Local, State Governments Creating Obstacles for Institutional Investors on the Housing Market

Large Wall Street investors are increasing their footprint in the housing market, like they did after the Great Recession, and some local and state governments are inventing new ways to prevent these institutional investors from cornering the market.

2 minute read

July 14, 2022, 5:00 AM PDT

By James Brasuell @CasualBrasuell

White clapboard house with For Sale sign in front yard

Juice Flair / Home for sale

Sharon O’Malley reports for Route Fifty on the growing policy response to the large number of institutional investors buying up homes on the market.

O’Malley summarizes the current scale of the trend with data from Redfin (more specifics by geographic area are included in the source article):

In the fourth quarter of 2021, institutional investors spent approximately $50 billion to buy more than 80,000 homes—18.4% of all homes purchased in the U.S. and nearly 75% of them single-family homes, according to the real estate company Redfin. More than three-quarters of the purchases were paid in cash.

O’Malley also reports that larger shares of new housing construction financed by large institutional investors are being built to rent—increasing by 16% last year, according to data from the National Association of Home Builders. According to O’Malley, the increasing share of rental properties on the market as a result of these large-scale investments limits the future homebuying options of potential homeowners.

O’Malley cites several examples of local policy responses to the trend of single-family homes converting to rental properties:

  • “Officials in the Atlanta suburb of College Park, where 75% of its approximately 14,000 residents are renters, turned away one developer who requested permits for a build-to-rent subdivision of new single-family homes that would never be offered for sale.”
  • “Atlanta Mayor Andre Dickens has said he wants the city, where the median home price rose 14% over the past year to $426,000, to place limits on how much real estate institutional investors may purchase.”
  • The Port of Greater Cincinnati Development Authority earlier this year spent $14.5 million for 195 houses throughout Cincinnati and surrounding Hamilton County to prevent institutional investors from buying the properties, in news shared by Planetizen at the time.

Higher levels of government have also entered the fray. California approved Senate Bill 1079 in 2021 to reduce the advantage of large institutional investors in foreclosure auctions. “[T]he Georgia General Assembly considered a bill earlier this year that would have stopped cities from placing restrictions on build-to-rent subdivisions,” report O’Malley, but the bill failed. Other legislative efforts in Ohio and California are included in the article.

Monday, July 4, 2022 in Route Fifty

Single-family homes in a suburban neighborhood in Florida.

New Florida Law Curbs HOA Power

The legislation seeks to cut down on ‘absurd’ citations for low-level violations.

June 16, 2024 - The Guardian

Multistory apartment building under construction.

New Tennessee Law Allows No-Cost Incentives for Affordable Housing

Local governments in the Volunteer State can now offer developers incentives like increased density, lower parking requirements, and priority permitting for affordable housing projects.

June 10, 2024 - Nooga Today

Aerial view of intersection in New York City with yellow cabs and zebra crosswalks.

Planners’ Complicity in Excessive Traffic Deaths

Professor Wes Marshall’s provocatively-titled new book, "Killed by a Traffic Engineer," has stimulated fierce debates. Are his criticisms justified? Let’s examine the degree that traffic engineers contribute to avoidable traffic deaths.

June 13, 2024 - Todd Litman

Bike parking in underground area with ramp for taking bikes upstairs.

California Building Code to Add Bike Parking Requirements

Convenient and secure bike parking can make a major impact on whether people adopt biking as a daily transportation option.

1 hour ago - Streetsblog California

Close-up on map of Kemmerer, Wyoming.

Nation's First Nuclear Power Plant in Nearly Half a Century Breaks Ground in Wyoming

Microsoft co-founder Bill Gates had shovel-in-hand for the groundbreaking of his company's small-scale nuclear power plant in Kemmerer, Wyoming, on June 10.

2 hours ago - WyoFile

Close-up of red Houston BCycle bike share bikes parked at a station

Houston Will Be Largest US City Without Bike Share

The city’s bike share system will cease operations at the end of June.

3 hours ago - Houston Public Media

Urban Design for Planners 1: Software Tools

This six-course series explores essential urban design concepts using open source software and equips planners with the tools they need to participate fully in the urban design process.

Planning for Universal Design

Learn the tools for implementing Universal Design in planning regulations.