Institutional Investors Gaining a Larger Footprint in the Housing Market, Report Says

The locations with the fastest growing populations are seeing the most dramatic increase in investor-owned single-family housing rentals.

2 minute read

July 19, 2023, 5:00 AM PDT

By James Brasuell @CasualBrasuell

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Jennifer G. Lang / Shutterstock

The recently published “State of the Nation’s Housing” report, from the Joint Center for Housing Studies of Harvard University, sheds new light on the trends in institutional investors buying up housing stock in the U.S. real estate market—a controversial and hotly debated topic in planning and housing circles.

Alexander Hermann, a research associate at the Joint Center for Housing Studies, writes an article explaining the report’s findings, noting that “investor purchases of single-family homes reached new heights during the pandemic, particularly lower-cost units and homes in Sunbelt markets.” The trends have coincided with a shift in the makeup of ownership of single-family rentals. “Most notably, a growing share of rental properties are owned by business entities and medium- and large-scale rental operators,” according to Hermann.

Hermann breaks down the significant takeaways about single-family residential rentals into eight major categories:

  • Single-family rentals have long been a substantial part of the rental stock.
  • Investor activity in the single-family market increased significantly since the start of the pandemic.
  • Investors are most likely to purchase lower-cost homes.
  • Investor activity is especially pronounced in Sun Belt markets with strong rent and population growth.
  • Investor activity increased for investors of all sizes since the start of the pandemic, though much of the growth was driven by large investors.
  • Rental property ownership is shifting away from individual ownership toward more ownership by business entities.
  • Large rental operators own a small share of the single-family rental stock.
  • Single-family rental construction hit record highs during the pandemic.

More detail on each of those eight takeaways is available at the source article, linked below. The findings of the Harvard report would seem to contradict a Wall Street Journal article based on data from Redfin, picked up by Planetizen in November 2022, about a 30 percent decline in investor purchases of single-family rental homes. The Harvard report does say that investor purchases peaked in early 2022, before “moderating” through the rest of that year and into 2023, however.

Tuesday, July 18, 2023 in Joint Center for Housing Studies of Harvard University

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