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For decades, homeownership has symbolized financial stability and security—goals that many Americans aspire to achieve. But in recent years, institutional investors have become a major force in the housing market, altering the landscape of homeownership in ways that make it less accessible for many.

A new study looks at the effects of institutional investors purchasing single-family homes, particularly in suburban areas, and converting them into rental properties. Originally concentrated in areas of heavy foreclosure in the wake of the Great Recession, the practice has expanded beyond foreclosures and is now driven by real estate investment trusts, or REITs, which buy income-producing properties to generate returns for investors.

“We have some pretty good evidence that there are some negative impacts of changing these neighborhoods to renters, and that the prices and neighborhoods overall start to decline as this happens,” said Stephen Billings, associate professor of finance in the Leeds School of Business and lead author of the .

Stephen Billings

According to the study, the conversion of owner-occupied homes to rental properties drives negative social and economic impacts in those neighborhoods, including declines in property values by up to 2%, lower property maintenance, reduced voter engagement and increased crime.

Billings and co-author Adam Soliman of Clemson University focused on Mecklenburg County, North Carolina, a region where investor activity has been especially high. Between 2011 and 2021, institutional investors purchased nearly 7% of all single-family homes sold in the county, with the concentration rising in neighborhoods with above-average Black populations.

By analyzing property records, crime data, political participation rates and other neighborhood-level indicators, the researchers assessed the effects of these investor purchases on property values, crime rates and civic engagement.

“When institutional investors start purchasing at this scale, the effects really start to compound, leading to broader declines in these neighborhoods. As these areas grow and become more concentrated with investor-owned properties, the overall decline becomes even more noticeable,” Billings said. “It’s not surprising that the character of the community changes. When people are constantly moving in and out, it’s hard to expect anyone to truly invest in the long-term well-being of the neighborhood.”

Financial and social costs

Billings points out that an increase in rental properties in neighborhoods with primarily single-family, owner-occupied homes can improve access for those who otherwise wouldn’t be able to afford to buy property there, including access to better schools and neighborhood amenities. But the study’s findings highlight several negative consequences of institutional investment in single-family homes. Homes located near properties purchased by institutional investors saw property values decline by 1-2%, depending on their exact proximity to the purchased property. While these decreases might appear modest, they point to a broader pattern of economic challenges in neighborhoods where investor purchases are concentrated.

The properties purchased by institutional investors often suffer from lack of maintenance. They tend to receive fewer repairs and improvements, and small upkeep tasks like maintaining yards can be overlooked, Billings explained, adding that this lack of attention leads to a decline in neighborhood aesthetics, which in turn impacts property values.

"They’re also less likely to invest in the homes, like renovating or making improvements, since their goal is renting, not ownership,” he said. “We also see less building permit activity in these neighborhoods, suggesting that people are investing less in their properties overall. This lack of investment in the community could be contributing to a decline in property values over time.”

The social costs of these conversions are also significant. The study points to the erosion of homeownership as a key driver of decreased community involvement. Homeowners are more likely to engage with their communities, whether through maintaining their properties, participating in local politics or attending neighborhood events.

Renters, particularly in areas dominated by absentee investors, tend to have lower rates of civic engagement, including voter registration and turnout. The researchers found a 0.7% decrease in the number of registered voters in neighborhoods with high concentrations of properties obtained by institutional investors and turned into rentals.

 “This decline in political participation is an important implication of the loss of homeownership as renters appear to be less active in their community, which could have longer-term effects on policies and investments in their neighborhoods” Billings said.

The study also found a 2% increase in property crimes, a 3% rise in violent crimes and a 9% rise in drug-related offenses in neighborhoods with more rentals created by institutional investors. 

Widening the racial wealth gap

The study also highlights the role institutional investors play in widening the racial wealth gap in the U.S. Historically, homeownership has been a key way for families—especially Black families—to build wealth. But as institutional investors snap up affordable, entry-level homes, they push working-class families, particularly those from minority communities, further out of the housing market.

“Increasingly, institutional investors are purchasing suburban starter homes, many of which have been a crucial path to homeownership for Black families,” Billings said. “As these homes are taken off the market by investors, it becomes harder for these families to access the stability and wealth-building opportunities that come with owning a home.”

How can communities mitigate the impact of institutional investors? Billings said limiting negative spillover effects may require stronger homeowners associations. For example, HOAs could enforce stricter building codes to ensure proper maintenance of investor-owned properties and even implement limits on the number of homes any single investor can purchase in a given area.

“This research highlights that homeownership continues to have social benefits to the larger neighborhood and community for those on the margin of buying a home,” Billings said.