There’s an interesting phenomenon in the U.S. housing market. On the one hand, there were several hundred thousand new homes built in 2015. On the other hand, there are over a million residences that are lying vacant. People are building new homes, but neglecting the structures that are already there. Many of those structures stayed vacant and abandoned for so long that they fall into disrepair. The only option now is to level them and start over.
What does the vacancy rate in the U.S. look like currently? Not as bad as last year, but still an alarmingly high number.
Vacancy Rate Extremes
Out of all the millions of homes around the country (roughly 85 million of them), over 1.3 million are sitting vacant (according to a recent report from Realty Trac). That’s about 1.6% of all homes out there. What that means is that if you enter the average city around the country, 3 out of every 200 homes currently has nobody living in it.
Naturally there are those on either end of the spectrum. For a long time, cities like Detroit have had a much higher vacancy rate (about 5.3%) than other cities like Fort Collins (.2%). So, what causes a city to have a massive housing crisis? First, let’s take a look at the regions with the highest rates of vacancy in the U.S.
Cities with High Vacancy Rates
When we are looking at vacancy rates, don’t confuse that with foreclosure rates. There are a lot of buildings out there that are simply empty. They’re not owned by the bank; they just don’t have residents.
- Flint, Michigan – 7.5% vacancy
- Detroit, Michigan – 5.3% vacancy
- Youngstown, Ohio – 4.4% vacancy
- Beaumont – Port Arthur, Texas – 3.8% vacancy
- Atlantic City, New Jersey – 3.7% vacancy
- Indianapolis, Indiana – 3% vacancy
- Tampa, Florida – 2.9% vacancy
- Miami, Florida – 2.8% vacancy
- Cleveland, Ohio – 2.8% vacancy
- St. Louis, Missouri – 2.6% vacancy
Knowing the cities that are the hardest hit, we can hypothesize why they are struggling to keep residents in their homes.
Common Themes in High Vacancy Cities
When we look at the top of the list, it’s no surprise that Flint, Detroit, and Youngstown are up high. These cities were hit hard in recent years by the recession and the collapse of the auto industry.
Flint, Michigan has been in the news a lot recently because of the problems with the city water. Deteriorating infrastructure has led to city water that is highly contaminated. A problem exacerbated by the fact that the city has been slow to fix the problem.
Flint should have the population and the tax income to fix their infrastructure problems. However, when the auto industry was in turmoil, back in 2008, the economy in much of Eastern Michigan collapsed. The income wasn’t there, and people migrated out en masse. Without people paying taxes, the city had to cut costs wherever possible. This led to water problems, and caused further emigration.
Detroit, Michigan has suffered from similar problems. Since 2008, the city has lost over 230,000 residents. This has led to a large number of vacant homes and apartment buildings. As those buildings are left to deteriorate, most people find that building new is a better option than trying to repair an old dilapidated structure.
Youngstown, Ohio has long been known for its steel production and manufacturing. The city has relied heavily on trade workers to produce high-quality steel used in everything from buildings to vehicles. Sadly, after the economy slumped, the city never fully recovered. As more and more manufacturing is shipped overseas, the town suffers even further.
When a town no longer has a viable job source, the housing market suffers.
The Bulk of the Vacancies
Interestingly enough, most of the vacant properties aren’t single family homes. One would expect that when the housing bubble burst, many people were foreclosed and forced from their houses. That would mean that most of the vacant residences sitting around are empty one-family homes.
The Realty Trac research, however, shows that the vast majority (76.7%) are investment properties. Investment properties include apartment buildings and residences where the owner of the property doesn’t live on the premise.
The cities with the highest percentage of vacant homes belonging in this category are primarily on the east coast. Myrtle Beach, South Carolina tops the list with 95% of the vacant properties falling into the investment property category.
The Bottom Line
There are a lot of theories and a lot of underlying reasons why so many properties around the U.S. are lying vacant (so many that there are two empty houses for every homeless person in the U.S.).
One primary reason is that after the housing collapse, and the great recession, the areas with high vacancy rates never fully recovered. Another reason is that after some time being vacant, many of these properties simply aren’t worth fixing anymore. Finally, when there are fewer residents, the city collects less tax. Less tax revenue means there aren’t the funds required to simply go through and bulldoze the buildings that are beyond repair.