More single-family homes were being built compared to the previous year as 2014 drew to a close, underscoring a strengthening real estate market.
But another trend is drawing attention for its potential impact on the housing market and struggling families: a growing number of single-family homes are now for rent.
“The worst of the housing crisis may be behind us, but the recent housing market recovery opens up a number of new community development questions,” Laura Choi, a senior research associate at the SF Fed’s Community Development department, writes in a September 2014 report, “The Rise of Single-Family Rentals in Arizona, California and Nevada.”
“Of particular concern is the potential impact of investor purchases of single-family residences, especially in hard-hit neighborhoods that experienced severe price depreciation and offered an abundant supply of distressed property,” Choi adds.
The trend is worth watching given its potential impact on rental affordability, particularly for low and moderate-income families, many of whom are still reeling from the effects of the recession.
Choi’s report cited a Harvard Joint Center for Housing Studies report that said that between 2007 and 2011 three million homes “switched on net” from being owner-occupied to being rental units.
That trend itself resulted from the turmoil that hit the housing market seven years ago, as Choi pointed out: “Much of this switch was driven by resident owners losing their homes during the foreclosure crisis.”
As the housing market recovered, a new trend emerged: single-family units as a share of the renter-occupied stock grew from 30.8 percent in 2005 to 33.5 percent in 2010—the largest increase among all rental property types.
“Single-family rental housing has become the fastest growing component of the rental market,” she said.
The report includes state and regional data for California, Arizona and Nevada, three states that were hit particularly hard during the foreclosure crisis.
You may also want to read The Rise of Single-Family Rentals in Arizona, California and Nevada.
The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.