The Rise of The New Landlords Post-2008

Although the 2008 financial crisis has often been depicted as being “bad for everyone”, it became clear once the dust had settled that some were in a much better position than others. The “winners” of the crisis include new landlords that would subsequently come to dominate much of the housing market. They are the “corporate landlord”, made possible by the surplus of cheap foreclosed homes; and the “professional landlord”, brought about by increasing concentrations of wealth in the hands of a few, as well as the advent of short-term rental services such as Airbnb. 

The Aftermath of 2008

The 2008 crisis, despite the short-term losses of many financial institutions, set the stage for the rise of a new propertied class. Investors from recently-bailed out banks, as well as finance-savvy individuals with access to capital would soon be able to buy up foreclosed homes at rock-bottom prices, often in cash. 

This gave them a distinct advantage, when compared to most homeowners who could take months to be granted a mortgage, especially at a time when the flow of credit had dried up. Something similar has occurred post-pandemic, as climbing interest rates have priced out all but the most affluent — who are able to outbid others when necessary — from purchasing a home. 

Other individuals took advantage of post-2008 prices to become home flippers, renovating houses before reselling them at a profit. This removes  “fixer-upper” houses from the market that more modest families could have bought, renovated, and then lived in themselves. 

The 2008 crisis, despite the short-term losses of many financial institutions, set the stage for the rise of a new propertied class.

Many of these recently purchased foreclosed homes would then find their way into post-2008 financial portfolios. Investors could now buy shares in real estate investment groups (REIGs), as well as real estate investment trusts (REITs), both of which are companies that own and manage properties. Although REIGs are less regulated than REITs, both of them pool together investors’ funds to purchase and/or rent out properties that may be commercial or residential. Investors are then provided with the income generated by the underlying properties. 

Take the example of the US REIT company Invitation Homes, who claim to be the “nation’s largest home leasing and management company”. They purchased their first single-family home in April 2012, back when housing prices were at a low and mortgages still difficult to come by for working families, although there is little mention of this on their website. 

Instead, they spin their service as one that takes the hassle out of renting, freeing tenants of the “long-term commitment of owning” (or the wealth that comes with it). Note that as REITs’ must provide dividends to shareholders, they have every incentive to keep input costs low — by delaying or refusing home repairs, for example —while continuously increasing the price of rent.

They spin their service as one that takes the hassle out of renting, freeing tenants of the “long-term commitment of owning”.

Invitation Homes continued to expand, purchasing additional homes as well as building new ones through various partnerships — known as build-to-rent  — until they eventually began trading on the New York Stock Exchange (NYSE) in 2017. Why a business that simply acts as one mega  “corporate landlord” should be allowed to list on the NYSE is beyond me, but here we are. 

The New Landlords

In addition to REITs, another company was able to take advantage of the 2008 housing crisis: Airbnb. Originally conceived as a start-up that, innocently enough, would allow home-owners to make a little extra cash by renting out a room, Airbnb has since grown into a major player in the housing industry.

Landlords who had an extra property quickly realized that they could list it on Airbnb as a short-term rental rather than letting it out on a medium to long-term basis. This proved to be much more profitable than traditional renting, especially as the tourism industry continued to expand in the years following 2008.

Another company was able to take advantage of the 2008 housing crisis: Airbnb.

This is because tourists who book on Airbnb are often willing to pay hundreds of dollars a night to stay in some of the world’s major tourist attractions, especially in Europe. Landlords who had the financial means to do so, within the context of rising economic inequality post-2008, could soon acquire additional properties and list those on Airbnb as well. This would restrict the supply of long-term rental properties, not to mention properties available for purchase.

The profitability of short-term rentals, despite attempts at regulation, has thus given rise to a kind of “professional landlord” whose occupation consists of managing multiple properties (just take a look at “superhosts” on Airbnb). This comes in contrast to the “mom-and-pop” or “dinner landlord” who only manages an extra property or two, perhaps the result of an inheritance. 

However, long-term renting still provides many advantages, such as stable income, for those who don’t necessarily want the obligation of managing multiple holiday lets. This is where the professional landlord makes his reappearance in the buy-to-let market, in which investors buy up homes with the sole intention of letting them out, as is increasingly common in the UK. This has, unsurprisingly, also resulted in the growth of the built-to-let market.

The profitability of short-term rentals, despite attempts at regulation, has thus given rise to a kind of “professional landlord”.

“Corporate landlords”, like the REITs we encountered earlier, are also to blame. Note that many REITs depend on the financial backing of institutions such as BlackRock; according to their 2024 Annual Report, for example, BlackRlock invested almost $39 million in residential REITs, making up about 14.3% of their real estate portfolio. 

Although less than 20% of rental properties, at least in the US, are owned by corporate landlords, this share remains significant and is growing. Furthermore, BlackRock’s influence on real estate spans far beyond single family homes in the United States. In December of last year, for example, BlackRock invested an additional €774m in its European Property Fund. 

What are some of the Implications? 

Although individuals, who are not affiliated with for-profit companies, still make up the majority of landlords, their power to disrupt the rental market is growing. As the Pew Research Center points out, the number of landlords relative to the general US population is quite small, only about 6.7% of taxpayers as per 2018 statistics. 

This was also the case in the United Kingdom, although professional landlords are now acquiring more rental properties than in prior years: 4 or 5 per landlord, as compared to 1 or 2. Many do so through limited companies, demonstrating that the line between professional and corporate landlord is sometimes blurred. In any case, given that landlords already make up a small percentage of the population, the danger here is that — as professional landlords increase their number of rental properties — they could form a kind of implicit cartel over the supply of rentals. 

This would mean further deteriorated housing conditions, as well as ongoing rent hikes, especially in countries where landlords face fewer rent restrictions (like the UK). The lack of visibility of the housing sector, when compared to more traditionally “commercial” industries that economists and policymakers prioritize, also makes tenants vulnerable.

Although individuals still make up the majority of landlords, their power to disrupt the rental market is growing.

This is all without mentioning the role of corporate landlords, such as the REITs discussed earlier. As additional capital is poured into the real estate sector, through private equity firms, insurance companies, and retirees who invest in real estate mutual funds among other financial products, many of these issues will only be exacerbated.

Although home vacancies have received limited media attention, they are also known to add to the lack of affordable housing, especially in European cities such as London or Paris. Many of these vacant properties belong to absentee, sometimes anonymous international investors, who acquire these “assets” as a means of securing funds. 

This is doubly beneficial for them. Vacant properties, which may be used as holiday or second homes, are often taxed at lower rates and sometimes not at all. Leaving these properties empty also reduces the overall supply of housing, either for rent or purchase, pushing up housing demand and thus property value. As the latter rises, homeowners’ equity increases — assuming they took out a loan — which releases even more capital for investment.

What it All Comes Down To

As house and rent prices continue to grow in much of the Western world, landlords — both corporate and professional — have every incentive to hold onto their properties. This restricts the supply of homes available for purchase, not to mention further aggravates a rental market that is already highly competitive.

One solution often presented is to simply build more properties, but this begs new questions. What happens if professional or corporate landlords just buy up these new properties as holiday lets or long-term rentals, removing them from the selling market? What about the millions of vacant properties already in existence, some of which are purposely kept so for investment purposes? 

Homeowners who view their properties as assets are going to do everything in their power to protect them.

Even if new properties are built, there is not necessarily any guarantee that they will be affordable. Indeed, with interest rates high, mortgages difficult to come by, and wealth inequality continuing to rise, private developers will likely turn towards properties that are predicted to sell quickly. It is not a coincidence that there has been a recent surge in luxury real estate, as compared to, say, your typical “mom-and-pop” housing. Yes, NIMBYs and zoning laws, especially in countries like the US, are also to blame for the current lack of affordable housing, but they, along with the points made above, all point to the deeper issue at hand: housing has become an investment rather than any kind of “social right”.

Homeowners, particularly the very wealthy, who view their properties as assets are going to do everything in their power to protect them. This is also true for loanees forced into paying inflated house prices; they will attempt to ensure, at the very least, that their property retains its value at the point of purchase, but ideally that it even goes up in price. 

Remember that if houses are considered an “asset”, as house prices increase, the value of homeowners’ estates increase. There is thus a conflict of interest between those who aspire to be homeowners and those who either maintain or derive their wealth — in the case of the professional and corporate landlords — from housing. Until this underlying issue is addressed, house prices are only bound to go up on the long-term.