Investors and Housing Affordability

69 Pages Posted: 7 May 2020 Last revised: 14 Jun 2021

See all articles by Carlos Garriga

Carlos Garriga

Federal Reserve Banks - Research Division

Pedro Gete

IE Business School; IE University

Athena Tsouderou

IE Business School; IE University

Date Written: June 11, 2021

Abstract

We study institutional investors in U.S. housing markets after the Great Recession. First, we document their characteristics. Most of them are local, buying houses within the MSA of their mail address. Moreover, most of them are small and located throughout the U.S. Instead, large investors are geographically concentrated in "superstar cities". In both the extensive (number of investors) and intensive (dollar purchases) margins the small investors grew the most. Then, we analyze how they affect affordability. Their purchases increase the price-to-income ratio, especially in the bottom price-tier, the entry point for first-time buyers. Institutional investors cause a short-run reduction in vacancy rates and a medium-run positive response of construction, which is stronger for multi-unit buildings. The supply response mitigates the effect on affordability, although not enough to reverse the effect. In highly elastic areas investors affect rents more than prices, whereas in highly inelastic areas investors have the opposite effect.

Keywords: Institutional investors, housing affordability, house prices, supply elasticity, propensity to invest.

JEL Classification: E52, G11, R21, R31, R38

Suggested Citation

Garriga, Carlos and Gete, Pedro and Tsouderou, Athena, Investors and Housing Affordability (June 11, 2021). Available at SSRN: https://ssrn.com/abstract=3574001 or http://dx.doi.org/10.2139/ssrn.3574001

Carlos Garriga

Federal Reserve Banks - Research Division ( email )

P.O. Box 442
St. Louis, MO 63166-0442
United States
(314) 444-7412 (Phone)
(314) 444-8731 (Fax)

Pedro Gete (Contact Author)

IE Business School

Calle Maria de Molina 12, Bajo
Madrid, Madrid 28006
Spain

IE University ( email )

Calle Pedro de Valdivia 21
Madrid, Madrid 28006
Spain

Athena Tsouderou

IE Business School ( email )

Calle Maria de Molina 12, Bajo
Madrid, Madrid 28006
Spain

IE University ( email )

Calle Pedro de Valdivia 21
Madrid, Madrid 28006
Spain

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