Institutional Investors, Rents, and Neighborhood Change in the Single Family Residential Market

Abstract

Institutional investors that buy and rent out single family homes have continued to increase their presence after the Great Recession. We examine their neighborhood entry choices and rent charging behavior by leveraging tax and deed transfer records and Multiple Listing Service (MLS) data for 2010-2021. We find that investor share is higher in markets with lower housing values and higher shares of Black and noncollege residents, but higher median income. We also find that investors raise rents at 60% higher rates than the average increase when first acquiring the property, and higher investor share in a neighborhood is correlated with faster rent increases for non-investor landlords. We do not find evidence that investor entry is associated with gentrification, as neighborhoods with high investor activity saw reductions in White and college educated resident share relative to other neighborhoods in their metro area.

Keywords: real estate, institutional investors, single family residential market, rentals

JEL Classification: G23, R21, R23, R31