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Large-Scale Buy-to-Rent Investors in the Single-Family Housing Market: The Emergence of a New Asset Class?

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Abstract

In 2012, several large firms began purchasing single-family homes with the stated intention of creating large portfolios of rental property. We present the first systematic evidence on how this new investor activity differs from that of other investors in the housing market. Many aspects of buy-to-rent investor behavior are consistent with holding property for rent rather than reselling quickly. Additionally, the large size of these investors imparts a few important advantages. In the short run, this investment activity appears to have supported house prices in the areas where it is concentrated. The longer-run impacts remain to be seen.

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  • James Mills & Raven S. Molloy & Rebecca Zarutskie, 2015. "Large-Scale Buy-to-Rent Investors in the Single-Family Housing Market: The Emergence of a New Asset Class?," Finance and Economics Discussion Series 2015-84, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2015-84
    DOI: 10.17016/FEDS.2015.084
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    1. Ulf Axelson & Tim Jenkinson & Per Strömberg & Michael S. Weisbach, 2013. "Borrow Cheap, Buy High? The Determinants of Leverage and Pricing in Buyouts," Journal of Finance, American Finance Association, vol. 68(6), pages 2223-2267, December.
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    8. DiPasquale, Denise & Glaeser, Edward L., 1999. "Incentives and Social Capital: Are Homeowners Better Citizens?," Journal of Urban Economics, Elsevier, vol. 45(2), pages 354-384, March.
    9. Shourun Guo & Edith S. Hotchkiss & Weihong Song, 2011. "Do Buyouts (Still) Create Value?," Journal of Finance, American Finance Association, vol. 66(2), pages 479-517, April.
    10. Val E. Lambson & Grant R. McQueen & Barrett A. Slade, 2004. "Do Out‐of‐State Buyers Pay More for Real Estate? An Examination of Anchoring‐Induced Bias and Search Costs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(1), pages 85-126, March.
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    12. Alex Chinco & Christopher Mayer, 2016. "Misinformed Speculators and Mispricing in the Housing Market," The Review of Financial Studies, Society for Financial Studies, vol. 29(2), pages 486-522.
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    Cited by:

    1. Jung Sakong, 2021. "Effect of Ownership Composition on Property Prices and Rents: Evidence from Chinese Investment Boom in US Housing Markets," Working Paper Series WP-2021-12, Federal Reserve Bank of Chicago.
    2. Molloy, Raven & Nathanson, Charles G. & Paciorek, Andrew, 2022. "Housing supply and affordability: Evidence from rents, housing consumption and household location," Journal of Urban Economics, Elsevier, vol. 129(C).
    3. Brett Christophers, 2022. "Mind the rent gap: Blackstone, housing investment and the reordering of urban rent surfaces," Urban Studies, Urban Studies Journal Limited, vol. 59(4), pages 698-716, March.
    4. Muñoz, Manuel A., 2020. "Macroprudential policy and the role of institutional investors in housing markets," Working Paper Series 2454, European Central Bank.
    5. Walter D’Lima & Paul Schultz, 2022. "Buy-to-Rent Investors and the Market for Single Family Homes," The Journal of Real Estate Finance and Economics, Springer, vol. 64(1), pages 116-152, January.
    6. Jurre Thiel & Henrik Zaunbrecher, 2023. "Mortgage Debt Limits and Buy-to-Let Investors: A Structural Model of Housing with an Endogenous Rental Sector," CPB Discussion Paper 449, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Gallin, Joshua & Verbrugge, Randal J., 2019. "A theory of sticky rents: Search and bargaining with incomplete information," Journal of Economic Theory, Elsevier, vol. 183(C), pages 478-519.
    8. Ihlanfeldt, Keith & Yang, Cynthia Fan, 2021. "Not in my neighborhood: the effects of single-family rentals on home values," Journal of Housing Economics, Elsevier, vol. 54(C).
    9. Stephen B. Billings & Adam Soliman, 2023. "The erosion of homeownership and minority wealth," CEP Discussion Papers dp1967, Centre for Economic Performance, LSE.
    10. Ken Chilton & Robert Mark Silverman & Rabia Chaudhry & Chihaungji Wang, 2018. "The Impact of Single-Family Rental REITs on Regional Housing Markets: A Case Study of Nashville, TN," Societies, MDPI, vol. 8(4), pages 1-11, September.
    11. Ihlanfeldt, Keith & Yang, Cynthia Fan, 2021. "Single-family rentals and neighborhood racial integration✰," Journal of Housing Economics, Elsevier, vol. 53(C).
    12. Marcus T. Allen & Jessica Rutherford & Ronald Rutherford & Abdullah Yavas, 2018. "Impact of Investors in Distressed Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 56(4), pages 622-652, May.

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    Keywords

    Institutional investors; buy-to-rent; ownership structure; real estate investors; rental housing; securitization; single-family rental;
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