Before the Tipping Point: Why Cities Must Act Now on Institutional Investment in Housing

A quiet shift is reshaping the American housing landscape—and most local governments aren’t prepared for what’s coming.

In 2021, institutional investors—private equity firms, hedge funds, and corporate landlords—purchased 13.2% of residential homes nationwide. Fast-forward just one year and that number was already climbing in 84% of U.S. states, especially in fast-growing counties across the South and Midwest. If this trend continues, institutional buyers could control nearly half of the single-family home market by 2050.

That’s a projection based directly on the data.

While some of these companies are building new rental housing, most are converting existing homes into rentals—often homes that could have otherwise gone to first-time buyers. According to the National Association of REALTORS®, 42% of homes purchased by institutional investors were converted into rentals, and only 45% were resold. That’s a net drain on the already-tight homeownership pipeline.

And this doesn’t happen in a vacuum. The markets targeted by institutional investors tend to share a chilling pattern:

• A high share of Black or Latino residents

• Rapid rent increases and fast home appreciation

• Lower vacancy rates and higher rentership overall

• And a disproportionately high number of StepReady households—those who are right on the edge of buying but can’t compete with cash offers. Perpetuating the rent cycle trap.

This isn't just a market trend. It's a structural takeover of residential space. One that pushes long-term residents further away from wealth-building, local stability, and homeownership.

Why Local Governments Must Act

Many cities still treat institutional buyers as invisible, folding them into blanket real estate statistics. But municipalities have real tools—zoning, land-use policy, tax incentives, and regulatory authority—to do more than just spectate.

We believe local governments can:

• Track and cap institutional ownership within specific ZIP codes

• Create ownership incentives for first-time or StepReady buyers

• Establish transparency laws requiring disclosure of beneficial ownership

• Promote nonprofit and cooperative ownership models as stabilizing forces

• Ensure land-use planning prioritizes ownership stock, not just rentals

The longer we delay action, the harder this balance becomes to restore. As institutional landlords expand their portfolios, they can gain leverage not only over tenants but over policymakers themselves.

How KeyStep Partners to Preserve Local Ownership

At KeyStep, we believe housing is more than a transaction—it’s the foundation of community stability. That’s why we’re working with civic leaders, planners, and housing advocates to keep homes in the hands of local residents.

We focus on supporting StepReady individuals—people who are on the cusp of buying but are increasingly boxed out by cash-rich institutional investors. With the right support, these are the folks who can become the next generation of local homeowners, not lifelong renters by default.

Here’s how we help municipalities take action:

• Partner to identify and support StepReady buyers already rooted in the community

• Secure homes at risk of being snapped up by institutional capital

• Structure shared equity or nonprofit ownership models to protect affordability over time

• Build long-term pathways to ownership, not just one-time interventions

Cities don’t need to reinvent the wheel. But they do need the right partners—and the will to act before housing becomes just another asset class managed from afar.

We’re Still Early—But Not for Long

This isn’t dystopian doomcrying. It’s a data-driven look at where we’re headed—and a call for clear-eyed leadership.

We see how institutional investment reshapes communities at the street level, and we know that without coordinated action, these trends will only accelerate. But with the right partnerships and priorities, it’s still possible to reverse course—and build a housing future that rewards participation over speculation.

Let’s work together to keep housing in the hands of the people who live in it.