NOTE: This column originally appeared on the Saporta Report website. For more analysis and perspectives from top Georgia State faculty, visit https://leadership.saportareport.com/higher-education.
In the wake of the U.S. foreclosure crisis, there has been a large increase – on the order of 50 percent – in single-family rental homes, or SFRs, across the country. As millions of families lost their homes to foreclosure, many of those homes were eventually purchased by investors – small and large– who converted those homes into rentals. At the same time, many families were compelled to rent their homes due to a foreclosure on their credit record or due to the tightening of mortgage markets.
I recently examined the growth of SFRs in the 50 largest U.S. metropolitan areas since the mortgage crisis. In all 50 metros, there was a 52 percent increase in the share of single-family homes that are renter-occupied.
The largest increases in SFRs were generally in Sunbelt metropolitan areas, such as Las Vegas (60 percent), Phoenix (69 percent), Tampa (59 percent) and Atlanta (67 percent). These metros were hit hard by the foreclosure crisis. They are also places where investing in single-family homes as rentals is relatively lucrative because of relatively weak tenant-protection laws.
In addition to many “mom and pop” landlords buying foreclosures to turn them into rentals, many of these metros also saw aggressive investing in formerly foreclosed properties by large “institutional” investors who were able to attract large-scale funding from Wall Street from about 2012 onward. Atlanta was the leading metropolitan area for Wall Street-backed investors.
The greatest increases in SFRs in metro Atlanta from 2010 to 2015 were in relatively diverse suburbs, especially in the five core counties of the metropolitan area – Clayton, Cobb, DeKalb, Fulton and Gwinnett counties. Suburbs in these counties accounted for over 60 percent of the increase in SFRs in the region, with the outer suburbs accounting for another 33 percent.
A surprisingly high 37 percent of the growth in SFRs in the suburbs occurred in low-poverty neighborhoods, those with poverty rates of less than 10 percent. This suggests that the growth in SFRs may be increasing access to strong school districts and local services for renters. At the same time, less than 13 percent of the increase in SFRs occurred in neighborhoods with predominantly white populations, suggesting that such neighborhoods are still not providing a great deal of access to rental housing.
Increased single-family rentals have important implications for fair and affordable housing policy and planning. The research suggests the growth of SFRs has broadened rental options for families in lower-poverty and racially diverse neighborhoods, at least in the Atlanta area.
At the same time, it will be important for fair housing advocates and enforcement agencies to pay close attention to actions local governments might take to limit rentals in their communities. Local governments, for example, could attempt to put firm limits on the share of rental housing in their communities. Efforts to regulate rental housing standards may be reasonable, but if such efforts become overzealous they may be used to discourage SFRs or renters overall, which could have disparate impacts by race, ethnicity or other protected classes and could constitute a fair housing violation.
Additional fair housing questions concern the advertising and screening practices of SFR landlords, including the practices of some institutional investors. For example, are owners marketing properties in low-poverty and predominantly white neighborhoods broadly? Do they accept Housing Choice Vouchers from tenants? These and other issues have become more important as the SFR sector now constitutes a larger portion of the rental landscape, particularly in many communities that had not been accustomed to substantial amounts of rental housing.
Urban Studies Institute, Andrew Young School of Policy Studies
At the Urban Studies Institute, Immergluck’s research concerns neighborhood change, housing markets, neighborhood change, urban poverty and racial dynamics, financial markets and urban form, and community and economic development practice and policy.