Most of us know that foreclosures can be a problem for homeowners and their neighborhoods, but a new report released Wednesday details the pain now being felt by renters, as rents continue to increase and many find themselves caught in a foreclosure they had nothing to do with.
“Today, investor-owned one- to four-family rental properties account for nearly 20 percent of all foreclosures,” said Nicolas P. Retsinas, director of the Harvard University’s Joint Center for Housing Studies, which produced the report. “Moreover, because many of the high-risk home purchase 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.” That renters are caught in foreclosure likely won’t surprise anyone; but the Harvard study does uncover some other interesting trends that might be less intuitive, at first glance. The number of renter households jumped by nearly one million last year, or more than four times the pace of renter growth over the 2003 to 2006 period, according to the Joint Center report. Despite the growing signs of economic weakness, monthly rents last year reached a record high of $775, as well. The result is a rental population that’s growing dramatically and quickly, but finding fewer and fewer opportunities to rent what they can afford, Retsinas said. Part of the problem is that investors are demanding higher rents for single-family and condo properties they own, needed to cover their outstanding mortgage obligations; these rents don’t track with property value and are often higher than what the typical renter can — and perhaps should — look to afford. The report also observes that rising foreclosures and the resulting turmoil in credit markets raises the costs 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 one-third of the 1986 record high. The report argues that the “blighting influence of vacant and foreclosed properties” will accelerate the abandonment of low-cost rental properties in distressed neighborhoods, further limiting the supply of affordable housing. “For the past decade, broader access to homeownership has been the centerpiece of federal, state, and local housing programs,” said William Apgar, a senior scholar at the Joint Center. “The rapid rise in mortgage delinquencies and home foreclosures unfortunately exposes the tragic flaw in this imbalanced approach.” “A balanced national housing policy should focus renewed energy on preserving the stock of subsidized rental housing,” he said. For more information, visit http://www.jchs.harvard.edu.