Jay Parsons@jayparsons
How's this for irony?
Just days before President Trump announced a ban on institutional investors buying homes, a bunch of academics in the American Real Estate & Urban Economics Association awarded its annual prize for best doctoral dissertation. The co-winner?
"The Impact of Institutional Investors on Homeownership and Neighborhood Access" by NYU’s Joshua Coven, who is now a professor of real estate at Baruch College in New York City.
So, what did Professor Coven conclude from his peer-reviewed and peer-honored study?
Three key conclusions, in his own words:
1) "I find that institutional investors increase the quantity of rentals and lower rents on net because their ability to operate large portfolios at scale outweighs the incentive to use market power to decrease the rental supply."
In other words: More scale = more supply = lower costs for operators (due to scale) + lower rents for renters (due to increased competition).
2) "Institutional investors decrease the quantity of homes available for homeownership and raised prices, however the homeownership impact is 1/5th of what it would be if there were no supply response and the price impact is far below the observed association between institutional investor purchases and actual price increases."
In other words: Yes, every sale impacts prices. But the impact is lower than generally assumed. Additionally: Coven found that if institutional buyers were removed, more than 60% of the homes they bought would have otherwise gone to small investors -- not individual homebuyers.
3) "I find that renters from regions with lower median incomes, worse school test scores, and lower historic economic mobility move into institutional investor rentals."
In other words: Single-family rentals help diversify neighborhoods with families who couldn't otherwise afford to buy homes there -- providing kids access to better schools and better upward mobility.
