Buy-to-Live vs. Buy-to-Let: The Impact of Real Estate Investors on Housing Costs and Neighborhoods

Abstract

How do buy-to-let investors impact local housing markets and the composition of neighborhoods? We investigate this question by examining a Dutch legal ban on buy-to-let investments, exploiting quasi-experimental variation in its coverage. The ban effectively reduced investor purchases and increased the share of first-time home-buyers, but did not have a discernible impact on house prices or the likelihood of property sales. The ban did increase rental prices, consistent with reduced rental housing supply. Furthermore, the policy caused a change in neighborhood composition as tenants of investor-purchased properties tend to be younger, have lower incomes, and are more likely to have a migration background. Our results suggest rental investors influence local housing conditions primarily through changing the residential composition of neighborhoods rather than direct house price effects.

Keywords: investors, house prices, rents, neighborhoods, gentrification