Single-Family Homes and the Housing-Crisis Debate

When Leilani Farha, United Nations special rapporteur on adequate housing, came to San Diego, California what she found troubled her: many single-family homes had found themselves owned by corporations rather than people.

As a result, these dwellings had become mechanisms for accumulating corporate wealth en masse, moving away from what Farha described as their “Core social purpose of providing people with a place to live in with security and dignity.”

How Did this Happen?

During the Great Recession, financial institutions, large corporations, and real estate investors scooped up properties at low rates. The federal government even encouraged Wall Street to get involved to reduce the prevalence of neighborhood blight caused by empty homes.

According to a paper by the National Bureau of Economic Research, the result was that approximately 1.5 million homes became rentals. According to CityLab, a think tank that specializes in housing, transportation, and associated issues, 35% of all rental properties became single-families homes– over 12 million units!

Curbed, a website that specializes in cities, homes, and architecture, did some digging and found that the bought-up houses tended to be rented by low and moderate-income families. These homes were concentrated in areas that experienced above-average foreclosure rates. Large corporations charge more rent and have greater eviction rates than small landlords. Curbed also found, however, that these companies charged only slightly more in rent and that the ownership shift was limited, with corporate control extending to 200,000 single-family homes that later became rentals.

Nonetheless, Farha deemed it necessary to express concern in letter form to both the U.S. government and Blackstone, an international equity fund that owns Invitation Homes, America’s biggest single-family home rental business. Farha believed that corporated homeownership was a possible contribution to California’s affordable housing shortage. And Farha isn’t the only one concern. Massachusetts Senator and leading Democratic presidential candidate Elizabeth Warren has introduced legislation that would limit corporate ownership of single-family rental homes.

Legislation’s Impact on Single-Family Rentals

Pacific Standard Magazine reported that Warren’s legislation would force the Federal Housing Authority to sell the majority of single-family homes gained as a result of foreclosure to owner-occupied buyers or community organizations that would renovate the units so owner-occupants could buy them. It has been questioned whether or not there are enough people, individually or collectively, who could buy those units on a meaningful scale.

Other legislative fixes have also been proposed.

Currently, California’s legislature is sitting on Senate Bill 50, which stipulates that local governments must build more multi-unit homes along major transit lines. Other bills wish to do away with single-family home zoning in general. Such laws would allow for the construction of duplexes, triplexes and quadplexes in zones previously limited to single-family homes.

Until those laws make gains, however, state and local governments will continue to push policies that makes it easier to construct accessory units, historically called “Granny flats”. With these policies in place it would be easier to build such units thanks to a streamlined permit acquisition process and a reduction in fees.

Along similar lines, in October of 2019, California Governor Gavin Newsom signing several housing bills that would make it easier to construct a backyard home that’s at least 800-square feet. The bills also made it easier to change a garage, office, or spare room into a third living space, as reported by Liam Dillon of the Los Angeles Times.

Bottom Line

What this all points to is the further growing issue that is the national housing crisis. With the eyes of journalists, think tanks, legislatures, presidential candidates, and even the United Nations pointing at the problem, hopefully a solution will be spotted quickly.

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