☆ Blocking investors from owning/leasing homes forces out less affluent residents, studies say
Cesar Carbajal: Pueblos de Colores
In SV Biz Journal, Assemblymember Alex Lee argues that companies should be limited to buying and renting out 1,000 homes, to keep housing affordable for Bay Areans. Howbeit, Reason's associate editor Christian Britschgi recaps two studies showing that corporate involvement actually safeguards low rent options—and when investors can't manage rental homes, neighborhoods start to “exclude” less wealthy residents. Britschgi's article, and Opp Now exclusive comment, below.
Last week, a team of Dutch researchers affiliated with the University of Amsterdam and Erasmus University released a study on the effects of a new law letting municipalities in the Netherlands ban buy-to-let arrangements. In Rotterdam, the country's second-largest city, officials used the new law to ban investors from purchasing homes in specific neighborhoods.
That allowed researchers to compare home sales, home prices, and the characteristics of new residents between the two types of neighborhoods.
They found that banning investors from buying and converting housing to rentals worked in one sense: The share of investor-owned rental properties in affected neighborhoods fell, and the number of properties bought by first-time homebuyers increased.
On the other hand, however, these new homeowners tended to be richer than the renters they were replacing, and the costs of rental housing increased overall.
"The ban has successfully increased middle-income households' access to homeownership, at the expense of buy-to-let investors. However, the policy also drove up rents in affected neighborhoods, thereby damaging housing affordability for individuals reliant on private rental housing, undermining some of the intentions of the law," write researchers in the study published on SSRN.
The number of homes sold and overall home prices also stayed flat, according to the study.
This cuts against common arguments against investor-owned rental housing: that it's raising prices for everyone else.
Indeed, the Dutch study suggests that institutional investors are playing a productive role in the market by providing rental housing to people who can't qualify for a mortgage.
Another 2022 study likewise found that institutional investment in real estate increases neighborhood diversity by opening up more affordable rental housing options. That study did find that these investors were raising home prices overall.
As The Atlantic's Jerusalem Demsas noted in an essay from earlier this year pushing back on the anti-investor pile-on, these institutional investors are a small portion of homebuyers, owning only about 3 percent of single-family homes.
That challenges the idea that BlackRock's homebuying business is driving major national trends in home prices.
This article originally appeared in Reason. Read the whole thing here.
Britschgi's comment:
Studies have found that bans and taxes on investor-owned single-family housing end up excluding lower-income renters from single-family neighborhoods. If policymakers want more families owning their own homes, they'd be better off passing policies that remove restrictions on the construction and financing of single-family housing.
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