Effects of natural disasters on the rental market

Owning a home is the gold standard of housing security. But for those who can’t afford to buy, they rent – ​​and lately the market share of renters has been steadily increasing in light of new housing trends that started two years ago. when the COVID-19 pandemic started to grip the market.

Today, there are approximately 44 million renter households in the United States. Between the first and third quarters of 2021, an additional 870,000 households entered the rental market, driving occupancy rates down to 5.8%, the lowest since the 1980s, and driving up rental prices. rents. skyward by 13.8%.

According to the 2020 census, approximately 330 million Americans live in 125 million housing units.

But according to the Harvard University Joint Center for Housing Studies (JCHS) 40% of the country’s rental housing stock (representing 17.6 million units) is at risk of “substantial annual losses from increasingly common environmental risks” based on the census tract in which they have been placed.

the Federal Emergency Management Agency assigns each census tract a “predicted annual loss estimate” ranging from “very low” to “very high” based on the impact of 18 environmental hazards on people, buildings and agriculture and economic loss estimated dollars related to these potential events.

According to the new America’s Rental Housing 2022 report from JCHS, these units can be affected by a number of disasters such as wildfires, floods, earthquakes or hurricanes and are primarily found on the West Coast, Coast of the Gulf and the central United States, better known as “Tornado Alley.

“California has the highest number of at-risk rental units, with 4.5 million rentals (76% of the state’s occupied rental stock) located in census tracts with at least moderate expected annual losses due to likely risks,” said Sophie Wedeen, research assistant at JCHS. “Of these units, 1.6 million are located in areas with “relatively high” or “very high” expected annual loss rates. Washington and Oregon also have a significant number of rentals in areas with at least moderate expected annual losses, with approximately 85% of occupied rental stock in each state located in these areas.

Other states with particularly high numbers of rental units at risk include southern states and along the Gulf Coast, including Texas (2.3 million units in areas with at least moderate losses ); Florida (940,000); North Carolina (570,000); Tennessee (540.00); Louisiana (470,000); and Georgia (460,000).

While single-family rentals and manufactured rentals are most at risk, an additional 2.6 million units in 2- to 4-unit multi-family buildings are at risk, as are 3.8 million units in multi-family buildings of 5 to 19 units and 3.5 million units. in large multi-family buildings with 20 or more units are classified as “moderate risk”.

Manufactured homes present additional problems: While there are only about 1.1 million units in high-risk areas, they are the most likely to be at risk nationwide. These manufactured homes are also the most likely to be deemed “structurally inadequate” by the Department of Housing and Urban Development and are therefore particularly vulnerable due to losses due to environmental hazards.

Low-rent tenants who pay for some of these units also come into play in light of a disaster.

“Many at-risk housing is low-rent or subsidized. 4.0 million occupied units with contract rents below $600, representing 40% of those rents, are located in areas with at least moderate annual losses expected due to environmental risks,” Wedeen said. “As stated in [in the research], the number and share of units rented for less than $600 has declined over the past decade. With the supply of low-cost housing already shrinking, massive losses of this stock due to environmental risks would leave low-income households with even fewer affordable rental options.

In addition, 2.1 million subsidized homes are located in these high-risk areas and 1.2 million of the 3.1 million homes (39%) created under the social housing tax credit are in moderate risk areas. An additional 700,000 HUD units (representing public housing, Section 8, affordable retirement housing, low-income and disability housing) are at risk, along with 230,000 (of approximately 400,000) government-subsidized units. USDA.

The loss of these units would give at-risk and marginalized tenants little or no housing options after a disaster, potentially setting local markets back years while everything is repaired or rebuilt.

“An increasing number of rental units will be at risk of loss due to environmental risks in the years to come. In the short term, hazard damage will almost certainly drive up the cost of repairing and rebuilding rental housing. Reducing the time it takes to build replacement rental housing after a natural disaster and increasing the availability of post-disaster financial assistance for tenants are two urgent priorities,” Wedeen concluded. “At the same time, the increasing frequency and severity of hazards and the scale of their damage will likely render an increasing number of rental units uninhabitable, displacing residents and threatening to further reduce the supply of rental housing. Massive federal and local investment is needed to preserve the existing stock and adapt rental housing to the wide range of acute and chronic environmental hazards exacerbated by global climate change.

Click here to see a full copy of the report.