Will they stay or will they go: Predicting subsidized housing opt-outs

Over the past 30 years, the share of renters in the United States spending over 30% of their income on rent, and thereby qualifying as rent burdened, has increased. This trend has particularly affected low-income families. At the same time, owners of thousands of privately owned, publicly subsidized rental housing units have left, or ‘‘opted out,’’ of subsidy programs across the country. The efforts of local governments to preserve these properties as affordable housing are handicapped by a lack of understanding of the underlying factors that drive owners’ decisions to opt out. This paper employs a unique dataset on subsidized properties in New York City and uses hazard models to explore why property owners in the Mitchell-Lama program, a New York State affordable housing program, choose to opt out. Our results suggest that properties located in neighborhoods with high property value growth, those with for-profit owners, and those past the affordability restrictions on all subsidies, are more likely to opt out. While our study focuses on Mitchell-Lama properties, the findings have broader implications for properties around the country that receive supply-side rental subsidies. We thank Jingqiang Du, Amy Faust, Tyler Jaeckel, Ken Adler, and Samantha Wright for their research assistance on this project. We are grateful for the valuable feedback from Vicki Been, Ingrid Gould Ellen, Andrew Hayashi, and the rest of the staff at the Furman Center for Real Estate and Urban Policy. We would also like to acknowledge the support from the Furman Center, Herbert Z. Gold, and the MacArthur Foundation. The opinions expressed herein are those of the authors and do not represent the official positions of the Federal Reserve Bank of Boston. 2013 Elsevier Inc. All rights reserved.