The Real Deal Miami

Rental conversions may hurt apartment building owners, research analyst says

September 16, 2009 04:01PM

As home owners continue to struggle to sell their homes, more and more are opting to rent out their unwanted homes rather than sell them at a loss. Since 2007, about 2.5 million homes have been converted to rentals and account for about 85 percent of the increase in rentals, compared to 500,000 in the 2003 to 2004 boom period. Cynthia Kroll, senior regional economist at the Fisher Center for Real Estate and Urban Economics at University of Berkeley, attributes the shift to three factors: home owners unable to keep up with mortgage payments are renting out rooms in their homes to help cover costs, recently-built condominiums are being converted to rentals and foreclosure buyers are renting out homes instead of selling them. Also, the addition of houses on the rental market may hurt the apartment buildings, which are already suffering. “With homeowners pricing their homes to rent, apartment buildings could be bearing the brunt of the cost because now apartment building owners are having to compete with home owners looking for extra income,” said Daniel McCue, a research analyst at Harvard University. [Huffington Post]