Post-foreclosure-crisis Investor Activity Threatens Housing Stability

Post-foreclosure-crisis Investor Activity Threatens Housing Stability
Elora Lee Raymond, Richard Duckworth, Benjamin Miller, Michael Lucas, Shiraj Pokharel
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As many Americans faced foreclose and exited homeownership during the financial crisis, an influx of institutional investors and large corporate landlords bought up many single-family rental homes. But little is known about how this influx of institutional investors and large corporate landlords has affected tenant well-being, including housing insecurity.

To understand the effect of these market trends, researchers created a cross-sectional, parcel-level dataset for single-family homes in Fulton County, Georgia, in 2015. To measure housing insecurity, researchers collected eviction records from the Fulton County Magistrate Court website. They pulled homeownership information from the Fulton County assessor’s parcel database and identified large corporate landlords by the distribution of properties and institutional investors by referencing national and global lists of investors. They also used data on deeds to determine past foreclosure activity. Then, researchers imputed tenant characteristics from American Community Survey block-group data and ran the model as a  logistic regression with census-tract fixed effects.

The study found large corporate landlords and institutional investors are more likely to evict tenants compared with smaller, noncorporate owners, even though their capital reserves could support economies of scale and a higher capability to provide affordable housing and more likely to absorb short-term losses.

Key findings
  • In 2015, the authors found an average of 107 eviction notices filed each day, for a yearly total equal to 22 percent of all rental households in Fulton County. Evictions were spatially concentrated, with some zip codes experiencing a higher than 46 percent eviction filing and 16 percent eviction judgement rate.
  • Eviction filings were concentrated in multifamily properties and tenants, with an eviction filing rate of around 28 percent. This is far higher than the 7 percent of single-family renters who received an eviction filing in the same period and the national eviction filing rate of 6 percent.
  • Ownership characteristics have a strong, significant relationship with housing insecurity.
  • Institutional investors have a 20 percent eviction rate, more than three times that of mom-and-pop landlords.
  • Single-family rentals with large corporate owners are 63 percent more likely to have housing insecurity.
  • Investor size is correlated with higher levels of housing insecurity among single-family rental properties. There appears to be a company effect, with some firms having significant, and substantially higher, eviction rates than other firms, even after controlling for property quality, location, and foreclosure history.
  • Postforeclosure properties are 59 percent more likely to have eviction notices than single-family rentals with no record of a foreclosure.
  • Black tenants are more likely than other tenants to face an eviction filing, as well as households headed by women.
Policy implications
  • The housing insecurity that occurred in the form of foreclosures during the late 2000s has been followed by a pattern of housing insecurity in the form of evictions.
  • The authors suggest policymakers should work toward providing safe, stable, affordable rental housing for the growing number of households who rent in Atlanta and elsewhere.
  • Adopting policies to restrict the public reporting of evictions and outstanding payments would reduce barriers to accessing new housing for tenants. Charging higher eviction-filing fees could also discourage landlords from liberally filing as part of a routine rent collection strategy.
  • The authors say municipalities should attempt to negotiate with institutional investors around issues of code enforcement, maintenance, and evictions, particularly where these institutional investors have a reasonable market share within certain urban submarkets.
  • At the federal level, the government-sponsored enterprises have shown their willingness to provide financial support and institutional investment in scattered site, single-family rentals. In accordance with their mandate, the GSEs can use their role to encourage and support the provision of affordable rental housing.