Renters, out-of-town landlords, and institutional investors: Who’s really bringing down the neighborhood?
Note: This is the first in the series of posts that explores the unique parcel-level data that we are collecting across the nationwide network of BuildingBlocks users. Our aim is to help local officials make more strategic operational and policy decisions based on evidence.
Who is the biggest contributor to blight in your community? Ask your code enforcement officers, and they are sure to have an opinion. It might be that one problem landlord with dozens of shell LLC’s. Or all of those college renters. Or out-of-town landlords. While intuition and experience are invaluable, we always like to back it up with data. So what evidence is there to get a better understanding of which types of owners are bringing down the neighborhood?
There is some research that compares residential property conditions and values across rental versus owner-occupied. One study that sampled over 500 houses in an Ohio town found that owner-occupiers are up to 158% more likely to perform maintenance than landlords and that owner-occupied properties are up to 92% more likely to have structural problems. Another study of 360 houses in Baton Rouge, LA, found that owner-occupied properties depreciated at a slower rate than rental properties. Another study looked at census tract data from 1980 to 1990 and found that a 1% increase in owner-occupancy rates resulted in an $800 increase in home values.
These studies tend to look at property values as an indicator of neighborhood condition because that’s the easiest metric to compare. We wanted to explore some of the unique data sets that we have access to through our partners in local government, so we started with the best indicator we have of substandard property conditions: code violations. There is no better metric to use if you want to answer the question, “who’s bringing down the neighborhood?”
We did a city-by-city analysis across a sampling of 54 of our partners with relatively uniform data that compared two groups of properties: non-owner-occupied residential properties that are owned by an organization (LLC, trust, corporation, e.g.) and owner-occupied residential properties owned by an individual with no other owned real estate in the same jurisdiction. For simplicity, we are calling these the Non-Owner-Occupieds and Owner-Occupieds. (For more information on how we identify these owner characteristics and how you can use them in BuildingBlocks, see our post on Owner Filters. Then we looked at the rate of code violations per property in each category.
The results, while varied, all supported the hypothesis that owner-occupants take better care of their properties. There was not a single city in which Owner-Occupieds had a higher rate of violations than Non-Owner-Occupieds. On average across the entire sample, a Non-Owner-Occupied property was nearly three times as likely to have a code violation as Owner-Occupieds. In some communities, Non-Owner-Occupied properties were over eight times as likely to be cited for a code violation. In every single community we looked at except one—a small Southwestern city—Non-Owner-Occupieds were at least twice as likely to have a code violation than Owner-Occupieds.
Of course, there are all sorts of reasons why these results might not reveal the whole truth. Most code enforcement in this country is complaint driven, and the likelihood of a renter complaining about a property is a whole lot higher than an owner turning themselves in for overgrown weeds. But the data tells us, at least directionally, that city officials looking to take a proactive approach to code enforcement should start with a firm understanding of who owns what in their community.