A booming rental market is tapering down decades of emphasis
on home ownership in the United States, and Wall Street is cashing in on the trend
with new securities.
The Wall Street
Journal is reporting
that rental units now account for the highest proportion of new construction in
the U.S. in 40 years. This trend is being attributed to higher lending standards - it’s
easier for corporations to obtain loans than families. The millennial
generation is also more
inclined to rent homes than put down roots.
There’s also been a flattening of wages, even as productivity
has soared and many household expenses have risen. The millennial generation is
saddled with student
loan debt, and there’s more global competition that will inevitably smooth salaries.
Those facts are not lost on Wall Street. Blackstone Group
has invested billions into
single-family rentals over the past several years. It’s selling
securities backed by those mortgages, which received
the coveted AAA rating from agencies (Moody’s, S&P) last year. However, tenants
have been moving
out and revenues are down.
The positives have included a resurgence
of the housing market in distressed areas.
Blackstone’s fitness as a property management company and
the implications on lower income Americans remain uncertain. The U.S. Federal
Reserve is monitoring, as some pundits have made comparisons with the sub-prime
lending crisis. However, the risk is very different on these rental securities
from subprime loans.
The U.S. has gone from an “ownership society” to one of fewer owners and more renters. This trend will likely continue, and ripple into
other aspects of the culture.
This post was originally published on Smartplanet.com