Housing practitioners and policy experts are advocating for an expansion in rental housing supply in contemporary cities around the world. The objective is to convince institutional investors to include rental housing investment in their investment portfolio to contribute to boosting housing supply. Unfortunately, the rental sector is characterized by numerous uncertainties and challenges, making it unattractive to institutional investors. With the growing attention to institutional investors in various housing market contexts, an understanding of the market risks (also known as barriers), is useful to inform future research and policymaking. Using a systematic literature review methodology, this paper synthesizes the extant literature on the market risks inhibiting institutional investment in rental housing. Findings reveal the following barriers: low profitability, non-progressive rent control policies, unclear target group for rented projects, poor landlord-tenant relations, inadequate property management and unreliable property market information. Among all the barriers identified, low profitability and inadequate property management had great influence on their investment decision. Firstly, institutional investors perceive rental housing investment as less profitable and unattractive in terms of project performance. Secondly, the lack of supporting structures for the property management sector contributes to derailing rental yields. The review also finds that the target group for rental projects are often vague especially for projects under government assistance. The rental sectors in many countries are confronted with numerous problems, some of which greatly inhibit institutional investors from investing in the rental asset. This paper concludes that, although the idea of expanding rental housing supply seems laudable, ignoring these problems may be detrimental to housing markets in the long run. Rental markets in many countries are volatile, and thus not ready to receive institutional investors fully into the sector. An expanded rental sector could be advanced if policy makers take the appropriate steps to resolve the identified challenges. Adequate structural preparations must also be made for large scale rental housing supply.
Housing Vouchers and the Price of Rental Housing
