International Journal of Sustainability and Innovation in Engineering (IJSIE)
December 2023
DOI https://www.doi.org/10.56830/IJSIE12202302
Authors
Krupa Goel
Abstract
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.
Keywords:
Hedge funds, Residential real estate, Investment strategy, Bulk purchasing, Single-family
homes, Rental income, Leverage, House flipping, Gentrification, Housing affordability.
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