Trends in the US PRS
The Week in Housing 11/02/22
This is my first newsletter of 2022 and there is certainly plenty to talk about. This week’s Daft.ie report saw rent increases return to levels not seen since around 2016, which will be a major concern given the recent introduction of inflation-pegged rent regulation, and, on the basis of a new BNP Paribas report, there was more media coverage of ‘vulture funds’ out-competing other potential purchasers. Indeed, over the last couple of months it feels like the BTR controversy is becoming the defining issue of housing politics in Ireland. There were also some new publications over the past month which I missed, chiefly this report on cost rental produced by Housing Europe for the Housing Agency. I hope to cover it in detail in the coming weeks. This week and next, however, I want to look at two new reports on the PRS internationally.
Back in December I organised a webinar featuring North American researchers and looking at institutional landlords in that context (watch the recording here). A few weeks ago Harvard University’s Joint Centre for Housing Studies published their annual report on the US PRS. Here I want to focus on some of the aspects that are most relevant to Ireland. In particular, it’s interesting to look at some of the international trends in order to analyse what aspects of the Irish PRS are the result of factors specific to this country, and what aspects may be part of international trends driven by transnational structural forces.
First, as we appear to be moving beyond the phase of lockdowns and similar public health restrictions, rental demand has bounced back strongly across the US. Vacancy rates fell to just 5.8% in 2021- its lowest reading since the mid-1980s, and this has been associated with rental price inflation. The ‘higher end’ of the PRS saw the biggest jumps in demand and prices, and this mirrors the fact that this segment was hit hardest during the pandemic (as I noted in my review of the impact of the pandemic on institutional PRS, available here).
Second, in terms of the structure of the PRS, there are two interesting trends which may be of particular interest to policy makers here in Ireland. On the one hand, the role of individual ‘mom and pop’ landlords in the US is declining and the role of institutions is increasing. The proportion of rental properties owned by non-household landlords increased by 8 percentage points from 2001 to 2018, to 26 percent. This is a also very much the case in Ireland, where small-scale landlords appear to be leaving the sector in significant numbers while demand from institutional investors has grown exponentially. On the other hand, there has been a shift in focus within the institutional or non-household sector, with 74% of purchases being of single-family homes. This trend would suggest that commentators here in Ireland where right to be worried about the move of institutions into the single-family dwelling market here in Ireland last summer, when the controversy around the purchase of an entire estate in Kildare broke out.
Third, there is a growing presence of higher income households in the PRS, mainly due to rising prices in the for-sale market. The consequence of this is that rents are being driven up, but also that BTR construction increasingly targets the ‘high end’ sector, all of which may be bad news for low income tenants. This also appears to match what’s happening here in Ireland, and raises a really important question: are we witnessing, at an international level, a kind of ‘gentrification of the PRS’? The report describes the impact of this change as follows:
Conditions in the rental market are increasingly polarized, reinforcing the stark divide between higher- and lower-income households. While renters with financial resources can choose from a variety of rental options in desirable locations, millions of cash-strapped households struggle simply to find housing anywhere they can afford.
This is not quite the case in Ireland at the moment, as the majority of households in the PRS appear to be struggling, not just those on low incomes. But if we project forward a decade or so, and the current pipeline of BTR apartments materialises, we may find ourselves in just such a situation.
The report also looks at the factors driving the growth of the PRS:
1. The number of younger adults forming new households is increasing
2. Prices in the for-sale sector are at record highs and available properties are at record lows. Consequently ‘rentership rates for younger and middle-aged households rose sharply in 2009–2019, likely signalling delayed transitions to homeownership’.
3. The number of older renters is growing rapidly.
All of the above points towards some of the ‘big picture’, structural processes that are driving rental sector growth. Big picture processes also featured in a second recent report, which I hope to discuss next week. My Home is an Asset Class was published by the European parliamentary group Greens/EFA a couple of weeks back. It represents a very original contribution to the debate on the financialization of the PRS. Specifically, the report is novel in three respects. First, it takes a political economy perspectives that focuses primarily on financial market structures and processes (rather than on, for example, housing policy or demographic drivers). Second, it focuses on the European level which sheds very interesting light on the presence of financial institutions in the PRS across Europe. Third, it proposes European level solutions. I’ll look at all three aspects in next week’s instalment of The Week in Housing.
Events
Richard Waldron of Queens is giving a Focus Lunchtime Lecture on generation rent and precarity. The Housing Studies Association annual conference is now open for registration. The conference is in ‘hybrid’ form this year. In June 2022 the Global Conference on Economic geography will take place in Dublin, and there is a call for papers for this session on ‘Corporate Landlords’. If you missed it, the launch of the Focus Ireland report on domestic violence and family homelessness is available to watch online.
What I’m reading
Two new papers on the PRS and housing activism. This one by Adrian Soaita, just out this week, looking at ‘everyday activism’ of PRS tenants (including a novel methodology). And this one on grassroots struggles against financialization in Spain. Also on the tenant activism front, what looks like a really interesting new paper looking at tenant activism in Berlin in the ‘60s and ‘70s.