Rise in Home Rentals Is Transforming a Neighborhood Near You

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.