Rental households also suffer during foreclosures
Homeowners aren’t the only ones who suffer greatly from foreclosure actions on residential properties. Renters often experience pain as well.
About 20 percent of all foreclosures are on investor-owned rental properties, which means many tenants face sudden eviction from their rented residence.
More attention by all levels of government should be focused on those rental households currently being harmed by the mortgage market turmoil, according to Harvard University’s Joint Center for Housing Studies. They recently concluded a study on this aspect of the market.
“Because many of the high-risk home purchases and home refinance loans now in default are concentrated in low-income and minority communities, the fallout from foreclosures is hitting the same neighborhoods where many of the nation’s most economically vulnerable renters live,” said Nicolas Retsinas, director of the Joint Center.
The report examined recent mortgage market events in the context of long-standing affordability problems that plague millions of renters. Fueled by record foreclosures and sluggish home sales, the share of households owning their homes is declining, while the number of renter households jumped by nearly 1 million last year. That’s more than four times the pace of renter growth over the 2003 to 2006 period, according to the Joint Center report.
Despite the current signs of economic weakness, monthly rents last year reached a record high. Also, the rising number of foreclosures and the resulting turmoil in credit markets raises the cost of financing rental housing construction and preservation.
Last year, completions of multifamily units for rent fell to 169,000 units, just two-thirds of the 2002 figure and only a third of the 1986 record high. The blighting influence of vacant and foreclosed properties also accelerates the abandonment of low-cost rental properties in distressed neighborhoods, further limiting the supply of affordable housing.
However, it should be noted that in recent weeks there has been a significant increase in construction starts of multi-unit structures, many planned as rental units.
“For the past decade, broader access to homeownership has been the centerpiece of federal, state and local housing programs,” said William Apgar with the Joint Center. “The rapid rise in mortgage delinquencies and home foreclosures unfortunately exposes the tragic flaw in this imbalanced approach.”
Center director Retsinas added that “A balanced housing policy should focus renewed energy on preserving the stock of subsidized rental housing, limiting losses of privately owned low-cost units, and eliminating land-use restrictions - barriers that needlessly increase the cost of producing homes for sale as well as for rent.”