comforting. By being involved in multi-family housing, new construction, and even mortgages, BlackRock maintains a direct influence over the real estate industry and the ways families live.

Why Would It Matter If BlackRock Was Buying Single-Family Homes?

So, why were people upset at BlackRock after the Wall Street Journal was published? 

Institutional investors buying up single-family homes across the US is ultimately bad for Americans. As we explained in our blog discussing why corporations are buying homes, corporate involvement in residential real estate squeezes families out of home-buying opportunities. 

A few reasons:

• Corporations have deeper pockets to make strong financial offers.

• Corporations have greater resources to consistently identify and pursue new deals on the market.

• Corporations can afford teams much larger and more sophisticated than a single real estate agent.

This is terrible news for families. In trying to compete against corporations with tons of cash, families will almost always be outbid by these companies. 

For many, many years, buying and holding property has been one of the most reliable ways to move up the socioeconomic ladder. When you have property, you can build equity—a powerful force that can be leveraged for loans and other financial assets.

Put simply: Property creates generational wealth. 

How Do Institutional Investors Make Money Off Single-Family Homes?

While homeownership is invaluable for families trying to build wealth, the circumstances are a little different when these giant investment companies purchase real estate. With many more resources at their fingertips, institutional investors stand to make much more money on their purchases than a family possibly could. 

There are a few strategies these companies can leverage. They include: 

1. The company can build equity. If the company has borrowed money to purchase the house, it can build equity over time, essentially increasing the percentage of the home it owns outright and can then borrow against later on.

2. They can turn the home into a rental property. In addition to building equity, the company can create a new income stream.

3. They can gain more control over the market. When a company owns multiple houses on a single block or in a single neighborhood, they have significant control over the residential real estate prices within their area, freeing them to artificially inflate property values for additional profit.

This is all bad for families. With fewer financial resources available, families are frequently overpowered by corporations hungry for more property. 

Fortunately, there are ways to break the cycle. 

How We’re Fighting Back

At New Local Realty, we’re focused on putting control back into the hands of the people. 

In creating new strategies to rent and buy single-family homes, we’re helping families get back into homeownership.

Together, we’re fighting against institutional investors to ensure consumers have more influence than corporations.  

To learn how we can help you, contact us! We’d love to tell you about our opportunities.