Rise in Home Rentals Is Transforming a Neighborhood Near You

Julie Schmit explores what the "unprecedented" growth in the single-family home rental market means for home builders, school districts, and the consumer economy.

With "three of four homeowners who lose homes to foreclosure or other mortgage distress" flocking to single-family home rentals across the country, investor capital is following them to the tune of "tens of billions, if not hundreds of billions, of dollars of private equity" in the next five to ten years.

As investors snap up homes in neighborhoods hit hard by foreclosure, the character of those neighborhoods is evolving along with the change in ownership. Using the example of a neighborhood in Phoenix known as The Arbors, in which 38% of the 484 homes appear to be rentals, Schmit notes that "the combination of rentals and declining home values have taken a toll" on the area's appearance, according to homeowners. As a result of the perceived harmful effects of rentals on community maintenance and neighboring home values, some cities, and even some home builders, have taken steps to limit the spread of rentals.

"The move toward a 'rentership society' is bad for home builders, says a report from Morgan Stanley, but it's good for home furnishing retailers," writes Schmit. "People buy furnishings when they move, whether they rent or buy, the report says." Furthermore, companies providing services as diverse as financial-services, storage, and insurance stand to benefit from money saved by those paying rent rather than mortgages.

Full Story: Home rentals — the new American Dream?

Comments

Comments

House rentals.

In the near term and continuing, it is likely many more people in this country will be moving often, chasing temporary jobs. A home will be a boat anchor in such a situation. Not surprising. And not surprising that more wealth will be transferred upward in such a situation.

Best,

D

Michael Lewyn's picture
Blogger

actually, Americans less mobile

http://www.statesman.com/news/local/fewer-people-moving-but-texas-leads-...

The reason being, I suspect, that (1) fewer jobs mean fewer jobs to move to, and (2) moves due to foreclosure are outweighed by people stuck in their existing homes because they can't sell them.

But the people who ARE moving can't afford to buy houses as frequently in the past, and are renting them instead.

Renting and mobility.

See what these numbers, Michael, look like in a few years when the employment rate starts to recover. The reported (and real) unemployment numbers mask this new reality.

Best,

D

Michael Lewyn's picture
Blogger

actually, Americans less mobile

http://www.statesman.com/news/local/fewer-people-moving-but-texas-leads-...

The reason being, I suspect, that (1) fewer jobs mean fewer jobs to move to, and (2) moves due to foreclosure are outweighed by people stuck in their existing homes because they can't sell them.

But the people who ARE moving can't afford to buy houses as frequently in the past, and are renting them instead.

Mobility will be important

and I mostly agree except the wealth transfer part. Many Americans have been financially devastated by homeownership. It's not just foreclosures and short sales, but so many have paid more in PITI than comprable rents for years with nothing to show for it. Owning is becoming more financially comprable again now, but only if you buy right and in some markets. If people see housing as a consumption good, not an investment good, they will be better off financially.

Stupid Laws about Rentals

"some cities, ... have taken steps to limit the spread of rentals."

Whenever this happens, there are always negative unintended consequences.

The worst ones are the reduction of affordability and the homogenization of neighborhoods.

Legalized discrimination against an economic group (renters) is illogical and dangerous.

We've been down this road before: "Fear of Renters" has caused useful things to be outlawed:

1. Single Room Occupancy - After it was outlawed in NYC, it was discovered that 50% of the homeless had previously lived in SRO.

2. In the 1950s, Carriage houses and granny flats were outlawed across the country.

3. Most cities now have a limit on the number of "unrelated parties" that can occupy a single dwelling unit. That means some zoning inspector has to perform the humiliating job of entering a house and trying to determine who lives there and how they are or are not related. Now you have to pass laws to define "family", a definition that is a moving target right now. Example: it's illegal for two gay couples with no children to occupy a 5 bedroom 3 bath mcmansion in Denver. Ridiculous.

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