After Foreclosure

As Christian Weller’s latest economic snapshot makes clear, the foreclosure situation remains abysmal:

Among other things, this raises the issue of where former homeowners are going to live post-losing their homes. Since America still has a high ratio of houses to households, in principle someone should buy up the housing stock and rent it out. But Barbara Kiviat wonders how feasible this is (that’s via Annie Lowrey):

According to government data, 89% of single-family detached houses are owner-occupied. Meanwhile, 83% of apartments are rented. There is a certain logic to this. An apartment building provides an economy of scale for a landlord that a suburban housing development doesn’t.

It’s true that this is in part driven by the “certain logic” but I think it’s also the case that public policy has, for decades, focused heavily on subsidizing ownership of single-family detached homes. Under the circumstances, it should come as no surprise that large firms aren’t particularly interested in becoming landlords of such homes. Instead, insofar as single-family homes are rented out it’s usually on a small-scale semi-amateur basis, and amateurs don’t have the capacity to realize any economies of scale. I think that on a level playing field you’d find that the basic direction of this tilt would be the same, but the scale would be smaller.

This means the question for policy is whether we want to try to credibly signal that homeownership is going to settle at a permanently lower rate and it makes sense to start investing in some kind of suburban rental outfit, or do we want to signal that this is a temporary phenomenon in which case that’ll look like a bad investment. If we do the former, at least this one aspect of the housing crisis would be closer to a resolution.