Joint Center Report: Mortgage Turmoil Contributes to Rental Affordability Woes

MBA (4/30/2008 ) Sorohan, Mike
New research released today from Harvard University’s Joint Center for Housing Studies found that the current mortgage turmoil reaches deep into rental markets as well.
The report, America’s Rental Housing: The Key to a Balanced National Policy, examined recent mortgage market events in the context of long-standing affordability problems facing renters. The report found that the current housing turmoil not only adds to the number of households competing for low-cost rentals, but also threatens renters living in foreclosed properties with sudden eviction.

“Today, investor-owned one- to four-family rental properties account for nearly 20 percent of all foreclosures,” said Nicolas Retsinas, director of the Joint Center. “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.”

The report noted that the share of households owning a home has declined, while the number of renter households jumped by nearly one million last year, or more than four times the pace of renter growth between 2003 and 2006. Such demand, despite the growing signs of economic weakness, composite monthly rents last year reached a record high of $775.

The report also said rising foreclosures and turmoil in credit markets raised the costs of financing rental housing construction and preservation. Last year, completions of multifamily units for rent fell to 169,000 units. “The blighting influence of vacant and foreclosed properties also will accelerate the abandonment of low-cost rental properties in distressed neighborhoods, further limiting the supply of affordable housing,” the report said.

William Apgar, Joint Center senior scholar and former FHA administrator, said policymakers should take a balanced approach to solving housing problems, providing incentives for renters as well as homeowners.

“For the past decade, broader access to homeownership has been the centerpiece of federal, state and local housing programs,” Apgar said. “The rapid rise in mortgage delinquencies and home foreclosures unfortunately exposes the tragic flaw in this imbalanced approach.”

Retsinas said policymakers at all levels of government should focus more attention on those renter households severely harmed by the current mortgage market turmoil.

“A balanced national housing policy should focus renewed energy on preserving the stock of subsidized rental housing, limiting losses of privately owned, low-cost units and eliminating land use restrictions and other barriers that needlessly increase the cost of producing homes for sale as well as for rent,” Retsinas said. “The nation now has an unprecedented opportunity to transform the large inventory of foreclosed and vacant properties into the next generation of affordable rental housing.”