Corporate ownership of housing, particularly 1-to-4 unit properties, has been on the rise in the US over the past decade. This trend encompasses ownership by parties ranging from individual investors using a limited liability corporation (LLC) to major institutional investors. Corporate acquisition of housing picked up after the foreclosure crisis and accelerated during the 2020s, with corporate buyers, broadly defined, accounting for a historically high share of home purchases across the US (around 15% across 40 major metros in 2021). The highest rates of purchases by corporate investors have appeared among lower-priced sales and sales in majority Black neighborhoods, accounting for 26% of the lowest-priced sales in 2023 and 30% of all sales in majority Black ZIP codes in 2021.
This trend of increasing corporate ownership, particularly ownership by large corporate investors with thousands of units, has raised a number of concerns and questions. First, growing corporate investment has increased competition for 1-to-4 unit properties. Investors, especially large ones, often pay cash and waive contingencies, making it difficult for households needing to finance with mortgages to compete. The concentration of corporate purchases among lower-priced properties has raised concerns about moderate-income households being able to transition to ownership. Given the importance of homeownership for building wealth in the US and the already substantial racial homeownership and wealth gap, this is a concern. In New Jersey, the Black and Latino homeownership rates in 2020 were 36% and 35%, respectively. The white homeownership rate was nearly double at 74%.
Second, there are concerns specifically about large-scale corporate investors as landlords. These types of corporate landlords operate in order to generate competitive returns for their investors, which in turn, tenants and housing advocates contend, leads them to charge high and regularly increasing rents and add fees and charges to boost revenues. Large corporate landlords may also be more likely to file for eviction since they do not have a personal relationship with their tenants and they view eviction as a way to coerce payment and add additional fees and charges. Research on large corporate landlords finds that they are more likely to file for eviction than other owners of comparable properties.
Additionally, researchers have linked corporate ownership, broadly defined, to housing disinvestment and relatively worse property conditions, on average, in some cities. The use of an LLC makes it difficult to identify the actual property owners and this structure limits their personal liability. An increasing share of investor owners, including small-scale owners, place their properties under LLC ownership. While for many owners, an LLC is simply a commonly used hedge against frivolous lawsuits, for others it facilitates speculation and neglect, worsening conditions for tenants and the neighborhoods targeted by these types of investors. Thus, while investor ownership, including corporate investor ownership, is not inherently negative, speculators may be more likely to use LLCs and it may be more difficult to hold negligent owners using an LLC accountable.
Much of the research on corporate ownership has focused on the trend of very large investors, including private equity firms and Real Estate Investment Trusts (REITs), purchasing large numbers of single-family homes in some parts of the US, particularly in Sun Belt cities like Atlanta and Las Vegas. With all of this work on large-scale investors in the Sun Belt, we were interested to investigate what corporate ownership looks like in New Jersey, which presents a very different context in terms of housing prices and property taxes, housing stock and development patterns, and regulations including tenant protections. A recent report by the Center for Law, Inequality, and Metropolitan Equity (CLiME) at Rutgers found that corporate investors accounted for about half of recent sales of 1-to-4 unit properties in Newark. While investors, corporate and other otherwise, have long owned a substantial number of 1-to-4 unit properties in Newark and other older NJ cities, there has been increasing interest in understanding the degree of corporate investor ownership across the state, where it has grown fastest, and, particularly, where absentee and large corporate owners may be present.
Our report builds on this prior research by examining the extent of corporate ownership of 1-to-4 unit residential properties in a sample of New Jersey municipalities that reflect the state’s diverse geography, development patterns, and housing market conditions: Asbury Park, Millville, Montclair, New Brunswick, Passaic, Phillipsburg, and West New York. In each municipality, we explored how corporate ownership has changed over time and which types of areas it affects.
We used state property tax list data to identify corporate-owned properties and examined the ownership patterns in the context of key demographic and housing market characteristics, including neighborhood racial and ethnic composition, tenure and home value, and recent histories of high-cost mortgage lending and foreclosure. We drew on New Jersey property assessor data from the N.J. MOD IV Historical Database to explore 1-to-4 unit properties, excluding condominium units. We identified corporate owners based on the presence of a corporate identifier in the owner name, for instance, “LLC.” We additionally identified properties as corporate-owned if the owner name indicated it was held by a trust and where the tax mailing address was not the same as the property address.
In addition to aggregating data at the municipal level and looking at trends over time, we took the parcel-level data and created maps showing the spatial variation of corporate ownership of 1-to-4 unit housing within each city. To preserve privacy and better display regional trends, we converted corporate-owned parcels to points and created kernel density surfaces showing the number of these parcels within 1/4 mile as a grid covering the whole city. To best illustrate these trends, we then extracted contour lines for every multiple of 5 corporate-owned parcels, allowing readers to see the concentration of corporate ownership for any portion of the city. We then added points showing the peak concentration of corporate parcels, along with contextual data layers showing the Census block groups shaded by plurality racial and ethnic groups and a simple polygon layer (in white) showing only 1-to-4 unit residential parcels. Our maps present corporate ownership in 2010 and 2022 side by side for easy comparison over time (see Figure 1, showing Asbury Park). These maps clearly illustrate the association between racial and ethnic composition and corporate ownership across our study areas.
Figure 1: Corporate Ownership of Small Residential Properties in Asbury Park (2010 and 2022)
Through our research, we found that:
- Corporate ownership of 1-to-4 unit residential properties increased in all seven cities between 2010 and 2022 (see Figure 2). In some cities like New Brunswick, this increase was dramatic. In other municipalities, like Montclair, the increase was modest when viewed as a share of total 1-to-4 unit properties.
- In most cities, corporate ownership is concentrated in one or two neighborhoods, especially those that historically had larger numbers of Black residents, high rates of foreclosure in the past decade, and/or large numbers of Latino immigrants or students. In West New York and Passaic, corporate ownership is more diffuse.
- Consistent with existing housing policy research, we found that across the cities we studied, high rates of high-cost lending and foreclosure before the financial crisis are associated with higher rates of corporate ownership.
- In most cities, corporate owners own a small number of properties on average. New Brunswick is the only municipality we studied where a small number of corporate owners own many properties. Very large institutional investors did not account for a major portion of corporate-owned 1-to-4 unit properties in our research areas.
- Most corporate owners do not have mailing addresses in the same municipality as their holdings, but in every municipality we studied at least three quarters of corporate-owned properties were owned by entities located in New Jersey, and the majority of non-New Jersey owners were located in Pennsylvania and New York. The three municipalities with the lowest rates of corporate owners with addresses in the municipality (New Brunswick, Millville, and Phillipsburg), also have the lowest housing costs among the cities we studied.
Figure 2. Corporate Ownership Over Time
Though this work answered the questions we set out to explore, it also raised a set of questions about the implications of corporate ownership for tenants, potential homebuyers, and neighborhoods. We suggest that future work consider these five sets of questions:
- First, are all or some subset of corporate buyers contributing to rising rental prices as a function of their business models? For example, some investors might have purchased properties in places where they perceived that current rents were below market value. Other investors might have purchased properties in order to upgrade them and rent for higher prices.
- Second, is corporate investment making it more difficult for potential homebuyers to purchase homes? While high prices and interest rates currently pose substantial barriers to buying, corporate investment in relatively lower-cost properties might have exacerbated difficulties in expanding homeownership for moderate-income households.
- Third, have some corporate investors made it easier or more difficult for tenants using Housing Choice Vouchers to find housing? Some investors, by raising rents beyond existing or previous levels, might put housing formerly accessible to someone with a voucher out of reach of the program’s rent price caps. Other corporate investors might deliberately market their properties to voucher holders, particularly in areas with lower incomes, to generate their desired rate of return.
- Fourth, what are the effects on neighborhood conditions? Some corporate investors, particularly in lower-cost markets, may not be as likely to invest in and adequately maintain their properties.
- Fifth, what is the impact of increased corporate owner purchases in communities of color, especially in areas that had historically been racially segregated?
