America's largest institutional homeowner is in a buying slump—how it’s pivoting in a tough market

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America's largest institutional homeowner is in a buying slump—how it’s pivoting in a tough market

Since interest rates spiked, capital markets shifted, and the Pandemic Housing Boom fizzled out in 2022, institutional landlords have been relatively inactive in scatter-site acquisitions. That includes institutional giant Progress Residential, which is owned by Pretium Partners, a New York City based private equity firm. In fact, in 2024, Progress Residential had its lowest calendar-year for acquisitions in over a decade.

Given the current state of the housing market—where elevated home prices, decelerated rent growth, higher rates, and elevated remodel costs make it harder to find properties for sale in their typical buy boxes that provide the needed returns—institutional groups like Pretium Partners are looking for different areas to deploy capital.

Back in January, Pretium Partners announced it had raised $550 million in capital, which will be used to originate up to $5 billion in loans to private homebuilders and developers “to create new and renovate existing housing stock” and fill “the void left by regional banks in real estate lending.” Over the past few years, smaller private builders have faced greater challenges in accessing capital compared to their larger peers. Josh Pristaw, Pretium’s Head of Real Estate, wrote in their January press release: “By providing bespoke debt capital solutions, we’re supporting private homebuilders who are underserved by traditional financial institutions, and we are facilitating new housing supply. This Fund will support the construction of approximately 12,000 new homes in key markets.”

That isn’t its only capital shift. This month, Bloomberg reported that Pretium Partners is raising its first fund dedicated to acquiring "affordable" single-family homes, renovating them, and renting them to tenants with Section 8 housing vouchers. This first fund could see it add more than 2,000 Section 8 homes to its portfolio.

In total, Pretium Partners’ Progress Residential owns around 97,000 single-family rentals, including around 8,000 built-to-rent properties, making it the largest institutional single-family homeowner. It’s just ahead of institutional giant Invitation Homes, which wholly owns 85,138 single-family homes and jointly owns another 7,622 single-family homes.

According to Parcl Labs, here are 10 metro area housing markets where Pretium Partners’ Progress Residential owns the most single-family rentals 👇

1. Atlanta-Sandy Springs-Alpharetta, GA —> 12,163 single-family rentals

2. Phoenix-Mesa-Chandler, AZ —> 8,326 

3. Dallas-Fort Worth-Arlington, TX —> 6,266 

4. Memphis, TN-MS-AR —> 5,914 

5. Charlotte-Concord-Gastonia, NC-SC —> 5,263 

6. Jacksonville, FL —> 4,990 

7. Houston-The Woodlands-Sugar Land, TX —> 4,650 

8. Las Vegas-Henderson-Paradise, NV —> 4,649 

9. Orlando-Kissimmee-Sanford, FL —> 4,645 

10. Nashville-Davidson--Murfreesboro--Franklin, TN —> 4,607

Why is Pretium Partners eyeing Section 8 single-family housing?

Institutional single-family landlords have been hesitant to jump into the Section 8 side of the market. Many big operators prefer streamlined leasing processes, and Section 8 comes with additional inspections,and paperwork.

The chart above, taken from VineBrook Homes' December 2024 investor report, illustrates how many large operators—with VineBrook being the main exception—have shied away from the bottom of the market. After all, that’s why VineBrook highlights this fact as a key part of its investment edge.

However, Pretium Partners reportedly getting into the Section 8 side of single-family rentals shows that the current housing environment might be causing some institutional players to take risks and move outside their traditional comfort zone in order to seek returns. They could be allured by the fact that Section 8 renters are subsidized by the government, which provides a guaranteed portion of the rent payment, reducing the risk of non-payment.

While most people think of apartments when they hear "Section 8 housing," a sizable portion of that market consists of single-family rentals.

According to a 2022 study by the Urban Institute, here’s the breakdown on Section 8 voucher holders…

• 24.8% live in single-family detached homes or manufactured homes

• 4.7% live in single-family attached properties

• 20% live in multifamily buildings with 2 to 4 units

• 50.5% live in multifamily buildings with 5 or more units

While some institutional operators, like Progress Residential (owned by Pretium Partners), are exploring new ways to deploy capital, it doesn’t mean institutional homebuying is picking up again—because, frankly, it isn’t.

Indeed, the latest data from John Burns Research and Consulting shows that institutional landlords owning at least 1,000 single-family homes still largely remain sidelined, only making up 0.3% of U.S. home sales in Q3 2024, compared to 2.2% in Q3 2021 and the all-time high of 2.4% in Q2 2022.

Existing home sales remain constrained

The early trajectory of U.S. existing home sales tells us that 2025 will be another year of affordability-constrained existing home sales.

The table below shows the NOT seasonally adjusted raw monthly prints. This morning, NAR published the February print.

U.S. existing home sales were running at a 4.26 million seasonally adjusted annualized rate (SAAR) in February.

What does that mean?

IF we maintain the current pace + seasonality acts as historically expected, NAR's model expects we'd do 4.26 million existing sales over the next 12 months.