Why Wall Street is snapping up family homes

Housing is the world’s biggest asset class. But until recently renting out family homes was a mom-and-pop cottage business, seen as uninvestable by Wall Street. When Blackstone, a private-equity giant, floated the idea of creating vast portfolios of homes after the global financial crisis of 2007-09, banks refused to lend to it. The firm ran the idea by Sam Zell, a property mogul who sold Blackstone his $39bn office empire before the financial crisis. “No way,” he retorted. For an investor routinely splurging on hotel chains and swanky office towers, the buy-to-let business seemed like small fry by comparison.

Blackstone went ahead despite Mr Zell’s advice. A decade on from the first purchase in Phoenix, Arizona—an outlay worth $100,000—the experiment has morphed into an institutional-grade asset class. Last year interest in the sector reached fever pitch. According to John Burns Real Estate Consulting, a research firm, big investors committed at least $45bn to buying single-family homes in America, up from $3bn the year before. Even as housing markets cool, investment is pouring in, with firms including Goldman Sachs and kkr following in Blackstone’s footsteps.