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

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  • Keyoung Lee
  • David Wylie

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.

Suggested Citation

  • Keyoung Lee & David Wylie, 2024. "Institutional Investors, Rents, and Neighborhood Change in the Single Family Residential Market," Working Papers 24-13, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:98521
    DOI: 10.21799/frbp.wp.2024.13
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    References listed on IDEAS

    as
    1. Rohan Ganduri & Steven Chong Xiao & Serena Wenjing Xiao, 2023. "Tracing the source of liquidity for distressed housing markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(2), pages 408-440, March.
    2. Baum-Snow, Nathaniel & Hartley, Daniel, 2020. "Accounting for central neighborhood change, 1980–2010," Journal of Urban Economics, Elsevier, vol. 117(C).
    3. Elora Lee Raymond & Ben Miller & Michaela McKinney & Jonathan Braun, 2021. "Gentrifying Atlanta: Investor Purchases of Rental Housing, Evictions, and the Displacement of Black Residents," Housing Policy Debate, Taylor & Francis Journals, vol. 31(3-5), pages 818-834, September.
    4. Bayer, Patrick & Casey, Marcus & Ferreira, Fernando & McMillan, Robert, 2017. "Racial and ethnic price differentials in the housing market," Journal of Urban Economics, Elsevier, vol. 102(C), pages 91-105.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    real estate; institutional investors; single family residential market; rentals;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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