The Impact of Institutional Investors on Homeownership and Neighborhood Access

62 Pages Posted: 19 Sep 2023

See all articles by Joshua Coven

Joshua Coven

NYU Stern School of Business

Date Written: August 29, 2023

Abstract

I estimate a demand system to study the effects of institutional investors’ conversion of large fractions of owner-occupied housing into rentals in the suburbs of US cities. I find the purchases and subsequent conversions of houses resulted in a tradeoff between homeowners and renters. Institutional investors decreased the housing available for owner-occupancy by 30% of the homes they converted, and their demand shock raised the price of housing in a census PUMA by 7.4pp per 1pp of housing they purchased. Higher prices made it harder for people to buy homes. However, the institutional investors increased the supply of homes available for renter occupancy by 69% of the houses they converted, and lowered rents by 2.3pp per 1pp of housing they purchased. The increase in the supply of rental housing allowed the financially constrained to move into neighborhoods that previously had few rental units. The people who moved into institutional investor-owned homes had lower incomes, a lower likelihood of having a bachelor’s degree, were more likely to be white, came from areas with worse historic economic mobility, and came from areas with lower school test scores than others who moved into the same census tracts. The findings suggest that institutional investors made it harder for people to purchase homes, but easier for renters to access neighborhoods that previously had few rentals.

Keywords: Institutional investors, Housing markets, Demand system

JEL Classification: D6, G23, R2, R3

Suggested Citation

Coven, Joshua, The Impact of Institutional Investors on Homeownership and Neighborhood Access (August 29, 2023). Available at SSRN: https://ssrn.com/abstract=4554831 or http://dx.doi.org/10.2139/ssrn.4554831

Joshua Coven (Contact Author)

NYU Stern School of Business ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

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