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The Complicated Issue of the Housing Market

Erlin Taylor - Tuesday, September 28, 2021
The Complicated Issue of the Housing Market

There is a housing crisis that is currently affecting people across the U.S. In a nutshell, there are people who want to buy homes, but there are no houses to buy. What’s causing this problem?

The housing issue is a complex one. While many people are quick to blame institutional investors, like private equity firms, for the current problems, many other factors affect it. Despite many media outlets blaming big investors like Blackrock, the truth is that these institutions play a small role in the American housing market. 

The main issue is that there are not enough homes. Many local governments and some neighborhood residents block new homes from being built, causing a nearly 4 million shortage of homes nationwide. Although investors do buy homes and, in some instances, probably do take homes away from families who want to purchase, investors only make up 20% of housing sales. This share includes institutional investors, people buying second homes or vacation rentals, individuals buying a single property for rental income, and small investors flipping a property for profit. 

Current research shows that institutional investors only make up a small part of this already minimal share. This might change in the future, but as of now, they are small players in the market. Experts also say that institutional investors traditionally do not compete with the average person who wants to buy a house. Investors often buy homes that need significant repairs because this is where they can maximize their profit. People who want to buy a home to live in usually want something move-in ready. 

So, despite what many people think, institutional investors are not the issue in the housing shortage problem. There are different factors, but the problem is mainly caused by a shortage of homes. There are not enough homes to meet the demands of buyers. What can be a solution to this problem? One could be to create more rental properties. 

If there were a big apartment complex being built in a neighborhood, nearby residents and homeowners would probably try to block its construction and completion due to the fear of how the new build will affect the value of their homes.

However, suppose it’s in a built-to-rent community. In that case, the possibility of adding more rental homes or properties will usually lead to a decrease in rent prices in the area, which tenants in the neighborhood will welcome with open arms. New construction means a rise in the number of homes available, affordable housing overall, and help both tenants and people looking to buy homes. 

The housing problem might be solved by increasing the number of rental properties available throughout the country, mainly through built-to-rent buildings and communities. Although this is not the only solution, it could help the situation and allow more individuals to find homes.

Do you need help managing a rental property? Learn more about rental properties and find helpful advice on maintaining your rental investments on our site Illume Property Partners.