Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Investing

Are Institutional Investors a Problem in the Housing Market?

by November 13, 2023
November 13, 2023
Are Institutional Investors a Problem in the Housing Market?

Vanessa Brown Calder

In a recent Senate Antitrust Subcommittee hearing on Competition and Consumer Rights in the Housing Market, participants argued that institutional investors negatively affect housing affordability. One legislator and witness claimed that investors “represent a sizable portion of [housing] sales” owning “a significant share of single‐​family homes” and the result is declining affordability.

The concern is that institutional investors buy up the housing stock, outbidding non‐​investors who have access to fewer resources. However, this concern is misplaced.

The US housing market is one of the largest markets in the world, so, unsurprisingly, investors have some presence in it. But investor purchases occupy a small share of the market. The National Rental Home Council (NRHC) estimates that large investors made 0.74 percent of single‐​family home purchases in 2021, so someone other than a large investor purchased 99.26 percent of single‐​family homes. Recent Brookings Institution research estimates that large institutional investors own around 3 percent of the single‐​family rental stock.

Moreover, despite increased media attention, investors are not a new, post‐​pandemic phenomenon. Vice President Laurie Goodman at the Urban Institute describes how investors sprung up after the 2008 financial crisis and put a floor under the distressed housing market. From this perspective, they filled a void and served a valuable purpose in the rocky days and years following the crisis.

As Goodman notes in subsequent work, large institutional investors typically buy homes in need of repair, and for various reasons investors can make these repairs more efficiently than owner‐​occupiers. Investors compete with other professional house flippers to provide this service and upgrade the housing stock.

In addition to upgrading the housing stock, research indicates that investor participation produces other benefits. A recent paper on The Impact of Institutional Investors on Homeownership and Neighborhood Access finds that investors “reduced supply of owner‐​occupancy homes” but also “increased the supply of homes available for renter occupancy by 69%,” and this “allowed the financially constrained to move into neighborhoods that previously had few rental units.”

In other words, investors bought housing units from the owner‐​occupied market and rented them out, which increased opportunity for renters who could otherwise not afford to live in predominantly owner‐​occupied neighborhoods. At a minimum, the effects of investors on the market are varied.

Perhaps most importantly, the cited negative effects of institutional investors in the current environment are a symptom of the broader issue of inelastic supply. In a world with abundant housing, regular folks would not need to go head‐​to‐​head with investors in bidding wars because there would be plenty of housing to go around. In fact, reporting indicates that investors focus purchases on markets with strong job growth and limited housing supply. Therefore, the solution is to radically overhaul the local regulatory landscape in which housing purchases exist.

Institutional investors may be convenient boogeymen, but the reality is that they serve a market purpose. Moreover, housing problems run much deeper than critics care to admit. Even if—through some unlikely and ill‐​advised action—policymakers were able to eliminate institutional investors’ market participation, housing markets across the country would still be subject to a plethora of federal, state, and local policies that produce high‐​cost housing. Owners and renters would still struggle to cope, in some cases more than before. This would be especially unfortunate for renters looking for homes in neighborhoods that otherwise do not provide rental options and owner‐​occupiers that can no longer sell to the highest bidder.

0
FacebookTwitterGoogle +Pinterest
previous post
DP Trading Room: Is Your Portfolio OUTDATED? The Truth About The 60/40 Mix
next post
Democrat support critical for Johnson’s plan to avoid shutdown amid growing GOP opposition

You may also like

Agree With It or Not, Colorado Supreme Court’s...

December 20, 2023

James L. Swanson, R.I.P.

April 22, 2025

Domestic Benefits from Foreign Tax Havens

May 31, 2023

Corporate Welfare Spending

March 4, 2025

Trump’s Trade Wars Harm Farmers and Taxpayers

March 26, 2025

Will Big Sky Country Redefine Climate Policy?

April 15, 2024

Australian Study on Opioid Prescribing is the Latest...

August 14, 2023

Who You Calling Far Right?

March 28, 2024

Questioning the Housing Crisis: Recap and Wrap-Up 

January 13, 2025

Vance, Like Biden, Flunks Econ 101: Backs Hiking...

July 24, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Trump warns of ‘serious consequences’ if Elon Musk funds Democrats

      June 7, 2025
    • Musk jokes about reconsidering stance on Big Beautiful Bill after Schiff’s praise

      June 7, 2025
    • Musk deletes explosive posts about Trump and Epstein files

      June 7, 2025
    • House witness flips script on Dem who ambushed him during hearing with unearthed tweet: ‘Iceberg is ahead’

      June 7, 2025
    • Call with China’s Xi, and Trump-Musk exchange fueled barbs during 20th week in office

      June 7, 2025
    • Trump’s conservative allies warn Congress faces critical ‘test’ with $9.4B spending cut proposal

      June 7, 2025

    Categories

    • Business (8,152)
    • Investing (2,019)
    • Politics (15,568)
    • Stocks (3,136)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved