Do Institutional Investors Really Cause the Housing Shortage | Tony Julianelle

Build to rent has moved from a niche label to one of the most active strategies in single-family real estate, and a new federal law just made it one of the only ways large investors can keep buying houses at all. The 21st Century ROAD to Housing Act became law in July and bars any investor controlling 350 or more single-family homes from purchasing another existing house, with build to rent carved out as an exception. In this episode, Atlas Real Estate CEO Tony Julianelle walks through what the law actually does, why he does not think it will produce a single additional home, and how investors are underwriting build to rent deals right now.

About Tony Julianelle

Tony Julianelle leads Atlas Real Estate, a Denver-based single-family and build to rent operating platform launched during the financial crisis at the start of the institutional single-family rental industry. Atlas manages just under 7,000 doors across 15 states and owns roughly 1,600 scattered-site single-family homes acquired over about sixteen months beginning in mid-2020. Tony also owns rental property personally and manages it himself.

What We Cover in This Episode

• What the 21st Century ROAD to Housing Act actually prohibits and when it takes effect
• The 350-home threshold that defines a large institutional investor
• Why the law's definition may capture property managers who own nothing
• How much of American single-family housing institutions actually own
• Why institutional buyers have been net sellers for three years
• Michigan's own institutional ownership law and how its threshold differs
• Why build to rent is carved out as an excepted purchase
• The homeownership pathway exception and how Atlas structures it
• What build to rent means as a distinct single-family rental sub-asset class
• Pre-entitlement land development versus buying at certificate of occupancy
• Expected return ranges on stabilized build to rent product
• The renter demographics driving build to rent demand
• Repairs and maintenance assumptions that make build to rent pro formas wrong
• Property tax assessment and insurance risk on new construction
• The exit optionality build to rent has that multifamily does not
• Where Tony thinks build to rent sits in the market cycle
• How AI is changing underwriting and leasing at an operating platform

Key Insight

Tony makes a point most coverage of the law has missed. The definition of a large institutional investor is written broadly enough that it appears to capture property management companies that manage single-family homes for other owners, even when the manager holds no ownership at all. He expects that to get corrected through rulemaking or litigation. Until it does, a manager with no balance sheet exposure to housing could be restricted from buying a house.

Why This Episode Matters

If you own single-family rentals or you are evaluating a build to rent opportunity, this episode tells you which door the law just closed and which one it left open. Tony also gives a direct list of the line items that make build to rent pro formas fall apart: understated repairs and maintenance, turn costs on larger units, tax assessments on new construction, and insurance. Those are the assumptions to stress test before you wire money.

Find Out More

Website: https://realatlas.com
LinkedIn: https://www.linkedin.com/in/tonyjulianelle/

Sponsors

Today's episode is brought to you by Green Property Management, managing everything from single family homes to apartment complexes in the West Michigan area.
https://www.livegreenlocal.com

And RCB & Associates, helping Michigan-based real estate investors and small business owners navigate the complex world of health insurance and Medicare benefits.
https://www.rcbassociatesllc.com