Eviction Risk of Rental Housing: Does It Matter How Your Landlord Finances the Property?
Abstract: We show, using a stylized model, how the ﬁnancing choice of landlords can impact eviction decisions in rental markets. Since multifamily loans rely on timely cash ﬂows from tenants, strict underwriting factors can increase the chances that landlords are able to weather income shocks. Lender provided relief may create further leeway for landlords to work out a deal with tenants who default on rental payments. Using comprehensive data on nationwide evictions in the U.S. and performance records on multifamily mortgages, we conﬁrm predictions from our model by documenting a negative relation between evictions and the ﬁnancing activity by government-sponsored enterprises (GSE) that impose strict underwriting criteria but generally offer borrowers relief during unprecedented income shocks. We also quantify the eviction risks induced by the COVID-19 pandemic for 12 U.S. cities using our empirical model.
Provider: Federal Reserve Bank of Philadelphia
Part of Series: Working Papers
Publication Date: 2021-02-11