Discover the Impact: What Happens When Private Equity Firms Buy Homes in Your Neighborhood?

Daniel Erb entered the world of corporate real estate somewhat unexpectedly. In 2020, he received a hefty bonus as an investment banker and decided to invest in real estate. He reached out to his cousin, a research analyst at BlackRock, who shared eye-opening data. A chart showed U.S. housing starts—the number of new homes being built—had hit a 60-year low despite growing demand.

After a decade of underinvestment, most new homes built were single-family houses. Erb, a millennial who dreamed of homeownership, saw an opportunity. Many of his friends were still renting, unable to buy homes despite their desire for a yard and space. He thought this gap in the market was worth pursuing professionally.

Erb and his cousin raised funds and bought homes in neighborhoods like Chatham-Arch in Indianapolis, renting them out to families who couldn’t afford to buy. They found this venture profitable. However, they weren’t alone—corporate buying of rental properties had been boosted by firms like Blackstone, which started this movement in 2012 with their buy-to-rent model.

The rise of corporate landlords has sparked heated debate. Prominent figures like JD Vance and Kamala Harris have criticized these investors, claiming they make homes unaffordable for average families. Homeownership has traditionally been a way for middle-class families to build wealth, and with corporate investors outbidding them, this opportunity is shrinking.

While Erb acknowledges the concerns, he believes his rental model provides much-needed housing options. Conversations about affordability can be emotional, especially among friends who blame him for high rental prices. Yet, he argues that his company gives young families a chance to live in neighborhoods they otherwise could not afford.

Research shows a complex picture. Corporate landlords may limit homeownership, but they also increase rental availability, making neighborhoods more diverse and accessible. A recent study from UC Berkeley found that institutional investors can reduce segregation, as new tenants are often younger and come from varied backgrounds.

The buy-to-rent strategy gained traction following the Great Recession when many homes went into foreclosure. Major investors were encouraged to buy distressed properties, allowing them to purchase homes more efficiently. Blackstone introduced innovative financial products, enabling them to finance purchases using future rent payments. As a result, their holdings grew dramatically—from nearly zero in 2010 to around 400,000 homes by 2021.

Erb and his cousin entered the market at a time when traditional home auctions were less common. Meanwhile, tech platforms like Zillow and Ring cameras have simplified the process of finding and managing properties, further driving the shift towards corporate rentals.

Despite concerns about displacement, experts argue that institutional investors are a small part of the entire housing market. Daryl Fairweather, chief economist at Redfin, points out they buy about 17% of homes, with most of those being mom-and-pop investors. Thus, they cannot be solely blamed for the rising home prices families face today.

Fairweather advocates for better housing policies rather than outright bans on corporate landlords. She suggests supporting building more homes, particularly in high-demand neighborhoods. Zoning laws often restrict growth, favoring current homeowners who want to limit construction to keep property values high. Tackling these barriers may help address the larger issue of affordability.

Erb feels the weight of this conversation. Despite his experience in investing in homes, he himself is not buying at today’s prices. He continues to recognize a fundamental challenge: America needs more homes to keep pace with population growth. The increasing demand for affordable housing makes it essential to find balanced solutions that benefit both tenants and aspiring homeowners.

As the housing crisis evolves, conversations about corporate landlords and their impact remain crucial. Balancing the needs of diverse communities with the desires of future homeowners is a challenge that all stakeholders must face.

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