In the wake of the 2008 housing crisis, many single-family houses went into foreclosure and were sold to large corporations that, instead of re-selling them, turned them into rental properties.
This trend’s potential negative effects – from more unaffordable housing and household instability to increased rents and evictions, depressed house prices and deferred maintenance – are detailed in two recently published research papers by Suzanne Lanyi Charles, assistant professor of city and regional planning.
The work stems from her ongoing research on shifts in the way global capital is being reinvested in local housing markets since the 2008 housing crisis, resulting in more single-family rental housing in suburban neighborhoods.
Charles takes a look at this dynamic in a broad collection of U.S. metropolitan areas, including Atlanta, Los Angeles and Boston, in “A Latent Profile Analysis of Suburban Single-Family Rental Housing (SFR) Neighborhoods.” The paper published Oct. 29 in Housing Policy Debate.
“Single-family rental housing is an increasingly prevalent form of housing tenure in U.S. suburban neighborhoods, representing a paradigm shift in how households gain access to a suburban single-family home,” Charles wrote.
Using a specialized data analysis technique, the paper classifies types of suburban neighborhoods having high rates of single-family rental housing in the 20 largest U.S. metropolitan areas. Charles found high concentrations in a variety of neighborhoods, including diverse middle-class, older white middle-class, low-income Hispanic, low-income African American and affluent neighborhoods.
The study finds that in an attempt to stabilize neighborhoods hard hit by the crisis, foreclosed single-family houses were sold off in bulk to large corporations. Increases in suburban single-family rental housing may provide households access to neighborhoods that are otherwise off-limits to renters, Charles said, but the reverse is also true.
The nearly controlling power that some corporate landlords have over some local housing markets may lead to increasing housing unaffordability and instability for households, Charles said. “Their concentrated ownership of single-family housing in some neighborhoods gives them considerable influence over local housing markets and households’ access to housing.”
In “The Financialization of Single-Family Rental Housing,” published Oct. 11 in the Journal of Urban Affairs, Charles writes that a new type of single-family rental investor emerged after the 2008 housing crisis: real estate investment trusts, known as REITs, which funnel large amounts of global capital into local housing markets.
The paper examines investments made by the four largest publicly traded REITS investing in single-family rentals in the Atlanta metro area. Many of the places where REIT ownership is clustered were hard hit by the 2008 housing crisis.
Increased rents, depressed housing prices, deferred maintenance and increased evictions due to REIT ownership may increase unaffordability, create greater instability and decrease the quality of housing for households in an already precarious position in the housing market, the study found.
Housing rights advocates and policymakers, including Massachusetts senator and Democratic presidential candidate Elizabeth Warren, have proposed legislation limiting large-scale institutional investment in single-family rental housing, Charles said. Yet a broad-brush approach to regulation may inadvertently curtail housing options for renters.
“Single-family rental housing in some neighborhoods may afford renters access to the opportunity that some neighborhoods can provide, while … in others [it] may have negative effects on households and neighborhoods,” Charles said. “Thus, a highly tailored policy approach to single-family rental housing is warranted.”
Charles received grants from the U.S. Department of Housing and Urban Development; Harvard University’s Real Estate Academic Initiative and Joint Center for Housing Studies; and Cornell’s Institute for the Social Sciences and President’s Council of Cornell Women.
Patti Witten is a writer for the College of Architecture, Art and Planning.