October 08, 2014

San Francisco Federal Reserve Community Development Department Issues Report on the Rise of Single-Family Rental Units

Washington DC – Last week, the Community Development Department of the Federal Reserve Bank of San Francisco issued a report titled, “The Rise of Single-Family Rentals in Arizona, California, and Nevada” examining trends in rental housing composition, with a focus on areas that have seen the fastest growth in single-family rentals, and their implications for community development. [i]
 
The report outlines the increase in single-family rental housing saying it, “has become the fastest growing component of the rental market. This trend of growing absentee ownership raises important community development questions around the issues of neighborhood stabilization, rental costs, property maintenance, and lost asset building opportunities for potential first-time homebuyers.”
 
The report also details the heavy concentration of single-family rentals in the Inland Empire, accounting for nearly 50 percent of all rental units. In Orange County however, single-family units account for only 29 percent of all rental units. Riverside County also saw a larger increase in market share of single-family renter occupied housing than surrounding counties.
 
Additional findings:
  • The share of single-family renters that are cost-burdened has also increased in the Inland Empire from 2007 to 2012.
    • 57 percent of single-family renters in Riverside County are cost-burdened. 
    • Riverside is tied with Los Angeles for the highest proportion of cost-burdened single-family renters in Southern California.
  • In the Bay Area, the counties of Contra Costa and Solano, which were hardest-hit in the region by the foreclosure crisis, have seen the fastest growth in the rental market share of single-family units.
  • Single-family units made up a growing share of the rental housing stock in Arizona, from 36.9 percent in 2007 to 43.8 percent in 2012. In Pinal County, part of the Phoenix metro area, the rental market share of single-family units jumped from 43.4 percent to 66.0 percent over the same period.
  • In Nevada, from 2007 to 2012, single-family rentals experienced the largest relative growth of 6.2 percentage points, while the next largest growth was in rentals with 20 or more units, which grew in market share by 1.6 percentage points.
The report concludes by summarizing the changes that have occurred in the Federal Reserve’s 12th District saying, “single-family homes are accounting for a growing share of the rental housing stock, as homes shift from being owner-occupied to renter-occupied. Investor activity has played an important role in this tenure shift, and given the concentration of distressed sales in lower-income neighborhoods, this trend has important community development implications. These include concerns around property maintenance, rental affordability, neighborhood stabilization, and the crowding out of potential first-time homebuyers.”
 
The report also calls for strong partnerships at the local level saying, “Mitigating the potentially negative effects of this trend will require local policymakers and community development organizations to work together and find ways to positively engage with rental property owners.”
 
Rep. Mark Takano (D-CA), who has called for the House Financial Services Committee to hold hearings on the impact of institutional investors in the rental market praised the report saying, “The report released by the Community Development Department of the San Francisco Federal Reserve shows the pressing need for us to further examine the flood of investors into the single-family unit rental market. More information is needed, plain and simple. Earlier this year I called for the House Financial Services Committee to hold hearings regarding this issue. I hope this report will compel Republican Chairman Hensarling to take the dramatic rise in single-family rental units seriously and address the matter as soon as possible.”
 
[i] Laura Choi, “The Rise of Single?Family Rentals in Arizona, California, and Nevada.” Community Development Research Brief, Federal Reserve Bank of San Francisco, September 2014. Available at http://www.frbsf.org/community-development/files/rb2014-the-rise-of-single-family-rentals-az-ca-nv.pdf