Owned Now Rented Later? Housing Stock Transitions and Market Dynamics by Stuart S. Rosenthal Maxwell Advisory Board Professor of Economics Department of Economics, Syracuse University Phone: 315-443-3809
[email protected] December 10, 2017 Support for this project from the Research Institute for Housing American (RIHA) at the Mortgage Bankers Association is gratefully acknowledged. An earlier version of this paper appears under the same title as a special report from RIHA, #16766, November 2016. Xirui (Sherry) Zhang, Jindong Pang, Boqian Jiang and Yimin Yi provided excellent research assistance. Lynn Fisher, Stuart Gabriel and John Harding provided helpful comments. Any errors are my own. Abstract Although it is well known that the durable nature of housing amplifies downturns, an overlooked mechanism by which this occurs is through shifts in the ownership status of local housing stocks. Based on census and American Housing Survey data, I show that there is a 2 percent net shift of single family U.S. housing stock into the rental sector with each passing decade. Short term transitions following the 2007 crash were larger, exceeding 10 percent for recently built homes, and should partially reverse as markets rebound. Indeed, in recent years,18 fewer construction permits were filed for every 100 post- crash own-to-rent transitions, about the same effect as from vacant housing. These and other patterns confirm that housing stock transitions contribute to filtering of older housing down to lower income families and slow recovery following a negative shock. I. Introduction Although it is well known that the durable nature of housing is an important driver of housing market dynamics, sometimes amplifying downturns (e.g.