As COVID-19 cases rose, rents fell in minority neighborhoods

April 15, 2021
The pandemic had opposite effects on rental prices between white neighborhoods and more diverse ones. (AP Photo/David Zalubowski)

The pandemic had opposite effects on rental prices between white neighborhoods and more diverse ones. (AP Photo/David Zalubowski)

The first four months of the COVID-19 pandemic saw large decreases in the mean and median rents in the largest metropolitan cities in the United States, but those decreases were driven almost entirely by reductions in Black, Latino and diverse neighborhoods, according to new research on how the pandemic impacted rental markets.

The study, published March 24 in American Behavioral Scientist, used data from online rental listings posted on Craigslist, and found that while rents in Black and Latino neighborhoods were going down, rents in white neighborhoods were increasing. While these changes may appear to be beneficial to renters in diverse neighborhoods, the long-term consequences may be detrimental to renters and landlords alike, according to John Kuk, an assistant professor at the University of Oklahoma. 

"Our findings are sending a message to lawmakers and state governments that there are issues with housing in these low-income, minority neighborhoods, and they need to direct their attention to it," Kuk said. 

More American households are renting now than at any point in the last 50 years, including the majority of low-income, nonwhite households and immigrant households in the nation. Kuk and his colleagues looked at more than 2.4 million rental listings across the 49 largest metropolitan areas in the United States, collecting listing date, rent price and geolocation data from Craigslist. While Craiglist isn't a complete census of all the rental housing in the country, it allows for a more immediate and comprehensive understanding of the rental market than other existing sources, such as the American Community Survey and the American Housing Survey.

For March 1 to June 1, they collected information from Craigslist rentals and compared the data with information on neighborhood racial and ethnic composition, socioeconomic status, and rental market dynamics taken from the 2018 American Community Survey to ensure that the listings data was truly representative of the neighborhoods. The researchers also examined COVID-19 positive cases at the metro level during the same period.

The researchers saw a clear dip in rents between March and mid-April, when COVID-19 cases first spiked in many parts of the country and the first federal stimulus payments began. Some cities, such as Seattle and New York City — which, early on, were the epicenters of the pandemic — saw a much sharper decline in rents than other cities with fewer cases. 

A 100% increase in positive COVID-19 tests — going from five cases to 10, then 10 cases to 20, for example — correlated with a $6.52 decrease in median rent and a $5.39 decrease in average rent. Given that positive test rates were increasing so rapidly during this time that 100% increases occurred multiple times in most large cities, that rent decrease is a significant one. Researchers noted that it wasn't until mid-June — after their analysis ended — that the average rents recovered.

However, as overall rents dropped, predominantly white neighborhoods saw continued increases, meaning that this decline was driven primarily by Black, Latino and diverse neighborhoods. A 100% increase in positive tests was associated with an $18.98 increase in mean rent and a $13.33 increase in median rent in white neighborhoods. White neighborhoods have had lower infection rates while poor and nonwhite households have experienced greater job loss and reduced income during the pandemic compared with their white counterparts, which means there's been reduced economic activity in their neighborhoods. 

"Compared to other studies on the pandemic impact on economic activity, our findings are very similar," Kuk said. "The pandemic has impacted a lot of different aspects of our life, but the clear-cut story is the same. Overall, the pandemic has a huge impact on racial inequality."

The rent decreases may have been economically beneficial for renters in the short term, but past crises have shown that sudden turmoil in the housing market could exacerbate problems such as residential segregation and eviction rates, according to Kuk. 

The COVID-19 pandemic also differs from previous external shocks to housing markets, such as natural disasters, because it has led not only to price reduction but also to a decreased demand. Stay-at-home orders reduced the ability and desire of renters to search for new homes, which may have lead landlords to withhold listings. Manhattan, for example, saw the number of signed contracts for properties drop 76% in 2020 compared to 2019. Additionally, the median sales price in the New York City borough dropped 18%, and the number of completed sales transactions was down over 50%, which indicates the impact on landlords as well as on their renters.

A rental market with too-low prices has the potential to push out mom and pop landlords, who will likely be replaced by larger corporate entities, according to Kuk. Further corporatization of the rental market will likely leave less room for affordable housing options and leave low-income renters at a greater risk of eviction. 

Further research needs to be done to properly examine the medium- and long-term consequences of these market changes, Kuk said, particularly using a larger pool of rental listings to see the full scope of the problem. Avoiding consolidation of the rental market should be a high priority for policymakers as they work toward rebuilding the economy post-pandemic, according to the researchers, and while eviction moratoria and rental-assistance programs have been essential in staving off evictions, this study suggests more should be done to prevent foreclosures for small property owners. 

"I don't think this is a renter versus landlord situation," Kuk said. "Anyone who is related to these neighborhoods is going to experience some sort of difficulty."

The study "The COVID-19 pandemic and the rental market: Evidence from Craigslist," published March 24 in the American Behavioral Scientist, was authored by John Kuk, University of Oklahoma; Ariela Schachter, Washington University in St. Louis; Jacob William Faber, New York University; and Max Besbris, University of Wisconsin–Madison.

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