Even many who support allowing market forces to work might question whether private equity involvement in the U.S. housing market “has been a good thing.”
The impact on housing supply, rental unit supply or prices for those products is contestable.
And while we might agree that other elements of the housing supply market arguably also are very important (zoning and other regulatory “red tape” issues), we might also agree that, so far, private equity involvement in U.S. housing has not been clearly positive, in terms of increasing supply or producing affordability gains.
PE firms are estimated to own at least 239,000 single-family rentals, over one million apartment units, and 275,000 manufactured home lots as of mid-2022, representing about 1.6 percent of all rental homes nationwide but up to 12 percent to 20 percent in some markets such as Atlanta or Phoenix.
To be sure, this activity arguably has some benefits for renters, though that argument remains contestable.
PE firms focused on rental operations can expand rental options and inject capital into the market, also reduces for-sale inventory, elevates prices, and imposes some higher costs on renters, some argue.
In some ways, the criticisms are similar to those made of extensive conversion of residential housing to short-term lodging such as provided by AirBnB operations, shifting housing supply from “available for full-time dwelling” to “commercial short-term rentals.”
Arguably, PE investments influence both for-sale and rental supply, often shifting homes from ownership to rental markets. Supporters of PE involvement say the impact is minimal.
Critics contend it exacerbates scarcity for buyers and does not necessarily create lower prices for renters.
The argument is that PE firms have bulk-purchased distressed or entry-level homes, converting them into rentals. This removes inventory from the for-sale market, particularly affordable starter homes, worsening a national shortage estimated at three million to five million units. Again, the impact might be “at the margin” in many cases.
Investors bought 26 percent of affordable homes in 2023, outbidding families and pushing first-time buyers out, critics allege. Studies show institutional buyers reduced for-sale stock by one percent to two percent nationally but up to 10 percent to 15 percent in Sun Belt metros post-2020.
On the positive side, PE arguably has expanded rental options by rehabilitating foreclosed properties and investing in build-to-rent developments.
Since 2012, firms have spent over $25 billion on single-family rentals, adding supply in underserved suburbs and reducing vacancy rates.
A Federal Reserve analysis notes that PE helped stabilize markets post-2008 by shortening foreclosure timelines and boosting local construction employment. In multifamily, PE owns about 10% of U.S. apartments (over 2.2 million units), including new builds that close supply gaps. Some research indicates this diversifies neighborhoods, lowers segregation by attracting lower-income, diverse tenants, and even nudges rents down through added competition.
While PE claims to boost economic growth by investments such as $280 billion in life sciences-related real estate (with spillover to housing), critics highlight opportunistic tactics, such as deferring maintenance or constraining new builds to keep occupancy high.
In affordable housing, PE's short-term focus can lead to unsustainable practices, reducing long-term supply quality. Empirical data shows no broad increase in total supply; instead, PE often repositions existing stock for higher-margin rentals, displacing potential owners.
PE's target 20-percent financial returns typically raise costs through higher charges, fees, and market consolidation. However, in some cases, increased rental supply can moderate rents, though evidence leans toward net upward pressure on both ownership and rental prices.
Some argue PE acquisitions have driven up home prices by 40 percent to 50 percent since 2020, partly due to reduced for-sale supply and cash-heavy bidding. Others make the opposite argument.
But PE defenders argue PE is a symptom, not cause, of high prices from underbuilding.
Rents have risen 30 percent nationally since 2020, with PE-linked properties showing aggressive hikes. Firms add fees boosting revenue 12 percent to 16 percent, and studies link PE ownership to 17 percent to 26 percent higher evictions in Minneapolis-St. Paul.
PE advocates, like the Private Equity Stakeholder Project, emphasize benefits such as $18.4 billion raised for affordable multifamily housing (2019-2024) and professional management improving quality.
So some might note that PE involvement in rental housing has modestly increased rental supply and significantly reduced for-sale inventory.
Harder to determine is the specific PE impact on higher home prices (up 40 percent to 50 percent) and rents (up 30 percent), which arguably have climbed for all sorts fo reasons.
