How Do Rental Properties Affect the Neighborhood?

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Homeownership has long been considered part of the American dream, but after the 2008 housing and mortgage crisis and a slow recovery, many people are opting to rent instead of buy. Many homeowners who were foreclosed on now find themselves as renters, too. Renting does not necessarily mean apartment living; single family homes are available for rent in many suburban neighborhoods. Some people think that the presence of renters will drive down property values in the neighborhood, but the research is not clear on this subject.


  • While some studies show that a high density of rental properties can drive down home values, other studies have found no real link between home values and the proximity of rental developments in the neighborhood.

Homeowner Perceptions of Rental Properties

There are several perceptions of what too many rental properties can do to a neighborhood. People might assume that the presence of renters will drive down property values, decrease the amount of maintenance and upkeep done on the rental properties to keep them appealing and reduce participation and involvement that might otherwise be found in the neighborhood. Homeowners who oppose renters in their neighborhood also assume they will have less income and create an unfair burden on schools and other municipal services.

Negative Consequences of Rentals

Research on the impact of rental properties in a neighborhood has been contradictory. While a study conducted by the Massachusetts Institute of Technology shows no real link between home values and the proximity of rental developments that house people of mixed incomes, other studies have shown that a high density of rental properties can drive down home values. While renters generally have a lower income than homeowners, that is not always the case. Nationwide, households making at least $50,000 annually make up 36 percent of the rental market.

In addition to the potential for lower property values and less stable income, renters in the neighborhood may be less willing to participate in the community because they do not want to make a personal investment some place they might not be living for the long term. The constant turnover of neighbors and presence of moving trucks can also contribute to a lower quality of life.

Positive Aspects of Rentals

For some homeowners, renting out their property is the only way to avoid foreclosure. Most neighborhoods would fare better with rental properties in the area instead of foreclosed or abandoned homes with no one to keep up the maintenance or landscaping. A study by Colorado State University confirmed that home values decrease when vacant properties take up a community.

There are also cases where renters take just as much pride of ownership in the homes they lease as their neighbors who own. High-quality tenants keep the lawns mowed, the house looking good and they stay for a long time. Property owners who want to protect their investment will make a point of renting the home out to stable, well-qualified renters.

Exploring Rental Restrictions

Some neighborhoods and homeowners associations are placing restrictions on the number of rental properties allowed within a particular area. The town of Winona in Minnesota became the first city in the country to impose a cap on the number of rental properties and in West St. Paul, Minnesota, a block can have no more than 10 percent of rental homes. HOAs can restrict the ability of property owners to rent out their homes. In addition to an outright prohibition, they can also forbid the placement of signs advertising a home for rent.