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58 | M REPORT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Natural Disasters' Effects on the Rental Market Renters are at particular risk of natural disasters, especially those in manufactured homes, and may have few options to turn to after a significant event. O wning a home is the gold-standard of housing security. But for those who cannot afford to buy, they rent—and as of late, the market share of renters has steadily risen in light of new housing trends that started two years as the COVID-19 pandemic began to take hold of the market. Today, there are about 44 million renting households in the United States. Between the first and third quarters of 2021, an additional 870,000 households entered the rental market, which drove occupancy rates down to 5.8%—the lowest since the 1980s—and in turn pushed rents skyward by 13.8%. As of the 2020 Census, there are about 330 million Americans liv- ing in 125 million dwelling units. But according to the Joint Center for Housing Studies at Harvard University (JCHS) 40% of the nation's rental housing stock (representing 17.6 mil- lion dwellings) is in danger of experiencing "substantial annual losses from increasingly common environmental hazards" based on the census tract they have been placed in. The Federal Emergency Management Agency assigns each census tract an "Expected Annual Loss Rating" ranging from "Very Low" to "Very High" based on the impact of 18 environmental hazards on people, buildings, and agriculture and the estimated eco- nomic loss in dollars tied to those potential events. According to JCHS's new America's Rental Housing 2022 Report, these units can be affected by any number of disasters such as wildfires, flooding, earthquakes, or hurricanes and mainly lie on the West Coast, Gulf Coast, and the Central United States, better known as "Tornado Alley." "California has the largest number of rental units at risk, with 4.5 million rentals (76% of the state's occupied rental stock) located in census tracts with at least moderate expected annual losses due to likely hazards," said Sophia Wedeen, a research as- sistant at JCHS. "Of these units, 1.6 million are located in areas with 'Relatively High' or 'Very High' expected annual loss rat- ings. Washington and Oregon also have significant numbers of rentals in areas with at least moderate expected annual losses, with around 85% of the occupied rental stock in each state located in such areas." Other states with particularly large numbers of rental units at risk include states in the South and along the Gulf Coast, including Texas (2.3 million units in areas with at least moderate losses); Florida (940,000); North Carolina (570,000); Tennessee (540,00); Louisiana (470,000); and Georgia (460,000). While single-family rentals and pre-manufactured rentals are at the highest risk, an additional 2.6 million units in 2-4-unit multifam- ily buildings are at risk, as are 3.8 million units in multifamily buildings with 5-19 units and 3.5 million units in large multifam- ily buildings with 20 or more units are categorized as being in a "moderate risk" category. Manufactured homes present additional problems: while there are only about 1.1 million units in high-risk areas, they are the most likely of any structure to be at risk nationwide. These manufac- tured homes are also the most likely to be deemed "structurally inadequate" by the Department of Housing and Urban Development and are therefore especially vul- nerable due to loss from environ- mental hazards. The low-rent tenants are paying for some of these units also come into play in light of a disaster. "Many of the units at risk are low-rent or subsidized. 4.0 million occupied units with contract rents below $600, representing 40% of those rentals, are located in areas with at least moderate expected annual losses due to environmen- tal hazards," Wedeen said. "As noted [in the research], both the number and share of units renting for less than $600 have been on the decline in the past decade. With the supply of low-rent units already shrinking, massive losses of this stock from environmental hazards would leave lower-income households with even fewer af- fordable rental options." Additionally, 2.1 million subsi- dized units are located in these high-risk areas and 1.2 million of the 3.1 million units (39%) created under the Low-Income Housing Tax Credit are in moderate risk areas. An additional 700,000 HUD units (representing public housing, Section 8, affordable housing for retirees, low-income and disability housing) are at risk, along with 230,000 (of about 400,000) USDA-subsidized units. Losing these units would give at-risk and marginalized renters little-to-no options for housing after disaster, which could set local markets back by years as everything is repaired or recon- structed. "An increasing number of rental units will be at risk of loss due to environmental hazards in coming years. In the short term, damage from hazards will almost certainly drive up the cost of repairing and rebuilding rental units. Reducing the time to build replacement rental housing after a natural disas- ter and increasing the availability of post-disaster financial assistance for renters are both urgent priori- ties," Wedeen concluded. "At the same time, the growing frequency and severity of hazards and the magnitude of their damages will likely make an increasing num- ber of rental units uninhabitable, displacing residents and threaten- ing to further reduce the supply of rental housing. A massive federal and local investment is needed to preserve the existing stock and adapt rental units to the wide range of acute and chronic envi- ronmental hazards exacerbated by global climate change."