Hal Singer
Presented to the OECD Competition Committee
Nov. 30, 2022
Based on working paper with Jacob Linger and Ted Tatos


 Capacitors’ Trial—CEO: Cartel functioned more
effectively during bouts of inflation
 “Softening the beachheads”—Consumer resistance
to price hikes may soften with inflation because there
now is a pretext for the price increase
 “Focal point”—Solves coordination problem by
providing a floor for future price increases
The Mechanism
2


 “Shelter,” comprised of “Rent of primary residencies” plus
“Owners equivalent rents of residences,” contributes 32
percent to the total CPI and about 40 percent of core inflation
 In 2022, rents were up almost 15 percent in the Miami/Atlanta
metro area and by 21 percent in Phoenix
 Per Zillow research, renters face growing housing affordability
hurdles in the United States; renters in Miami, e.g., need to
work 96 hours at the average wage to pay the typical rent
 In ten U.S. cities, including Atlanta, Jacksonville, Tampa and
Orlando, institutional investors, defined as entities owning over
100 properties nationwide, had previously acquired at least 15
percent of all single-family rental units.
 Suggests a possible nexus between concentration (in levels) and
rental inflation
The Rental Problem
3


 Hypothesis 1: “It’s the consumer’s fault”
 Krugman: Remote work sparked demand for more
space (but that fails to explain why one-bedroom rents
also increased)
 The Economist: Covid migration towards Sun Belt
 Hypothesis 2: “It’s beyond the companies’ control”
 Business press every day (but costs in network
industries are largely fixed and thus likely don’t enter
the pricing calculus)
 Hypothesis 3: “Companies in concentrated industries
are using inflation as a facilitating device”
Who Is to Blame?
4


 Federal Reserve Bank of St. Louis (2020) found that purchases by
institutional investors, as measured by the share of properties owned by all
institutional investors collectively in a Metropolitan Statistical Area (MSA),
increase the rent-to-income ratio generally, especially where the housing
supply elasticity is high.
 Using a database comprised of all multifamily real estate transactions of
greater than $2 million, Tapp and Peiser (2022) estimated the distribution
of HHIs across all Opportunity Zones within the US, showing that
investors have grown to consolidate a growing share of the affordable
rental housing market.
 Analyzing the relationship between ownership concentration and rents in
New York City, Watson and Ziv (2021) find that a ten percent increase in
concentration is correlated with a one percent increase in rents.
 Gurun et. al (2022) estimate that neighborhoods in which a merger
permitted a single entity to control more than five properties realized an
increase in rents by 0.51-1.62 percent.
Prior Literature
5


Example of Clustering in South Shore
Neighborhood of Riverview, FL, 2015-
2022
Note: Based on Florida Property Tax Roll data
6


Florida Census Tract HHIs
in 2022
7


FLORIDA MONTHLY AVERAGE ZORI AND
HHI BY CENSUS TRACT (2015—2022)
Sources: Zillow Observed Rent Index; Florida NAL Property Tax Rolls (2015—2022). 8


Summary Stats
9


 Dependent variable
 Rent level in the census tract in the month
 % Increase in rent in the census tract in the month
 Explanatory variable
 Use the annual HHI in the census tract itself
 Use average annual number of units per property
within a given Census tract as an instrument
 As an alternative instrument, use average HHI across
all other neighboring Census tracts within the same
county, excluding the tract’s HHI itself
Estimation Approach
10


 The level of concentration is positively related to
level of rents in a statistically and economically
significant way, controlling for migration and other
factors
 The level of concentration is positively related to the
rental inflation in a statistically and economically
significant way, controlling for migration and other
factors
 Tables available in the Appendix
Empirical Results
11


 By raising interest rates, the Fed perversely steers
demand away from single-family home ownership and
towards multi-family rental properties increasing rental
prices
 Legislative bodies, at either the state or federal level,
could impose limitations on the extent of ownership by a
single institutional investor within a given Census Tract
 Given nexus between concentration and rental inflation,
support for stronger antitrust enforcement over longer
time horizon
 Prevent new mergers and unwind old mergers
Policy Implications
12


Appendix
13


OLS AND IV REGRESSIONS OF
RENT LEVELS ON HHI
14


OLS AND IV REGRESSIONS OF
RENTAL INFLATION ON HHI
15