Does Rental Housing Have a Role to Play?

Convention used to hold that the stabilizing influence of homeownership was one of the greatest keys to a community’s success. The more neighborhood residents taking out a mortgage and owning a stake in the community, the better. As these homeowners put down roots, they would begin to build a reputation among their neighbors. They were known. They become interested in property values and would strive to keep them on the rise, by keeping their own home in good repair and perhaps by gently encouraging the neighbor next door to do the same.

But now we know that there is an important caveat to this line of thinking. Mortgages made to borrowers who couldn’t afford them have been the demise of neighborhoods nationwide. An entirely new federal program (HUD’s Neighborhood Stabilization Program) sprang up in 2008 to save neighborhoods from the de-stabilizing influence of homeowners who couldn’t afford their homes but were trapped, unable to unload them.

Perhaps the lesson here is that a single-minded focus on homeownership is misguided. The most stable neighborhoods these days seem to be those with a mixture of homeowners and renters. The availability of rental housing provides an alternative to homeownership for those who wouldn’t be stable homeowners anyway, whether by choice (those who are risk-averse or prefer the freedom to move) or circumstance (those with unsteady or low-paying jobs). When the renter next door loses his job, he moves out and is replaced with another tenant. But when the homeowner across the street falls on hard times and finds herself stuck in a house she can no longer afford, her house begins to deteriorate and ends up foreclosed, vacant, and boarded-up.

When integrated into neighborhoods of homeowners, rental housing can provide a degree of community flexibility – a flexibility that paradoxically makes neighborhoods stronger and more stable.