Investors are buying up houses and flipping them to landlords, squeezing out the average home buyer, especially in communities of color, a Bloomberg Business + Equality article reports. The investors are taking advantage of a barely-noticed facet of the real estate market called iBuying: as the tech industry tries to simplify the selling process, they depend on flipping those homes to large finance firms such as KKR & Co., Cerberus Capital Management, and Blackstone Inc.

More than 100,000 property records analyzed by Bloomberg show that the biggest iBuyers, Opendoor Technologies Inc. and Offerpad Solutions Inc., as well as Zillow before they pulled the plug on the operation last year, are selling thousands of houses to landlords backed by these large institutions. In a market starving for affordable housing, institutional landlords crowd out families looking to buy their first home, sucking up homes from the ordinary market and renting them out at higher rates. Unlike traditional flippers, iBuyers use algorithms to purchase a property near the market price in an effort to gain a small profit on a big number of transactions. In the 3^rd quarter of 2021, the three biggest iBuyers had acquired more than 27,000 homes, worth more than $10 billion in real estate.

Institutional landlords buy and sell quickly and often, focusing on moderately-priced suburbs where iBuyers are most active, such as in the Sun Belt. When questioned by Bloomberg about the practice of iBuying, both Zillow and Offerpad maintained that iBuying remains a small part of their overall business, while Opendoor declined to comment. But investors accounted for more than 18% of all U.S. home sales in 2021’s 3^rd quarter, in yet another avenue that average home buyers are being shoved out of the market. And in Bloomberg’s analysis, they found that iBuyers were much more likely to flip houses to investors in areas that are predominantly non-White, such as the greater Atlanta area (60% more likely) and metro Phoenix (41% more likely).

The majority of U.S. rental homes are now owned by small investors, at the same time that the country is also facing a rental housing shortage that’s driving up prices. A landlord buying a property from an iBuyer is adding a rental unit to a market that needs it, refutes the trade group The National Rental Home Council. But that adds challenges when renters look to purchase a house. Institutional landlords already have the advantage over an average buyer. And with iBuying listings being mostly off-market, their hand is strengthened, making it that much harder for buyers who would otherwise be able to buy a starter home.