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Working Paper
Investors and Housing Affordability
This paper studies the impact of a new class of investors on the dynamics of U.S. housing affordability after the Financial Crisis. Using a novel instrumental variable and processing 85 million housing transactions, we find that investors purchases increase the price-to-income ratio, especially in the bottom price-tier, the entry point for first-time buyers. Investors cause a short-run reduction in the vacancy rate of owner-occupied units and a medium-run positive response of construction. These equilibrium responses mitigate the effect on affordability. The effects on price-to-income and ...