[Edaily Marketin Soyoung Park Reporter] In Japan and the United States, where the institutionalization of the rental housing market proceeded earlier, opinions are divided regarding the role of institutional capital. In Japan, the rental housing sector has become large-scale and specialized, centered on REITs and private equity funds (PEFs), and has established itself as a distinct income-generating real estate market. In contrast, in the United States, institutional investors’ purchases of single-family homes are concentrated in certain regions, and as controversies over rent and various fees intensify, there are growing efforts to restrict large institutions from buying homes.

In South Korea as well, as investment in rental housing by global institutional funds increases, there are calls to ensure that such investment does not stop at purchasing existing homes but leads to new supply, while also establishing institutional mechanisms to manage the concentration of investment in specific areas and to regulate rental and management fees.

Japan’s 6.7 Trillion Won Rental Housing Market… Growing as Institutional Assets

In Japan, small rental apartments have grown

into

major

assets

for REITs, insurance companies, and pension funds. A structure is evolving in which multiple housing units are bundled into a single portfolio for investment and managed by specialized operators.

A prime example is the acquisition by Dash Living, a Hong Kong-based residential investment and management company. Dash Living is a residential specialist that collaborates with global institutions such as BlackRock and Schroders. Last March, the company acquired eight multifamily residential properties (totaling 550 units) located in Kurumae, Ryogoku, Nezu, Toranomon, and Shinjuku in Tokyo for approximately $400 million (about 564.4 billion won).

A market report published by Mizuho Trust Bank in June of this year also supports the fact that institutional investment in rental housing is expanding. Last year, the transaction value for whole-building rental apartment transactions in Japan (transactions in which an entire rental apartment building was sold) reached 758 billion yen (approximately 6.7776 trillion won), a 15.4% increase from the previous year. This is the second-highest figure on record since 2000. The number of transactions exceeding 10 billion yen (approximately 89.4 billion won) also reached a record high since records began.

At the same time, a structure has taken root in Japan where institutions hold apartments or condominium complexes for the long term, while specialized companies handle leasing, vacancy management, and facility maintenance. Advance Residence, Japan’s largest residential REIT, is cited as a prime example. As of the end of January this year, this REIT owned 287 rental properties (22,688 units). In accordance with its investment principles, it holds assets for 5 to 10 years and entrusts rental management to specialized property management (PM) companies. Operations are managed through monthly reports covering tenant move-ins and move-outs, rent collection, tenant complaints, and repair status.

Side Effects Mounting in the U.S. … Buying Opportunities First for Actual Buyers

In the U.S., institutional investors have been buying up large numbers of single-family homes foreclosed following the global financial crisis. These properties were quickly converted into rental housing. Institutional investors expanded their housing portfolios using low borrowing costs and substantial capital.

The proportion of single-family homes held by large U.S. institutions is not particularly high. According to a report released by the U.S. Government Accountability Office (GAO) in March of this year, the share of single-family homes held by institutional investors stood at 1–3% of the total single-family housing stock as of 2024. These figures reflect the status of institutional ownership of single-family homes in six metropolitan areas: Cincinnati, Dallas, Jacksonville, Nashville, Phoenix, and Seattle.

However, the picture changes when looking specifically at single-family homes used for rental purposes. The proportion of rental single-family homes owned by institutions reached 4% in Seattle and 22% in Jacksonville. This indicates a concentration of institutional ownership in the rental single-family home markets of these specific regions.

Controversy over rent and fees has also intensified. The U.S. Federal Trade Commission (FTC) filed a lawsuit against Invitation Homes, a major single-family rental operator, alleging that the company charged mandatory fees and other charges without disclosing them to tenants. The company agreed to provide consumer refunds. In March, the FTC began refunding more than $47.2 million (approximately 66.6 billion won) to some 440,000 affected consumers.

Given this situation, the government has shifted its policy direction. In January, U.S. President Donald Trump signed an executive order preventing institutional investors from purchasing single-family homes intended for actual homebuyers. The order restricted federal government and government-guaranteed agency support for institutional investors acquiring single-family homes. It also expanded the “first-look” policy, which gives individual homebuyers priority in purchasing such properties.

As South Korea is also working to revitalize corporate-style rental housing, experts believe there are many lessons to be learned from the examples of Japan and the United States. Specifically, they argue that corporate rental policies should be designed with a focus on △the availability of new supply, △regional concentration, and △mechanisms for managing rent and fees.

An official at a global asset management firm operating in Japan stated, “The Japanese commercial real estate market ranks third in the world thanks to a rare combination of △economic stability △resilient returns, and △abundant market liquidity," adding, "In South Korea, where the corporate rental market is still in its early stages, I believe that to attract long-term institutional capital, it is necessary to focus on assets that demonstrate the potential for sustainable earnings growth and are priced reasonably relative to their fundamentals."