> When investors buy property to rent out, they are diverting housing away from homeowners, to make them available to renters.

I think you're describing single-family, but bulk of those deals are done in multi-family space, where a building is either an apartment complex (with units intended for rent) or a condo (with units that are owned). So most real estate investors are buying from another investor (or a builder).

While there are some developers that do condo conversions (apartments -> condo), apartment conversions are rarely a thing, probably due to complexity of the deal.