Rep. Takano Releases "Rent on the Rise in Riverside" Report

Press Release

Earlier today, Representative Mark Takano (D-CA) released his "Rent on the Rise in Riverside" report showing that one in three renters in Riverside County is paying more than fifty percent of their income on rent, a twenty percent increase since 2007. The report also show that the number of people paying more than half of their income on rent in Riverside County is rising faster than other Southern California counties.

The report, gathered from information available in the Census' American Community Survey, also showed that while rent has continued to rise, wages are still below their 2007 levels, making the increase in rent even more difficult to afford.

Key Findings:

City of Riverside: 12,365 households are paying over half of their income in rent, a 51.8 percent increase since 2007.
Moreno Valley: 8,481 households are paying over half of their income on rent, a jump of 40.4 percent since 2007 in raw households; however the overall percentage is close to where it was in 2007.
While wages have begun to rebound, the median income for Riverside County is still $5,524 below its 2007 level. As wages have dropped, rent continues to rise. Median rental costs in Riverside County increased $756 in the same amount of time.
The amount of people paying over half of their income on rent in Riverside County is rising faster than other southern California counties, increasing 20.1 percent since 2007.
In 2012, rental vacancy rates in the City of Riverside fell precipitously -- falling some 53 percent, from 9.9 percent to 4.7 percent.

The report calls for several recommendations, including restored Section 8 funding, targeted homeless Veterans assistance, and increased housing counseling.

Analyzing the cause of the change, the report also determined that rents are partially rising because purchasing a home has become much more difficult for non-investors, who must finance the home and are subjected to tighter credit markets. Investors are more attractive to sellers because they are able to pay with cash.

The rise of large investor purchases has also seen an increase in poor upkeep and a lack in responsiveness by investor landlords to their tenants.

Private equity firms and real estate investment trusts, including The Blackstone Group, have purchased nearly 200,000 homes across the United States in communities hit hardest by the mortgage crisis, such as Riverside, Phoenix, Tampa, Sacramento, Atlanta, Los Angeles and Las Vegas. Homes in these communities were the easiest to purchase at fire-sale prices. The report released by Takano addresses the danger of rental backed securities saying, "According to a recent report by the Federal Reserve, this type of, "investor activity may pose risks to local housing markets if investors have difficulties managing such large stocks of rental properties or fail to adequately maintain their homes. Such behavior could lower the quality of the neighborhoods in which investors own rental properties.'"

"Additionally, it's unclear how these new financial products could react to a downturn. If vacancy rates rise or renters are unable to pay their rent, Blackstone and others may be forced to sell off vast amounts of property to make their investors whole. Selling a large amount of properties quickly would not only deprive renters of their home, but destabilize the market for homebuyers and send housing prices into a freefall."

Representative Takano sent a letter today to the House Financial Services Committee requesting hearings on the rise of investor owned properties and the single-family rental backed securities saying, "The Financial Services Committee can help resolve unanswered questions about these new bonds and the impact they may have on the housing market. Proper oversight of new financial innovations is key to ensuring we don't go down the same road of the unchecked sub-prime mortgage backed security, and create an unsustainable bubble that will wreak havoc when it bursts."

Source