Thanks for your patience. Still in LA at the Milken Conference (I feel like I have been parachuted into a Pasadena Republican/Chicago School of Economics parallel universe, although I have managed to find some fellow apostates. If I spent enough time here, I might be brainwashed (social assent is very powerful).
Thus I hope you will bear with me for a bit longer. It also feels a bit weird to post when time constraints mean I haven’t been able to spend much time on other blogs. I worry I am missing good stuff (and might waste time on something done better elsewhere) but will have to do a bit of catch up later.
This post, on how renters are affected by mortgage defaults, is newsworthy by virtue of suppling some data, rather than merely noting that the phenomenon exists.
The rise in foreclosures isn’t just affecting homeowners, it’s also putting pressure on renters, according to a report released Wednesday by the Joint Center for Housing Studies at Harvard University.
For one, the uptick in foreclosures is prompting more households to compete for low-cost rentals. Also significant is the number of renters who face sudden eviction when properties they’re living in are foreclosed on, the report found.
“Today, investor-owned one- to four-family rental properties account for nearly 20% of all foreclosures,” said Nicolas P. Retsinas, director of the Joint Center for Housing Studies, in a news release. “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.”…
Those involved with the study stressed that renters should not be forgotten as housing takes center stage on Capitol Hill….The current conditions provide an opportunity to transform the inventory of foreclosed and vacant properties into affordable rental housing…
The study shows that demand for affordable rental housing is increasing while the supply of low-cost units is declining, said Jonathan Fanton, president of the MacArthur Foundation, which helped in funding the report….
The study also found:
With an abundance of mortgage capital available during the housing boom years, there was a substantial rise in high-risk lending to absentee owners of one- to four-unit rental properties. In 2007, almost one in five foreclosure starts were on loans made to nonresident owners.
Foreclosures are also adding to the number of units that are held off the market, in part because of the long foreclosure disposition process and also because some who are buying the foreclosed properties are waiting for conditions to improve before putting the units back on the market.
While the weak home-buying market is adding to the supply of higher-priced rentals — as owners rent out their vacant condos and homes — many renters don’t have the income required to seize these opportunities.
In 2006, 42.6% of all working families didn’t earn enough to afford an appropriately sized housing unit. Nearly half of all renters paid more than 30% of their incomes for housing in 2006 and a quarter spent more than 50%.
The minority share of renter households increased from 37% in 1995 to 43% in 2005, and Hispanic renters accounted for nearly half of the gain.
Newly built apartments in buildings with five or more units had a median asking rent of $1,057 in 2006, a record high. The median gross rent for all units that year was $766. Only 20,000 new, unfurnished apartments renting for less than $750 were completed in 2006, even though these units were most in demand.
Condo conversions rose from a few thousand in 2003 to 235,000 in 2005. Only 60,000 units were converted from rentals to condos in 2006. Virtually no conversions were completed in 2007.
From 1995 to 2005, two rental units were removed from the inventory for every three units built. The losses to inventory were the highest in the Northeast; there, two rental units were lost for every one built.