Is preserving small, low-end rental housing feasible?

Abstract

This paper uses multiple national datasets to examine the financial, structural, neighborhood, and tenant characteristics of 1-4 unit low-end rental properties, which house 44 percent of all poor renters in US cities. We investigate the feasibility of two strategies to stabilize these properties: (1) outsourcing property management, and (2) transferring bundles of properties to large owners to generate economies of scale, cash reserves, and lower financing costs. We find that approximately five percent of small affordable rental properties are stable, 65 percent are salvageable but at risk, and about 30 percent are not salvageable. For roughly 19 percent of the salvageable properties, a key problem is high vacancy rates, which could be addressed by professional tenant placement services. Bundling has greater potential, but requires purchases at below market prices, amounting to a subsidy. © 2011 Virginia Polytechnic Institute and State University.