Market Power and Consumer Welfare: Evidence from Home Rental Markets
47 Pages Posted: 28 Jun 2019
Date Written: May 26, 2019
This paper examines the recent rise of institutional investment in the single-family home-rental market and its implication to renters' welfare. Using institutional mergers to identify local exogenous variation in corporate landlords' market power, we show that rent increased in neighborhoods where both of the merging firms owned properties (i.e. overlapping neighborhoods) relative to other non-overlapping neighborhoods. Interestingly, crime rate also decreased significantly in the overlapping neighborhoods after mergers. Our findings suggest that while corporate landlords leverage market power to extract greater surplus from renters, they also improve the quality of rental service by internalizing the cost of public goods.
Keywords: Real Estate, Home Rental, Institutional Investor, Market Power, Horizontal Merger
JEL Classification: G20, R30
Suggested Citation: Suggested Citation