The Role of Hedge Funds in the Residential Real Estate Market
DOI:
https://doi.org/10.56830/IJSIE12202302Keywords:
Hedge funds, Residential real estate, Investment strategy, Bulk purchasing, Single-family homes, Rental income, Leverage, House flipping, Housing affordabilityAbstract
US-based hedge funds have adjusted their investment targets to include the residential real estate market, influencing the availability and affordability of homes. After the 2008 financial crisis, hedge funds moved from operation in stocks and derivatives to real estate as this area had more stability and probable high yields. This paper analyzes the approaches adopted by hedge funds, the buying and extensive conversion of single curb houses and single facilities into rental houses, the use of financial assets, and house swapping. These activities have also contributed to this paradigm shift, affecting housing prices and rent charges in metropolitan regions. The massive capital and flow of strategic properties by hedge funds have increased property prices and rents, bringing homeownership dreams out of reach for middle-income earners and first-time homeowners. These investments introduced positive consequences, including the revitalization of properties and production of profits through property tax, and negative impacts, including displacement and reduced opportunities for small investors to access property investments. The concentration of ownership has tilted markedly towards institutional investors and rentals, especially with the heavy involvement of hedge funds in high-demand locations. The paper demonstrates how and with what effects these investment practices are at work locally, for housing markets and the economy more generally. This article reasons for moderate legislation in that it seeks to reduce undesirable effects and tap into the economic advantages of hedge funds in real estate. Considering different responses and legislation measures, the study reveals that policies should be formulated to create better housing options that do not favor one individual while maintaining market stability. This includes, for example, rejecting large quantities of purchases, improving standards of tenants while improving standards of accommodation, and lastly, investing in affordable housing projects. The study results indicate that hedge funds have positively affected local communities. However, their leadership in the housing market requires closer monitoring to avoid adverse effects on the locals and their viability in the long run
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