Local Laws, Not Market Size, Decide Who Wins the Starter-Home Race

First-time homebuyers claimed 69% of starter-home purchases across 30 U.S. metros in 2024. Investors took the rest — 31% — but that average masks a deeper truth: where you buy matters more than how much you earn. In Miami, investors bought 56.89% of starter homes, outnumbering first-time buyers. In Denver, the opposite happened: 84.31% went to first-time buyers, the highest share in the study. The difference isn’t driven by income or housing costs. It’s driven by law.

Denver’s short-term rental rules block non-owner-occupied properties from operating as vacation rentals. That removes a major profit channel for investors. Seattle does something similar, limiting hosts to two short-term rental units and requiring one to be their primary residence. Washington’s tenant protections and high acquisition costs add friction, making bulk buying less attractive. Los Angeles combines both approaches: its Home-Sharing Ordinance ties short-term rentals to owner-occupied homes and requires registration, while state law gives owner-occupants a 45-day window to match investor bids on foreclosed properties. SB 1079 slows down bulk acquisitions. The result? 80.75% of starter homes in LA went to first-time buyers.

Indianapolis and Dayton don’t rely on tourism policy. They use land banks. Programs like Vacant to Vibrant and Welcome Home Ohio steer abandoned homes to owner-occupants, often with five-year deed restrictions that block investor resale. That preserves affordable inventory. In Oklahoma City, the opposite is true: state law bans rent control and lets short-term rentals operate under a simple license system. Investors took 41.89% of starter homes there. In Atlanta and Nashville, light regulation and strong population growth make long-term rentals lucrative. Investors captured 44.90% and 44.33% of starter homes, respectively.

Miami stands alone. It’s the only metro in the study where investors won. At 56.89%, their share is high — and enabled by Florida’s state preemption laws. Cities can’t ban short-term rentals or impose rent control. There’s no first-look advantage for owner-occupants. Profitability is unimpeded. But Cleveland may be shifting. In February 2024, it passed Residents First, requiring registration, rental certificates, and lead-safe standards for non-owner-occupied properties. The rules weren’t in effect during the data period. They will be soon.

The pattern is clear: first-time buyers aren’t vanishing. They’re winning in places where policy tilts the field. Where it doesn’t, investors dominate. The starter-home market isn’t lost. It’s legislated.