This presentation by Hal SINGER, Managing Director at Econ One Research, was made during the discussion “Competition and Inflation” held at the 139th meeting of the OECD Competition Committee on 30 November 2022. More papers and presentations on the topic can be found out at https://oe.cd/cinf

1. Hal Singer
Presented to the OECD Competition Committee
Nov. 30, 2022
Based on working paper with Jacob Linger and Ted Tatos

2. 
 Capacitors’ Trial—CEO: Cartel functioned more
effectively during bouts of inflation
 “Softening the beachheads”—Consumer resistance
to price hikes may soften with inflation because there
now is a pretext for the price increase
 “Focal point”—Solves coordination problem by
providing a floor for future price increases
The Mechanism
2

3. 
 “Shelter,” comprised of “Rent of primary residencies” plus
“Owners equivalent rents of residences,” contributes 32
percent to the total CPI and about 40 percent of core inflation
 In 2022, rents were up almost 15 percent in the Miami/Atlanta
metro area and by 21 percent in Phoenix
 Per Zillow research, renters face growing housing affordability
hurdles in the United States; renters in Miami, e.g., need to
work 96 hours at the average wage to pay the typical rent
 In ten U.S. cities, including Atlanta, Jacksonville, Tampa and
Orlando, institutional investors, defined as entities owning over
100 properties nationwide, had previously acquired at least 15
percent of all single-family rental units.
 Suggests a possible nexus between concentration (in levels) and
rental inflation
The Rental Problem
3

4. 
 Hypothesis 1: “It’s the consumer’s fault”
 Krugman: Remote work sparked demand for more
space (but that fails to explain why one-bedroom rents
also increased)
 The Economist: Covid migration towards Sun Belt
 Hypothesis 2: “It’s beyond the companies’ control”
 Business press every day (but costs in network
industries are largely fixed and thus likely don’t enter
the pricing calculus)
 Hypothesis 3: “Companies in concentrated industries
are using inflation as a facilitating device”
Who Is to Blame?
4

5. 
 Federal Reserve Bank of St. Louis (2020) found that purchases by
institutional investors, as measured by the share of properties owned by all
institutional investors collectively in a Metropolitan Statistical Area (MSA),
increase the rent-to-income ratio generally, especially where the housing
supply elasticity is high.
 Using a database comprised of all multifamily real estate transactions of
greater than $2 million, Tapp and Peiser (2022) estimated the distribution
of HHIs across all Opportunity Zones within the US, showing that
investors have grown to consolidate a growing share of the affordable
rental housing market.
 Analyzing the relationship between ownership concentration and rents in
New York City, Watson and Ziv (2021) find that a ten percent increase in
concentration is correlated with a one percent increase in rents.
 Gurun et. al (2022) estimate that neighborhoods in which a merger
permitted a single entity to control more than five properties realized an
increase in rents by 0.51-1.62 percent.
Prior Literature
5

6. 
Example of Clustering in South Shore
Neighborhood of Riverview, FL, 2015-
2022
Note: Based on Florida Property Tax Roll data
6

7. 
Florida Census Tract HHIs
in 2022
7

8. 
FLORIDA MONTHLY AVERAGE ZORI AND
HHI BY CENSUS TRACT (2015—2022)
Sources: Zillow Observed Rent Index; Florida NAL Property Tax Rolls (2015—2022). 8

9. 
Summary Stats
9

10. 
 Dependent variable
 Rent level in the census tract in the month
 % Increase in rent in the census tract in the month
 Explanatory variable
 Use the annual HHI in the census tract itself
 Use average annual number of units per property
within a given Census tract as an instrument
 As an alternative instrument, use average HHI across
all other neighboring Census tracts within the same
county, excluding the tract’s HHI itself
Estimation Approach
10

11. 
 The level of concentration is positively related to
level of rents in a statistically and economically
significant way, controlling for migration and other
factors
 The level of concentration is positively related to the
rental inflation in a statistically and economically
significant way, controlling for migration and other
factors
 Tables available in the Appendix
Empirical Results
11

12. 
 By raising interest rates, the Fed perversely steers
demand away from single-family home ownership and
towards multi-family rental properties increasing rental
prices
 Legislative bodies, at either the state or federal level,
could impose limitations on the extent of ownership by a
single institutional investor within a given Census Tract
 Given nexus between concentration and rental inflation,
support for stronger antitrust enforcement over longer
time horizon
 Prevent new mergers and unwind old mergers
Policy Implications
12

13. 
Appendix
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14. 
OLS AND IV REGRESSIONS OF
RENT LEVELS ON HHI
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15. 
OLS AND IV REGRESSIONS OF
RENTAL INFLATION ON HHI
15