Investors have also been criticized for causing a supply shortage in cities where they are active. But Blackstone argues that the shortage is mostly because homebuilders have failed to keep pace with population growth. "Over the past 4 years, the US has added only 700,000 homes annually (single- and multi-family) on average, while population growth and obsolescence require an estimated 1.5 million units to meet demand," it said.

Blackstone also notes the housing recovery has been broad-based and not just limited to cities where it is active. Home prices were rising by 19% and 10% respectively in Salt Lake City and Detroit, where Invitation Homes is not present. This is because home prices remain well below their long term averages.

In any case home buyers and investors do not compete for the same homes in the first place, Blackstone argues. "Invitation Homes only buys post-foreclosure homes, after all attempts at loan modification and other measures have failed. Moreover, these homes are often sold at auction for cash, requiring settlement in three days and often significant capital expenditures in fix-up costs. Few, if any, first time home buyers can do this."

Meanwhile, private investors such as Blackstone are playing an important role in stabilizing housing prices, the company says. Foreclosed homes that are left vacant for too long often deteriorate due to lack of maintenance, dragging down prices of other homes in the neighborhood.

Blackstone has invested $500 million and employed thousands of contractors to fix up homes, in addition to the cost of the home. "When neighborhoods improve and house prices stabilize or rise, this is a good thing -- fewer homes are underwater and homes are easier to sell, which is good for both sellers and buyers."

Finally, investors such as Blackstone were adding to the single-family rental supply and was making rent affordable for families. Blackstone homes are on an average rented out at a 30% discount to comparable multi-family homes, the company said.

-- Written by Shanthi Bharatwaj New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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