Investor ban boosts homeownership without hurting housing prices

The research, conducted by Matthijs Korevaar and Sjoerd van Bekkum of Erasmus School of Economics, together with economists from the University of Amsterdam, evaluates the 2022 buy-to-let ban (purchase protection policy), which gives Dutch municipalities the authority to prohibit investors from buying certain homes to rent out. Focusing on Rotterdam (the first major city to implement the measure) the study offers rare causal evidence on how homeownership policies affect housing markets and the composition of local neighborhoods.

More homeowners, no price crash

The study finds that the ban led to a dramatic 73% drop in investor purchases in regulated areas, with most of that demand replaced by first-time homebuyers. This shift caused the share of owner-occupied homes to increase by an unusually large movement of one percentage point in 2022. Surprisingly, this reallocation of buyers did not cause property values to fall; instead, average house prices in affected areas rose slightly in the two quarters following the ban. This counterintuitive outcome is attributed to greater demand from prospective owner-occupiers who viewed the ban as a signal of improved neighborhood quality.

Buy-to-Let ban reshapes communities without spillover effects

In addition to changes in ownership structure, the study documents a shift in the profile of new residents. Homebuyers who replace renters tend to be more affluent, more often are born in the Netherlands, move shorter distances, and stay longer, suggesting stronger ties to the community. The researchers argue that this process of “residential sorting”, can enhance neighbourhood stability and desirability, which in turn may explain the resilience in house prices despite diminished investor activity. Moreover, there is no evidence that investor purchases were displaced into neighboring areas, implying the policy had localized effects without unintended spillovers.

Trade-offs of ownership-driven housing policy

However, the researchers caution that these benefits come with trade-offs. The ban appears to reduce housing options for lower-income renters and may unintentionally constrain mobility, particularly for households facing major life transitions such as job changes, divorce, or starting a study.

According to the researchers, the study outcomes show that promoting owner-occupancy can reshape communities without causing the feared dip in market performance. However, while neighbourhoods may benefit, there's a real risk of reduced flexibility and access for renters, especially those with fewer resources.

The findings offer timely insights for policymakers worldwide, as many cities explore strategies to manage rising rents, housing shortages, and the role of investors in urban housing markets.