Private equity’s modest investment in residential real estate has had meaningful impacts, supporting the increasing demand for rental properties without raising costs.
- Although institutional investors account for less than 1% of all single-family housing units across the United States, private investment is helping increase the supply of a range of affordable rental options.
- Private equity’s investment in real estate can act as a stabilizing force in uncertain markets without spiking prices for families.
There is no question that the United States is facing a housing affordability crisis. In fact, data from the National Association of Realtors shows that the cost of owning a home for a family increased 55% between 2021 and 2022 alone. In most cases, housing affordability is hurt by factors affecting housing market volume, such as supply chain issues for building materials, labor shortages, and zoning challenges.
In a housing market like this, affordable rental opportunities for families represent a critical need – and private equity helps fill the gap.
Private equity strengthens the rental market without spiking prices
As rental demand surges and vacancy rates reach 40-year lows, private equity’s modest, but meaningful investment in real estate can help meet the demand gap for affordable rental properties – without contributing to surging costs.
Despite what agenda-driven groups may claim, property records data shows that institutional investors positively impact housing markets. An analysis from the Urban Institute notes that institutional investors “boosted local home prices and reduced vacancy rates … there is no evidence they increased local rents.”
Lauren Lambie-Hanson, an advisor and research fellow at the Federal Reserve Bank of Philadelphia’s Consumer Finance Institute, agrees “there really isn’t any evidence … that institutional investors led to higher rents or greater eviction rates.”
Private investment can be a stabilizing force in uncertain markets
When the housing collapse hit in 2008, over six million households found themselves displaced, as one out of every 54 homes experienced foreclosure. As communities began to recover, private investment was there, providing housing options in a challenging market, bolstering housing prices, and reducing vacancy rates.
Today, private equity continues to invest in communities and provide housing choices for Americans who may not have the means to purchase a home.
The bottom line
Private equity is a small investor in single family rentals. Their investments offer solutions in the face of housing crises – where demand for affordable housing exceeds supply – ensuring that Americans don’t just have a place to live, but somewhere they can truly call home.
