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Daniel Erb became a corporate landlord kind of by accident. It started in 2020, when he received his first bonus as an investment banker. It was more money than he was used to. He wanted to invest in real estate, so he called his cousin, a research analyst at BlackRock, for advice.
As they talked over options, his cousin showed him a striking chart of the number of "housing starts" in the U.S. since 1950 (basically the number of new houses and apartments built each year). It showed that the last 10 years had the fewest starts since the 1960s, even though the U.S. population was now much larger.
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It was a full decade of underinvestment. They focused on single-family homes — the classic house with a yard, often in the suburbs.
"I'm a millennial," says Erb. "I've always envisioned having a home." But none of his friends had bought a house yet. Neither had he. Contemplating this lack of new houses and rising demand from millennials like him, he saw "a big opportunity … something that I was willing to spend my career on."
So Erb and his cousin raised money from investors, bought homes in places like the Chatham-Arch neighborhood in Indianapolis (which was affordable, had a growing population and was benefiting from redevelopment), and rented them out — presumably to people who wanted a house with a yard but couldn't afford to buy one. Erb says it was a profitable business.
He was not the first New York finance person to profit from single-family rentals across the United States. The private equity firm Blackstone (commonly confused with BlackRock) more or less invented this buy-to-rent strategy in 2012, under the moniker Invitation Homes. It's now a public company valued at more than $18 billion.
The response to this development — of Wall Street buying Main Street, or at least some of its cul-de-sacs — has been bipartisan, populist and patriotic condemnation. Both JD Vance and Kamala Harris called for bans on these corporate landlords. Since houses tend to rise in value over time, homeownership has been a primary way that middle-class families build wealth. But now private equity was outbidding aspiring homeowners, making it more expensive to buy a home and pocketing the appreciation in home values.
Even some of Erb's friends told him they thought he was making homes unaffordable. "Nothing that has stuck with me or made me second-guess what I'm doing," he says. He wasn't responsible for the decade of underinvestment; he felt they were giving young couples the option to live in a house without breaking their bank account. "But, yeah, very emotional conversations."
Now that these institutional investors have been buying and renting out houses for more than a decade, researchers have had time to study their impact. And they've found a surprising nuance.
These investors can and do make homeownership harder to attain, just as their critics claim. But by providing rentals, they also make neighborhoods more affordable and more diverse. They are diversifying the suburbs.
The big bang of buy-to-rent
When institutional investors first started buying single-family homes, the U.S. government laid out the welcome mat.
Before the Great Recession, major investors hadn't had much interest in the suburbs. In the early 2000s, a firm called Redbrick Partners tried buy-to-rent. It ultimately abandoned the effort. Unlike in an apartment building, its leadership noted, where corporate management is common, fixing faucets and other maintenance were much less efficient when dealing with geographically dispersed homes.
But during the Great Recession — just before the decline of new starts in Erb's chart — the U.S. had a glut of single-family homes in foreclosure. Many were auctioned off en masse, including by the federal government, which organized auctions for investors like Blackstone and even provided a $1 billion loan guarantee to encourage Blackstone to buy.
This allowed private equity firms (which raise money from wealthy families, pension funds and other organizations to seek out profits, often by buying private companies) and real estate investors to efficiently and cheaply buy, say, a dozen similar homes located in the same Phoenix suburb.
This solved two big problems for these institutional investors. It reduced the "search costs" of finding suitable homes (often starter homes with three bedrooms), and it allowed them to buy similar homes clustered in one area (which ameliorated the dispersed-faucets problem).
Blackstone then introduced a financial product that supercharged the buy-to-rent sector: the rent-backed security. It was a bond, or IOU. Investors bought them, providing Blackstone with more money to buy and renovate homes. In exchange, investors were entitled to a cut of future rent payments.
Wall Street could now buy homes by paying with the rent they would collect in the future. Per the Federal Reserve Bank of Philadelphia, the number of homes owned by Blackstone and similar firms increased from almost nothing in 2010 to around 400,000 by 2021.
This is around when Erb and his cousin started buying homes. The batch auctions were long gone. But Erb says new technology allows companies like his to have a geographically dispersed portfolio of homes. The universality of listing platforms such as Redfin and Zillow keeps search costs down. Products like Ring cameras allow potential tenants to tour properties without being shown around by an agent. And software like Zoom has made it easier for them, like other executives, to manage a remote workforce.
In 2012, many government officials had welcomed firms like Blackstone into the housing market because they worried about abandoned houses and saw rental conversions as a win. Today, though, institutional investors compete with middle-class families for starter homes. Is that why homeownership has gotten more expensive?
The trade-off
As Kamala Harris and JD Vance were calling for bans on corporate landlords, Konhee Chang was a Ph.D. student in economics. Born in Korea, Chang had always rented while living in the U.S. but never the "quintessential house that I think of when I think about an American house," with a front yard and a backyard. He wanted to know why there were so few rentals in the suburbs and who would live there if renting was an option.
Chang realized these investors' buy-to-rent strategy provided an ideal case study of what happens when more rentals are available. If someone had built new homes to rent out, that would increase the supply of homes, changing the neighborhood. But since they converted homes into rentals, only one variable had changed, like in an experiment.
So Chang assembled and analyzed data on neighborhoods before and after corporate landlords showed up, including demographic data on the residents. His biggest finding? Institutional investors were reducing segregation. When private equity rented out homes, the new tenants tended to be lower income than the prior owners and more likely to be young and nonwhite.
"I think I was most surprised by the fact that the effect was so sharp and immediate," says Chang, who has since earned his Ph.D. from UC Berkeley. He took it as a sign that these families really wanted to live in these areas but were prevented by the lack of rentals and their inability to get a mortgage.
This is particularly notable because one of the most important economics findings of the past decade is the impact on children's development and career prospects of their hometown and neighborhood. (You can listen to a Planet Money episode on moving to opportunity here.) Suburban neighborhoods are not inherently better than rural or urban areas. But another study, for example, showed that single-family rentals in North Carolina served "as a pathway for access to high-performing public schools" for economically disadvantaged children.
These results did not turn Chang into a cheerleader for private equity. He's too careful a scholar, and his results hold for rentals in general, regardless of whether the landlord is Invitation Homes or a couple down the street. Plus, he did not investigate other criticisms of corporate ownership.
(For example, a Bloomberg investigation in 2013 found that Magnetar Capital LLC became the largest landlord in Huber Heights, Ohio, and then pushed for lower assessments of its properties' value. If it had succeeded, it would have been the largest property tax cut in county history, reducing the school district's budget by $800,000 a year.)
Most of all, Chang found that the buy-to-rent strategy was hurting the middle class. Creating rentals aided lower-income families and nudged rents down. But reducing the supply of homes available for sale also pushed home prices up, hurting families on the cusp of homeownership.
Erb says he feels good about the rental service they provide. (In 2024, he and his cousin teamed up with a veteran real estate investor to co-found a larger investment firm, Strand Capital.) But he agrees this trade-off exists.
"There's always gonna be a cost and a benefit," he says. But the bigger problem for housing affordability, he adds, is that "we just haven't built enough [homes] to keep up with the population growth and household formation."
The boogeyman
"People get really riled up about this idea of private equity coming in and buying the block," says Daryl Fairweather. "I think they are kind of the boogeyman though."
That's because institutional investors own a very small slice of single-family homes in the United States. As the chief economist at the real estate platform Redfin, Fairweather says investors purchase about 17% of homes. But most of those purchases are by mom-and-pop investors, not big firms like Blackstone. Institutional investors just don't own enough homes to be the main culprit for high home prices.
- The U.S. homeownership rate is around 65%.
- As of December 2022, the five largest investors owned about 300,000 homes — just under 2% of single-family rental homes nationally.
- Institutional investors own roughly 2% to 25% of single-family rentals in major markets.
In fact, Fairweather sees some societal benefits of institutional investors. Unlike with mom-and-pop landlords, it's easier to regulate large corporate landlords and check whether they are, say, following the Fair Housing Act. Plus, in places like Silicon Valley, where politicians are trying to address housing crises by encouraging the development of duplexes and triplexes, profit-driven institutional investors are a potential boon, since they're more likely to turn suburban homes into duplexes.
And in areas with more open land, like the suburbs near Denver, institutional investors are building new housing specifically to rent out. Think cookie-cutter homes, perhaps with a dog park or pool.
"I think that we should embrace investors who want to make those kinds of investments," Fairweather says.
Still, she thinks middle-class families are right to worry about private equity displacing them from the housing market. She worries about fewer families achieving homeownership and gaining control over this intimate part of their lives, which has also been the dominant path to building wealth in America.
But a ban? As an economist, she hates bans. If politicians succeed in banning corporate landlords, perhaps by making it illegal to own more than 300 homes, she suspects we'd see lots of 300-home companies replacing Blackstone — without doing anything to increase homeownership among the middle class.
Instead, she advocates for policies that will incentivize and allow developers to build more housing. The trade-off caused by single-family rentals — that they benefit some low-income renters but hurt some aspiring homebuyers — is "because we are restricting the number of homes that can be built in neighborhoods."
Many desirable neighborhoods are zoned so that it's impossible to build the duplexes or apartment buildings that would make them accessible to low-income families. Many prosperous towns block the building of new single-family homes, often at the behest of current homeowners who don't want to deal with construction or who want to restrict supply and boost their home's value. The best way to stick it to Blackstone and private equity, to prevent Wall Street firms from profiting off the housing crisis, is to make it easier to build more homes.
As for Daniel Erb, even though he has spent his career responding to the dearth of suburban homes, betting on our collective underinvestment in American dream properties, he might appreciate that too. He says he doesn't own a home, in part because he often travels to the towns where his company buys homes. And he says he's not buying for himself at today's prices.
Alex Mayyasi is the author of The Planet Money Book, due to be published in April 2026. Sign up here to get notified, when presales start, about special offers and presale gifts.
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