Neroli Austin

I study the effect of private equity housing investments on the owner-occupiers around them, exploring a novel channel where sophisticated investors coordinate the behavior of other investors. I exploit variation in the recognizability of institutional investors, as well as a new national news index that captures how owners would interpret the presence of an institution in their local market. Consistent with the coordination channel, I find that: (i) A one standard deviation increase in recognizable institutional ownership raises owner-occupiers’ home investments by 3.6% of the base rate per standard deviation of the news shift. (ii) Anonymous institutional ownership produces no response. (iii) Around recognizable institutions, the effect grows with the number of surrounding owners. (iv) The induced owner-occupier investment is value-preserving maintenance rather than overinvestment. At the sector’s disclosed national spending, the induced investment amounts to $1.3 to $1.6 billion per year.