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Institutional housing investors and the Great Recession

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  • Oosthuizen, Dick

Abstract

Before the Great Recession, residential institutional investors predominantly bought and rented out condos, but then they increased their market share of rental houses from 15 percent in 2001 to 27 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.

Suggested Citation

  • Oosthuizen, Dick, 2026. "Institutional housing investors and the Great Recession," European Economic Review, Elsevier, vol. 182(C).
    • Handle: RePEc:eee:eecrev:v:182:y:2026:i:c:s0014292125002612
    DOI: 10.1016/j.euroecorev.2025.105211
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    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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