Institutional Housing Investors and the Great Recession

99 Pages Posted: 17 Oct 2023

Date Written: October, 2023


Before the Great Recession, residential institutional investors predominantly bought and rented out condos, but then they increased their market share of rental houses from 17 percent in 2001 to 28 percent in 2018. Along with this change, rental survey data show that the annual house operating-cost premium of institutional investors relative to homeowners fell from 44 percent in 2001 to 28 percent in 2015. To measure how these reduced costs affected the housing bust of 2007–2011, I build a heterogeneous agent model of the housing market featuring corporate investors and two types of dwellings: condos and houses. A transition experiment intended to replicate the Great Recession yields three results. First, house prices would have fallen by 1.6 percentage points more without the corporate-cost reduction. Second, the corporate-cost reduction can explain the fall in the homeownership rate. Third, the cost reduction produced a welfare gain of 0.4 percent for homeowners and 0.6 percent for individual investors.

Keywords: general equilibrium, housing, investors, housing prices, homeownership

JEL Classification: D10, D31, E21, E30, E51

Suggested Citation

Oosthuizen, Dick, Institutional Housing Investors and the Great Recession (October, 2023). FRB of Philadelphia Working Paper No. 23-22, Available at SSRN: or

Dick Oosthuizen (Contact Author)

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

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