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Does It Matter How Your Landlord Finances Your Property?

Credit Market Spillover Effects to the Real Economy: Evidence from Rental Housing Evictions
Brent W. Ambrose, Xudong An, and Luis A. Lopez
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The number of rental properties backed by government sponsored entities (GSEs)—Fannie Mae, Freddie Mac, and Ginnie Mae—has increased in wake of the 2008 financial crisis, but little is known about how this has affected tenants. A recent study suggests rental property financing and debt service support could be influencing how landlords engage with tenants.

Rental properties are generally financed through either private channels or the GSEs. Government-backed financing could provide less expensive financing because of its government guarantee. GSEs are also mandated to provide credit to underserved areas and support affordable housing initiatives, and they may provide relief to the housing market during crises. All these factors may reduce the likelihood of a GSE-financed property evicting renters during a shock.

The authors of this study created a model to explore how the choice of lender can factor into landlords’ decisions when dealing with tenants. To test this model, they used eviction data from the Princeton Eviction Lab, which include more than 80 million records on evictions and eviction filings collected from court records, state provided reports on landlord-tenant cases, and legacy datasets of public eviction records. They combined this with data on multifamily loans obtained from Trepp, which contain information on more than 92,000 multifamily loans performing between 2000 and 2016. Researchers then used a panel data model with fixed effects to run various analyses that estimate landlord action and eviction risk.

Key findings
  • Having a GSE loan is associated with a lower likelihood that a landlord would pursue an eviction.
  • Evictions are more likely to be prevalent in areas where most multifamily loans are originated via nonagency lenders. Increasing the share of GSE-backed properties in a given market would lower eviction rates.
  • There could have been more than 39,000 evictions in the second quarter of 2020 in the selected 12 large cities if there were no government interventions or moratoria. These cities would have experienced about 20 percent more evictions without GSE financing during the pandemic.
Policy implications
  • GSE policy changes affect renters and the larger economy, and it is critical for policymakers to understand these spillover effects when making decisions.
  • Federal policymakers should consider including multifamily credit supply as a metric when evaluating how GSEs are meeting affordable housing mandates.
  • Moratoriums and other eviction protection policies were effective at reducing evictions in 2020.