Major rental-home companies merge as homeownership rate lags

New entity will control 82,000 homes in 17 markets

The $4.3 billion merger of Invitation Homes and Starwood Waypoint Homes will create a company with 82,000 houses for rent in 17 markets.
The $4.3 billion merger of Invitation Homes and Starwood Waypoint Homes will create a company with 82,000 houses for rent in 17 markets. (Justin Sullivan/Getty Images)

With the rate of homeownership in the U.S. still well below pre-recession levels, two of the country’s biggest corporate owners of single-family rental homes in the United States have agreed to a merger.

The $4.3 billion deal between Invitation Homes and Starwood Waypoint Homes will create an entity with 82,000 houses for rent in 17 markets, including Atlanta, Chicago, Phoenix, Southern California and Miami.

“The markets that we’re in are characterized with high population growth, high household formation growth and, most importantly, job growth,” Starwood CEO Fred Tuomi told The Wall Street Journal. “These are markets that people are moving to for opportunity versus moving from.”

Institutional ownership of single-family homes skyrocketed after the housing collapse, which forced millions of homeowners into foreclosure. Sensing opportunity, big investment firms stepped in, purchasing some 200,000 homes at sharply reduced prices, fixing them up and renting them, usually through a newly formed subsidiary.

Invitation and Starwood Waypoint were two of the four largest investors in the rental-home market, which also included Colony American Homes and American Homes 4 Rent. Starwood Waypoint and Colony American, which together owned 30,000 homes, combined in 2015 - an indication that home prices had reached a level at which bargains were growing scarce.   

The Starwood Waypoint-Invitation deal comes at a time when the share of U.S. households that rent is 37 percent, a 50-year high, according to the Joint Center for Housing Studies of Harvard University. Homeownership, on the other hand,  is at a 50-year low -- 63.7 percent, 5 percent below what it was on the eve of the housing-price collapse in 2008.

Meanwhile, rising home values and a shortage of inventory across the country are making it hard for many renters to make the transition to homeownership.

That’s good for the new, bigger and better Invitation Homes, which, according to the company will capitalize on the economies of scale created by the merger to benefit both residents and shareholders.

But not everyone is convinced. Housing advocates worry that the merger is also an opportunity to raise rents.

Kevin Stein, a lawyer and deputy director of a California group that supports the rights of tenants and homeowners, told The New York Times that he’s concerned the merger has put too much rental housing in the hands of a single landlord.

"What is the level of concentration? This is a concern to our members,” Stein said. “There are so many communities in California where people are being driven out because of housing costs, and this is part of the dynamic.”