Academic journal article Cityscape

From Foreclosure to Eviction: Housing Insecurity in Corporate-Owned Single-Family Rentals

Academic journal article Cityscape

From Foreclosure to Eviction: Housing Insecurity in Corporate-Owned Single-Family Rentals

Article excerpt

Introduction

During the foreclosure crisis, around 5 to 6 percent of households in the United States exited homeownership, contributing to both the supply and demand for single-family rental homes. The foreclosure crisis was the culmination of a long period of institutional change in housing and mortgage markets, in which moderate- and middle-income households were exposed to increasing levels of housing precarity (Dwyer and Phillips Lassus, 2015). Broad changes in mortgage markets, including deregulation, technological change, innovation in product offerings, and the rising importance of non-bank mortgage lenders the 1990s and 2000s had the composite effect of shifting risk of foreclosure away from government institutions and financial firms and onto households. Homeowners that had previously been sheltered from precarity were exposed to increasing housing insecurity.1 In this article, we examine the phenomena of evictions among single-family rentals, many of which were formerly foreclosed homes, as another episode in institutional change in housing markets, and another example of growing housing insecurity among moderate- and middle-income households.

Since the real estate and financial crisis of the early 2000s, homeownership has fallen to 62.9 percent, a 51-year low. More households are renting for a variety of reasons: home price instability; demographic shifts; changing tastes among millennials, delayed household formation and widening wealth and income inequality; and rapid change in the financial institutions that undergird mortgage markets, leading to the credit tightness that characterizes the post-crisis mortgage markets (Acolin, Goodman, and Wachter, 2016; Goodman, Pendall, and Zhu, 2015; Immergluck, 2018).

In response to the post-crisis decline in demand for homes and the glut of bank-owned properties, the government made some effort to stabilize neighborhoods and help struggling homeowners with neighborhood stabilization programs and direct governmental assistance around financial education and refinance and loan modification programs (Immergluck, 2011). Another part of government response involved facilitating the shift of single family homes from owner-occupied into rental housing stock in the private real estate market. From 2009 to 2015, the number of single-family rentals grew by 2.8 million, from 11.8 million to 14.6 million; over two-thirds of these rentals were in the 50 largest metropolitan areas (Census, 2005-2009, 2011-2015; Immergluck, 2018). In part responding to encouragement by the government, private sector institutional investors realized an opportunity and poured cash into an illiquid housing market. From 2011 to 2013, institutional investors and hedge funds bought an estimated 350,000 bankowned homes (Eisfeldt and Demers, 2014). Those purchases were focused on newer single-family homes in Sunbelt cities like Atlanta where increased demand during the housing bubble of the early 2000s had led to an explosion in new construction and where the long-term market outlook was rosy.

Investors bought with a variety of profit strategies that ultimately influenced property management decisions. Some bought to quickly resell; others to rent for the short term and resell; in other cases, to manage properties long term as scattered-site rental properties. Research in the last 5 years has tried to understand what sort of landlords these corporations would be (Eisfeldt and Demers, 2014; DJ Fields, Kohli, and Schafran, 2016; Green Street Advisors, 2016; Immergluck, 2013; Immergluck and Law, 2014a; Lambie-Hanson, Herbert, Lew, and Sanchez-Moyano, 2015; Mallach, 2014). What sort of strategies would this new breed of landlord pursue, and would these strategies lead to safe, affordable housing, or would they further contribute to housing insecurity?

Housing insecurity, sometimes referred to as housing instability, describes the condition where a household or family has a residence, but faces uncertainty about their ability to retain that residence due to lack of tenure security, affordability, poor housing conditions, or threats of harassment (Cox, Henwood, Rice, and Wenzel, 2017). …

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