1/ Excited to share a thread about my JMP: The Impact of Institutional Investors on Homeownership and Neighborhood Access.

RT @arpitrage: In a recent paper, we simulate exactly the effects of this kind of capital gains removal!. In steady state, it would improve….

RT @arpitrage: Great job market candidate at NYU Stern—Courtney Wiegand—finds clever exogenous fiscal shocks to Debt/GDP which impact stock….

19/ Thanks for reading. If you want to learn more, please take a look at my paper

18/ There are a number of ways that these landlords might affect households that I do not study, including evictions, renovations, changing neighborhood amenities, fees, and more. I focus on mechanisms that are unique to this setting that have been highlighted by policymakers.

17/ Takeaways:. Institutional investors. 1) lowered rents compared to what they would have been because economies of scale > market power. 2) lowered homeownership by less than expected because of supply. 3) increased quantity of rentals in areas with few rentals.

16/ I also examine individual-level migration data to study who moves into institutional investor rentals. Those who moved in came from areas with lower median household incomes, middle school math test scores, and historic economic mobility.

15/ I simulate a ban on the investors and a 5% annual rent increase cap for corporations. Both policies raise rents because they decrease the rental supply, showing that mistaking the correlation between investors and rent increases for causation leads to counterproductive policy.

14/ To make sure I measure market power correctly, I simulate a merger by having 3 investors enter the market compared to 4 (diagram on the left) and find it aligns with empirical merger studies of these investors. Mergers raise rents (right) and lower quantities of rentals

13/ Differences between the model impacts & observed associations are most likely due to selection. They targeted areas with expected pop. growth to maximize expected returns. Consistent with this, areas they entered experienced more population growth than the rest of the country.

12/ While institutional investors increased prices an economically meaningful amount in their most concentrated regions, it's below the observed correlation & in most of the country 0 impact. Their entry lowered rents relative to what rents would have been had they never entered

11/ Investor entry increases the number of rental homes by 0.58 homes for each home purchased. The impact is not 1:1 due to small landlord exits. On net, market power is outweighed by economies of scale leading to an increase in supply and decrease of rents

10/ I find that institutional investor entry decreased homeownership by 0.23 homes for each home purchased. The impact is not 1:1 due to supply responses: builders build and small landlords sell homes. Not accounting for supply leads to incorrectly estimating the impact by 4x

9/ The model identifies the impact of investors because it includes only the entry of investors and their impact on prices, rents, and quantities. It doesn't include other forces that may have affected these variables like population flows or job growth in these regions.

8/ I examine these forces in a model where 3 institutional investors enter Georgia. Small landlords, households, and a construction sector respond. Large landlords are Cournot oligopolists, small landlords are price takers, and households choose where to live and to own or rent

7/ Stylized diagram of single-family rental market: If large landlords enter and have constant returns to scale, the equilibrium moves from A to B. If there is one large landlord, it is a monopolist of demand to the right of A, and can move the equilibrium to C to maximize profit

6/ I analyze cost data to find that the key difference is that small landlords have decreasing returns to scale and large landlords can scale efficiently. Efficient scaling leads to large portfolios, which could lower rents. But large portfolios can also allow for market power.

5/ My paper asks: how does institutional investor behavior affect housing markets? First we have to understand how institutional investor landlords are different than the existing "mom-and-pop" small landlords.

4/ However, we need to be careful not to confound correlations with causal impacts. Investors can affect the market in a number of competing ways, ex: market power can raise rents, but low operating costs can increase the rental supply and lower rents.

3/ These areas experienced high subsequent price and rent growth. Politicians have proposed bans on these investors citing two main mechanisms of concern: that investors decrease homeownership due to converting homes to rentals, and that they raise rents through market power.

2/ Since 2012, institutional investors entered the single-family rental market and bought homes to rent in the suburbs of Sunbelt cities. 7 of them bought up to 10% of the housing in some tracts in suburbs of Atlanta as of 2021, and became owners of a large share of rentals