Distribution of Single-Family Rental Homes Reflects Effects of 2008 Housing Crisis

A recent paper in Housing Policy Debate, A Latent Profile Analysis of Suburban Single-Family Rental Housing (SFR) Neighborhoods,” categorizes neighborhoods with high concentrations of single-family rental homes (SHRs) into five identifiable types. Whereas concentrations of SFRs in low-income neighborhoods might have negative implications, they can be a source of opportunity for lower-income renters when found in middle-income and affluent neighborhoods.

The research was prompted by the development of scattered-site SFRs as a new “institutional asset class.” Although small investors have historically dominated investments in SFRs, the housing crisis of 2008 spurred institutional investors to purchase single-family properties and rent them. This paper classifies and describes the primary types of suburban neighborhoods in which concentrations of SFRs are found so that more fine-grained policy responses can be developed. The author identified 5,814 high-SFR neighborhoods in the 20 largest U.S. metropolitan statistical areas (MSAs), which is roughly 31% of all suburban neighborhoods in those metro areas. Each neighborhood was evaluated on the basis of 34 demographic and economic variables, including race, age, education, employment, and income. 

The author grouped these high-SFR neighborhoods into five categories: diverse middle-class, older white middle-class, low-income Hispanic, low-income black, and affluent. Beyond the demographic features identifiable in their names, these types of neighborhoods differ in the age of the housing stock, median rents, and access to excellent school systems and public amenities. 

To demonstrate how the distribution of SFRs varied across different metropolitan areas, the author provides profiles of Atlanta, Los Angeles, and Boston. In Atlanta, 45.2% of all SFRs studied are located in low-income black neighborhoods spread out to the southeast of the city, and only 2.9% of SFRs are in affluent neighborhoods. In the Los Angeles suburbs, over half of all SFRs are located in low-income Hispanic neighborhoods, many of which are found in a large contiguous cluster southeast of the city. Boston exhibits a very different pattern: 52% of SFRs in the Boston suburbs are found in older white middle-class neighborhoods, and 28% are found in affluent neighborhoods.

The author argues that these patterns reflect the racialized nature of the 2008 foreclosure crisis. The prevalence of SFRs in low-income black and low-income Hispanic neighborhoods reflects the fact that these neighborhoods were targets of subprime lending and subsequent institutional investments in foreclosed properties. The author argues that concentrations of SFRs in such neighborhoods might increase housing insecurity, exacerbate concentrations of poverty, and hasten the physical deterioration of suburban neighborhoods. Institutional investors are more likely to evict tenants and neglect maintenance, so policies to curtail institutional investment in SFRs in such neighborhoods might be warranted. In middle-class and affluent neighborhoods, however, lower-income renter households might gain access to neighborhood amenities without having the financial qualifications to own a single-family home. Accordingly, the author advises caution in adopting “broad-brush” approaches to regulating SFRs.

The paper can be found at: https://bit.ly/2q6R6aI