Tag Archives: housing supply

The fight to make it harder for landlords to evict their tenants

Originally published in Vox on May 1, 2023.
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In most US communities, renters have very little assurance of staying in their homes long term if they’d like to. Landlords can hike rents, evict tenants through court with little difficulty, or simply choose to not renew their lease. Nearly 5 million Americans lose their homes through eviction and foreclosure every year, and millions more deal with threats of housing loss.

In July 2021, local lawmakers in Albany approved New York’s first “good cause” eviction law — a city ordinance affirming tenants’ right to renew their leases, defining what could lead to eviction, and protecting them against “unconscionable” rent hikes exceeding 5 percent. Within a few months, four more upstate New York cities — Kingston, Newburgh, Poughkeepsie, and Beacon — followed suit.

But tenant advocates didn’t have long to celebrate. Landlords challenged the measures in court, arguing the local laws violated their state property rights. In three separate rulings over the last six months, the courts agreed, and “good cause” laws in Newburgh, Albany, and Poughkeepsie were struck down. Kingston lawmakers preemptively repealed their own measure two weeks ago.

A statewide “good cause” eviction law is now at the heart of one of the most high-profile battles in New York’s legislature. It mirrors the growing focus of housing advocates across the country, who argue lawmakers need to do more to prevent the harms clearly linked to losing one’s home, including higher job loss, debt, suicide, and reduced credit access.

Similar state-level “good cause” measures have passed recently in California, Oregon, and Washington state, and legislators in Colorado, Connecticut, and Maryland have taken up the idea this year, too.

Landlord groups argue “good cause” eviction rules will upend the housing market during an already volatile period, and slow down much-needed new construction. Supporters of the protections say this is just real estate industry fear-mongering, noting that in states that have already passed “good cause” eviction laws, construction has continued apace.

No state has had a “good cause” ordinance longer than New Jersey, which passed its own version in 1974.

“There’s a thriving rental market in New Jersey, it has not collapsed by any stretch of the imagination,” said Peter Hepburn, a sociologist at Rutgers University-Newark and an analyst at Princeton’s Eviction Lab.

Julia Salazar, the New York senator leading the push in her state legislature for “good cause” eviction, said opposition is led largely by those “who want to exploit the need people have to be housed.” She argued there’s been a lot of misinformation about her bill.

“No one is saying we have enough housing stock or we don’t need to build, and I believe we urgently need to build more housing,” she told Vox. “If ‘good cause’ were in fact any impediment to that then I would certainly be concerned, but the reality that we’ve seen in states like New Jersey and Oregon is it’s just not.”

However, whether these laws will provide the kind of protection advocates yearn to see is not clear, since many common reasons for eviction — like being a nuisance or damaging property — are listed as “good causes” in the statutes. One hope, though, is that they could provide more regulation over the myriad informal evictions that typically take place outside of court. To date, there’s been little research on the effectiveness of the laws in the states that have recently passed them, partly because they’re so new and partly because it’s challenging to disentangle the effect of “good cause” from all the other Covid-19 tenant protections.

In New Jersey, advocates concede, “good cause” has not been a strong deterrent against evictions, partly because its language barring “unconscionable” rent increases lacks a specific threshold (like 5 percent, for example), making enforcement difficult.

“The note of caution I would sound is that every ‘good cause’ statute permits eviction for nonpayment of rent,” said Hepburn. “And nonpayment of rent is far and away the most common cause that evictions are filed.”

How “good cause” eviction laws work

Laws requiring “good cause” for eviction (sometimes called “just cause” or simply eviction “for cause”) are tenant protections meant to give renters a greater sense of housing security and empower them to hold landlords accountable for poor conditions without fear of retaliation.

The laws vary from place to place but they always include specific reasons a landlord could choose to legally evict a tenant or opt not to renew their lease. A tenant can then challenge an eviction in court if they feel it was ordered without legitimate cause.

The National Low Income Housing Coalition lists three core components of “good cause” legislation. Beyond defining the legal grounds for an eviction, advocates say most place limits on rent increases (some of these limits are vaguer than others), and most laws also include enhanced requirements for written eviction notices, so tenants have enough time to gather any documentation they need to challenge it. In Oregon, for example, landlords have to provide a tenant they want to evict with 90 days notice.

While there has not been much research to date on the impact of “good cause” eviction laws, some evidence suggests they make a difference. One study found local “good cause” ordinances in four California cities lowered eviction rates between 2000 and 2016. The researcher concluded the measures “have a significant and noticeable effect on eviction and eviction filing rates” and provide a low-cost policy solution for other states and cities. Other advocates note that traditional eviction data — which relies on court filings — generally fails to capture the 72 percent of forced displacement that occur outside the court system.

Ned Resnikoff, the policy director for California YIMBY, said he doesn’t believe there’s any reliable data yet on California’s statewide “good cause” measure that took effect in 2020, partly because some eviction moratoriums remain in effect. “But the Terner Center has found that the rent stabilization piece of [the law] isn’t being adequately enforced, so I think it’s reasonable to surmise that we might face a similar issue with just cause protections,” he told Vox.

Progressives are throwing their weight behind the fight in New York

Progressive activists have named “good cause” eviction a top priority for this year, and powerful congressional Democrats including Reps. Alexandria Ocasio-Cortez, Jerry Nadler, and House Minority Leader Hakeem Jeffries have also come out in support.

The bill would bar rent increases that exceed 3 percent of the previous rental amount, or 1.5 percent of the Consumer Price Index, whichever is higher. This could provide significant protection: Even among New York City’s 1 million rent-stabilized apartments, tenants are looking at rent increases for next year that could range between 5 and 16 percent.

New York’s bill would go further in protecting tenants than the “good cause” laws that passed on the West Coast, as New York’s proposed limits on rent increases would apply not only to old units, but also to new and future housing.

The Community Service Society of New York, a progressive advocacy group, estimates that 1.6 million New York households would be protected from eviction based on unreasonable rent increases under Salazar’s bill.

Landlords are fighting back, arguing the eviction moratorium from the pandemic already put them under severe financial strain, will lead to more backlogged court cases, and will leave them financially vulnerable in an inflationary period. The right-leaning New York Post blasted the proposed law for potentially discouraging new housing and driving existing landlords out of business.

Tim Foley, the CEO of the Building and Realty Institute, which represents Westchester and mid-Hudson region real estate professionals, told Vox his members worry it will hurt their ability to get financing to complete their projects. He pointed out that banks, including the recently collapsed Signature Bank, paused or stopped lending following the passage of New York’s 2019 state tenant protections. His organization also found repairs and maintenance in rent-stabilized units decreased after the 2019 law, suggesting there could be “unintended consequences” to the tenant rights law.

Ann Korchak, the board president of Small Property Owners of New York, a landlord advocacy group with roughly 600 members, told Vox she believes her state “already has incredibly strong tenant protections” and disagrees with advocates who say otherwise.

Salazar told Vox she sees Democratic Gov. Kathy Hochul as their biggest political obstacle, and previously indicated she’s open to making modifications to her bill. Lawmakers tried and failed to pass a similar bill in 2019, but Salazar thinks there are more elected officials now who embrace a “housing justice” platform.

Hochul, who introduced her own housing agenda earlier this year, has thus far signaled disinterest in the proposed “good cause” eviction bill, though her proposals have failed to gain traction and pressure remains for lawmakers to do something on the affordability crisis.

Evictions are life-altering and preventable

Despite research showing harms related to eviction, it wasn’t until the pandemic that the government stepped up to help families avoid this traumatic experience. One of the most significant Covid-19 social policy developments was the creation of the federal Emergency Rental Assistance Program, which authorized $46.5 billion to help people stay housed. More than half of states passed their own eviction prevention measures as well.

But now emergency rental aid has mostly tapped out, state and local eviction moratoriums have mostly expired, and a federal bill to establish a permanent eviction prevention fund died in Congress.

Advocates say “good cause” measures, especially since they can be passed at little cost to governments, represent a meaningful interim step lawmakers can take now as they continue fighting for more rental assistance, source-of-income discrimination bans, and right to counsel. To make “good cause” ordinances more effective, tenant advocates say local courts and legislators must also develop stronger enforcement mechanisms, including better ways to track and analyze eviction filings and judgments. The National Low Income Housing Coalition also emphasizes the need to pass “equitable marketing strategies” that can help tenants learn how to exercise their rights.

Hepburn, of Rutgers and the Eviction Lab, said “good cause” eviction measures are worthy ideas, especially in a place like New York, which has the highest share of renters among all 50 states. Yet he noted the unfortunate reality that gaps in housing security between blue and red states continue to widen.

“These laws should happen, but it should be noted that where they’re passing are in places that have tenant protections already,” he said. “These bills are not coming up in places like South Carolina, like Virginia, like Georgia. How do we do something like this in Indiana?”

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Where are all the apartments for families?

Originally published in Vox on April 23, 2023.
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Roughly 40 percent of American millennials have four-year college degrees, and if there’s one thing these highly educated young people have liked to do over the last 15 years, it’s move to big cities.

Researchers find they (well, we) have accounted for more than half the population increase in “close-in” urban neighborhoods in the country’s largest metro areas since 2010, and they credit our migration (and our taxes) with accelerating urban revival. We don’t have to guess as to why: Millennials like diverse, walkable environments with good public transit and bike lanes. They like the rich cultural amenities, including bars, restaurants, and concert venues. And they like the higher-paying work opportunities available.

All this might make you think millennials have moved to cities permanently. But as they get older, the number of urban children has continued to drop. Lower birth rates are part of the story, but economists say the strong correlations with population shifts strongly suggest that “out-migration” of cities explains a big portion of the loss. In other words, millennials now in their mid-30s and 40s with young kids have started decamping for suburbs to raise their families.

Some older adults nod smugly, seeing these suburban migration patterns as proof that there was never any meaningful difference between their preferences and that of millennials at all. Millennials did not start the trend of moving to cities in one’s 20s: Plenty of baby boomers and Gen X moved to urban areas in young adulthood, and then back to the suburbs to raise a family once they coupled up and needed more space.

And certainly some millennial families really do crave the kind of lifestyles found in suburbs: the bigger houses and lawns, the schools, and safety.

But for many other young people looking to start families, the choice to stay in the city or move to the suburbs doesn’t feel much like a choice at all. There simply aren’t many family-oriented housing options in cities, let alone ones young couples could afford.

For years now the shortage of housing, and the dearth of new housing built to accommodate a growing population, has been getting more attention. But only more recently have people started to discuss that, even in places that have loosened their zoning rules and authorized new housing construction, the overwhelming majority of new units are studios or one- and two-bedroom apartments, built with singles, childless couples, and adult roommates in mind.

Advocates for more housing say they’re aware that cities are losing families with kids, even in areas that are adding new units to the market — and they argue that it’s one reason why reforming zoning is only the first step toward building cities that house more people.

“Yes, there’s been a ‘build baby build’ attitude because we’re so far behind, but there are big asterisks and caveats to that,” said Matt Lewis, a spokesperson for California YIMBY, a pro-housing group. “If you just do zoning, you will end up with a whole lot of one- and two-bedrooms.”

Zoning reform is necessary but not sufficient

Housing demand outstrips supply in major cities, leading to rising costs for tenants and prospective homeowners. A top culprit for this scarcity is local zoning laws that bar new construction and empower homeowners who gain financially from restricting new housing to decide whether or not to make room for more neighbors.

Over the last decade, there has been a growing movement to loosen zoning rules to facilitate more construction. And among those few places that have changed their zoning laws, evidence suggests it has helped contain rising rents, largely by reducing competition among individuals for units.

Addressing restrictive zoning is a crucial first step to making cities more affordable, and most communities still haven’t even taken that step.

Orphe Divounguy, a senior economist at Zillow, analyzed the top metropolitan areas sourced from the American Community Survey and found that the most “doubling up” — meaning a family living with another family — occurs in the nation’s most expensive cities, like Los Angeles, Boston, Denver, Seattle, and Washington, DC.

While some might simply prefer these living arrangements, Divounguy observed that nearly 70 percent of families doubling up in these high-cost cities had incomes of $35,000 or less — suggesting their choices to live in closer quarters may be driven by financial need. “We need to build more units,” Divounguy told Vox. “If we had more units then buyers and renters would have more buying power and prices would go down.”

Christopher Leinberger, a longtime land use strategist, agreed that upzoning — altering rules to allow more dense housing in places previously zoned only for single-family homes — is the fundamental prerequisite for creating more family-oriented housing. Without that, he argues, land prices will remain “completely out of whack” and drive up prices.

“A few decades ago, the plot of land itself would be no more than 20 percent of a home’s price,” Leinberger said. “Today it can be up to 50, 60, or 70 percent.”

Higher land prices is also a top reason developers don’t bother building entry-level starter homes anymore, even in areas they’re legally allowed to; the increasingly expensive plot of land can’t justify the expense of building a low-cost affordable house.

Emily Hamilton, the director of the Urbanity Project at the Mercatus Center, echoes Leinberger and Divounguy in saying that liberalizing zoning laws would help expand family-oriented housing. “Freeing homebuilders to serve a wider variety of households at a broad range of incomes is the path to abundant housing,” she wrote recently in Discourse magazine. “It would allow more parents to have shorter commutes, freeing more time to spend with their kids.”

Other regulatory barriers stand in the way of family-oriented housing

The problem is, as housing advocates are learning, upzoning is not enough.

The basic back-of-the-envelope calculations of housing developers in America today are such that if a builder can construct more housing in cities, they will almost always build one- and two-bedroom apartments because smaller units generate more rent per square foot. Developers are, in effect, incentivized to try and pack in as many units as they can.

The most successful strategy for ending homelessness is under attack

One option is to pass laws that require developers to include more family-sized units in their portfolio — more three- or four-bedroom places, for example. But housing experts say trying to force developers to build family-oriented housing will probably backfire. “Dictating to developers what their product mix should be is going to be difficult,” said Leinberger. “If you get into the business of legislating that, they’ll just go to some other town.”

So if you’ve fixed your city’s restrictive zoning, now what?

Lewis, of California YIMBY, said they’ve been learning out in the Golden State that the next step is to look at the building codes and other regulatory barriers that influence the types of housing developers choose to build.

“It’s like whack-a-mole,” he said, meaning just when pro-housing advocates think they’ve defeated the last barrier to new construction, new ones come into clearer view. “These are all arcane rules that no one was paying attention to until five-seven years ago.”

One such building code restriction is the requirement that most multifamily buildings have two stairwells. This is a rule rooted in fire safety, though most other countries allow one stairwell and opt for other fire safety strategies instead. One consequence of the double stairwell model is it ends up making architecture more homogenous and inefficient. (This is why most apartment buildings in America have long central hallways, with apartments on either side.)

Housing activists lately have been rallying around “single-staircase” reform, changing building codes to eliminate this requirement for a second stairwell. These reforms will make it easier to use different floorplans and hopefully make it more cost-effective to build family-oriented housing in cities — perhaps a three-bedroom, one-and-a-half bath apartment, with only one bedroom having a walk-in closet.

Lawmakers in Washington state overwhelmingly approved a bill this month to legalize single-stairwell construction, and California legislators are currently pursuing a similar reform.

Other barriers include regulations like minimum lot sizes, “set-back” requirements that give towns power to dictate how far back from the curb a home can be built, and “floor-area ratios” — the ratio of a building’s total floor area to the size of the land on which it’s built.

California Sen. Scott Weiner has been leading the way in his to state to push bills tackling these barriers. “We need to reform zoning, but we also need to end loopholes that make it impossible for our communities to actually build the multifamily housing for which we have already zoned,” he said.

The risk-averse banks also need to be convinced

Unfortunately, adding more homes for families in cities will likely require even more than just making these land-use changes.

Bobby Fijan, a developer who has been trying to build more family-oriented housing in cities, said one of the biggest challenges is convincing American real estate investors that these projects are worthy bets. “I firmly believe it is a chicken and egg problem,” he told Vox.

“Real estate in the US is very conservative, they want to back things in a very standardized way, and they want to look and see heaps of data showing something already works,” he said. “In industries like tech and retail, people are obsessed with the question of ‘what does the customer want?’ That’s not a question that’s really asked in real estate.”

Right now, because the housing supply and demand gap is still so wide, it’s likely that real estate investors will keep backing projects that look like what they’re already building: buildings that cater to childless adults. These are safe bets, with strong track records of delivering returns.

But this doesn’t mean real estate trends can’t change. Fijan has been working to get financing from private equity and is hoping he can build enough “proof points” of successfully profitable family-oriented housing in cities to get the more risk-averse banks to bite in the future.

It’s a gamble that holds a lot of promise. Plenty of young families will still opt for the suburbs’ greener pastures, but many parents would be happy to stay put in their beloved dense cities and raise their kids. To make that a viable option, though, they need somewhere they can actually live.

The fight to make it harder for landlords to evict their tenants

Originally published in Vox on May 1, 2023.
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In most US communities, renters have very little assurance of staying in their homes long term if they’d like to. Landlords can hike rents, evict tenants through court with little difficulty, or simply choose to not renew their lease. Nearly 5 million Americans lose their homes through eviction and foreclosure every year, and millions more deal with threats of housing loss.

In July 2021, local lawmakers in Albany approved New York’s first “good cause” eviction law — a city ordinance affirming tenants’ right to renew their leases, defining what could lead to eviction, and protecting them against “unconscionable” rent hikes exceeding 5 percent. Within a few months, four more upstate New York cities — Kingston, Newburgh, Poughkeepsie, and Beacon — followed suit.

But tenant advocates didn’t have long to celebrate. Landlords challenged the measures in court, arguing the local laws violated their state property rights. In three separate rulings over the last six months, the courts agreed, and “good cause” laws in Newburgh, Albany, and Poughkeepsie were struck down. Kingston lawmakers preemptively repealed their own measure two weeks ago.

A statewide “good cause” eviction law is now at the heart of one of the most high-profile battles in New York’s legislature. It mirrors the growing focus of housing advocates across the country, who argue lawmakers need to do more to prevent the harms clearly linked to losing one’s home, including higher job loss, debt, suicide, and reduced credit access.

Similar state-level “good cause” measures have passed recently in California, Oregon, and Washington state, and legislators in Colorado, Connecticut, and Maryland have taken up the idea this year, too.

Landlord groups argue “good cause” eviction rules will upend the housing market during an already volatile period, and slow down much-needed new construction. Supporters of the protections say this is just real estate industry fear-mongering, noting that in states that have already passed “good cause” eviction laws, construction has continued apace.

No state has had a “good cause” ordinance longer than New Jersey, which passed its own version in 1974.

“There’s a thriving rental market in New Jersey, it has not collapsed by any stretch of the imagination,” said Peter Hepburn, a sociologist at Rutgers University-Newark and an analyst at Princeton’s Eviction Lab.

Julia Salazar, the New York senator leading the push in her state legislature for “good cause” eviction, said opposition is led largely by those “who want to exploit the need people have to be housed.” She argued there’s been a lot of misinformation about her bill.

“No one is saying we have enough housing stock or we don’t need to build, and I believe we urgently need to build more housing,” she told Vox. “If ‘good cause’ were in fact any impediment to that then I would certainly be concerned, but the reality that we’ve seen in states like New Jersey and Oregon is it’s just not.”

However, whether these laws will provide the kind of protection advocates yearn to see is not clear, since many common reasons for eviction — like being a nuisance or damaging property — are listed as “good causes” in the statutes. One hope, though, is that they could provide more regulation over the myriad informal evictions that typically take place outside of court. To date, there’s been little research on the effectiveness of the laws in the states that have recently passed them, partly because they’re so new and partly because it’s challenging to disentangle the effect of “good cause” from all the other Covid-19 tenant protections.

In New Jersey, advocates concede, “good cause” has not been a strong deterrent against evictions, partly because its language barring “unconscionable” rent increases lacks a specific threshold (like 5 percent, for example), making enforcement difficult.

“The note of caution I would sound is that every ‘good cause’ statute permits eviction for nonpayment of rent,” said Hepburn. “And nonpayment of rent is far and away the most common cause that evictions are filed.”

How “good cause” eviction laws work

Laws requiring “good cause” for eviction (sometimes called “just cause” or simply eviction “for cause”) are tenant protections meant to give renters a greater sense of housing security and empower them to hold landlords accountable for poor conditions without fear of retaliation.

The laws vary from place to place but they always include specific reasons a landlord could choose to legally evict a tenant or opt not to renew their lease. A tenant can then challenge an eviction in court if they feel it was ordered without legitimate cause.

The National Low Income Housing Coalition lists three core components of “good cause” legislation. Beyond defining the legal grounds for an eviction, advocates say most place limits on rent increases (some of these limits are vaguer than others), and most laws also include enhanced requirements for written eviction notices, so tenants have enough time to gather any documentation they need to challenge it. In Oregon, for example, landlords have to provide a tenant they want to evict with 90 days notice.

While there has not been much research to date on the impact of “good cause” eviction laws, some evidence suggests they make a difference. One study found local “good cause” ordinances in four California cities lowered eviction rates between 2000 and 2016. The researcher concluded the measures “have a significant and noticeable effect on eviction and eviction filing rates” and provide a low-cost policy solution for other states and cities. Other advocates note that traditional eviction data — which relies on court filings — generally fails to capture the 72 percent of forced displacement that occur outside the court system.

Ned Resnikoff, the policy director for California YIMBY, said he doesn’t believe there’s any reliable data yet on California’s statewide “good cause” measure that took effect in 2020, partly because some eviction moratoriums remain in effect. “But the Terner Center has found that the rent stabilization piece of [the law] isn’t being adequately enforced, so I think it’s reasonable to surmise that we might face a similar issue with just cause protections,” he told Vox.

Progressives are throwing their weight behind the fight in New York

Progressive activists have named “good cause” eviction a top priority for this year, and powerful congressional Democrats including Reps. Alexandria Ocasio-Cortez, Jerry Nadler, and House Minority Leader Hakeem Jeffries have also come out in support.

The bill would bar rent increases that exceed 3 percent of the previous rental amount, or 1.5 percent of the Consumer Price Index, whichever is higher. This could provide significant protection: Even among New York City’s 1 million rent-stabilized apartments, tenants are looking at rent increases for next year that could range between 5 and 16 percent.

New York’s bill would go further in protecting tenants than the “good cause” laws that passed on the West Coast, as New York’s proposed limits on rent increases would apply not only to old units, but also to new and future housing.

The Community Service Society of New York, a progressive advocacy group, estimates that 1.6 million New York households would be protected from eviction based on unreasonable rent increases under Salazar’s bill.

Landlords are fighting back, arguing the eviction moratorium from the pandemic already put them under severe financial strain, will lead to more backlogged court cases, and will leave them financially vulnerable in an inflationary period. The right-leaning New York Post blasted the proposed law for potentially discouraging new housing and driving existing landlords out of business.

Tim Foley, the CEO of the Building and Realty Institute, which represents Westchester and mid-Hudson region real estate professionals, told Vox his members worry it will hurt their ability to get financing to complete their projects. He pointed out that banks, including the recently collapsed Signature Bank, paused or stopped lending following the passage of New York’s 2019 state tenant protections. His organization also found repairs and maintenance in rent-stabilized units decreased after the 2019 law, suggesting there could be “unintended consequences” to the tenant rights law.

https://19a14d1daaf88dac80a00453c408ba3d.safeframe.googlesyndication.com/safeframe/1-0-40/html/container.html

Foley said his members instead back bills to expand legal representation for low-income New Yorkers during eviction proceedings (known as “right to counsel”) and to expand access to housing vouchers.

Ann Korchak, the board president of Small Property Owners of New York, a landlord advocacy group with roughly 600 members, told Vox she believes her state “already has incredibly strong tenant protections” and disagrees with advocates who say otherwise.

Salazar told Vox she sees Democratic Gov. Kathy Hochul as their biggest political obstacle, and previously indicated she’s open to making modifications to her bill. Lawmakers tried and failed to pass a similar bill in 2019, but Salazar thinks there are more elected officials now who embrace a “housing justice” platform.

Hochul, who introduced her own housing agenda earlier this year, has thus far signaled disinterest in the proposed “good cause” eviction bill, though her proposals have failed to gain traction and pressure remains for lawmakers to do something on the affordability crisis.

Evictions are life-altering and preventable

Despite research showing harms related to eviction, it wasn’t until the pandemic that the government stepped up to help families avoid this traumatic experience. One of the most significant Covid-19 social policy developments was the creation of the federal Emergency Rental Assistance Program, which authorized $46.5 billion to help people stay housed. More than half of states passed their own eviction prevention measures as well.

But now emergency rental aid has mostly tapped out, state and local eviction moratoriums have mostly expired, and a federal bill to establish a permanent eviction prevention fund died in Congress.

Advocates say “good cause” measures, especially since they can be passed at little cost to governments, represent a meaningful interim step lawmakers can take now as they continue fighting for more rental assistance, source-of-income discrimination bans, and right to counsel. To make “good cause” ordinances more effective, tenant advocates say local courts and legislators must also develop stronger enforcement mechanisms, including better ways to track and analyze eviction filings and judgments. The National Low Income Housing Coalition also emphasizes the need to pass “equitable marketing strategies” that can help tenants learn how to exercise their rights.

Hepburn, of Rutgers and the Eviction Lab, said “good cause” eviction measures are worthy ideas, especially in a place like New York, which has the highest share of renters among all 50 states. Yet he noted the unfortunate reality that gaps in housing security between blue and red states continue to widen.

“These laws should happen, but it should be noted that where they’re passing are in places that have tenant protections already,” he said. “These bills are not coming up in places like South Carolina, like Virginia, like Georgia. How do we do something like this in Indiana?”

Democrats eye new legislation to rein in Wall Street landlords

Originally published in Vox on December 2, 2022.
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Institutional housing investors — largely, the commercial banks, private equity, and other financial entitles that flip homes or rent them out — have been the subject of conflicting media messages.

On the one hand, we’re told investors are buying up more housing than ever. In 2021, they bought nearly one in seven homes sold in the 40 largest US metropolitan areas, the most in at least two decades, according to Redfin data analyzed by the Washington Post. In the first quarter of 2022, investors comprised between one-quarter and one-third of home sales in Atlanta, Jacksonville, Charlotte, Phoenix, and Miami. The US House Financial Services Committee reported in June that corporate ownership of single-family rental homes has grown 3 percent annually since 2010, “with the third quarter of 2021 posting the fastest year over year increase in 16 years.”

These trends are worrying, researchers and advocates stress, because there’s evidence that corporate landlords, under pressure to deliver big profits to their shareholders, are more likely to evict their tenants, raise rents more aggressively, and shirk responsibility for basic maintenance and repairs. There’s also evidence that some investors have been targeting homes in Black neighborhoods at disproportionate rates, accelerating gentrification and putting homeownership for some families further out of reach.

On the other hand, housing owned by large corporate investors makes up a much smaller percentage of the nation’s overall housing stock than is often suggested by headlines. Institutional investors, referring to entities that purchase 100 or more properties, accounted for under 3 percent of home sales in 2021 and 2022, according to Freddie Mac. So-called “mom-and-pop” investors, who own fewer properties, are growing at faster rates, and according to the National Rental Home Council, only 1.16 percent of single-family rental homes were owned by rental companies. Americans for Financial Reform estimated that as of June 2022, private equity firms owned about 3.6 percent of apartments and 1.6 percent of rental homes.

Defenders of the sector point to research showing that most people moving into single-family rentals are poorer, younger, have worse credit, have larger families, and are more likely to be single parents than their home-owning counterparts. One study published last year estimated that 85 percent of single-family rental residents would not qualify for a mortgage. Taking away these rental options, advocates warn, would just take away more spacious living arrangements for younger families who can’t yet afford to own, or might not want to even if they could.

Others say the focus on Wall Street investors is largely a scapegoat to avoid wrestling with the real culprit of the housing crisis: the dearth of available units. Sam Khater, the chief economist of Freddie Mac, cited labor shortages, land use regulations, zoning restrictions, political opposition to new housing, lack of developers and lack of land as root causes of the housing shortage. And economic research published this summer found that remote work has also increased US aggregate home prices by 15.1 percent since late 2019.

Still, with damning press and congressional investigations into corporate housing abuses, political pressure has mounted on lawmakers to step in. In August, senators heard testimony from people like Laura Brunner, the president and CEO of the Port of Greater Cincinnati Development Authority. Brunner detailed how institutional investors have upended their local housing market, and dramatically hiked rents in the process. “We’ve been told by institutional investors that they only own about 1 percent of single-family homes; however … this could mean 50 percent of the houses on a single street,” she testified. “When the geographical impact is so concentrated, it has a game-changing effect on what it means to live in that neighborhood.”

In late October, three Democratic House members from California — Reps. Ro Khanna, Katie Porter, and Mark Takano — introduced a new bill, the Stop Wall Street Landlords Act, to address these growing concerns. Senators have also been getting involved, holding listening sessions with renters and housing policy experts. A spokesperson for Sen. Sherrod Brown told me that Brown is focused on “predatory investors and landlords — particularly deep-pocketed investors taking advantage of new technologies” that price out families from homes and leave tenants with unsafe living conditions. Brown is currently working on “legislative steps to protect families and address these predatory practices,” the spokesperson said.

Khanna said he doesn’t see his new bill as a comprehensive housing solution, and stresses that lawmakers need to stay focused on fighting barriers to new housing construction, increasing housing supply, and expanding down-payment assistance. “But we don’t need to be subsidizing institutional investors to go buy up housing in working-class neighborhoods and holding them for appreciation and turning them into Airbnbs,” he told me. “You could make an argument that it was necessary to subsidize Wall Street investors after the 2008 financial crisis when the market collapsed, but that certainly now has run its course.”

The Stop Wall Street Landlords Act, explained

The stated goal of the new House bill is to deter future institutional investments into single-family homes. It would try to do this in a few ways, including by barring corporate investors from claiming certain tax breaks like the mortgage interest deduction, and imposing a transfer tax on the sale value of new single-family home purchases.

The legislation also would bar the government-sponsored mortgage companies — Fannie Mae, Freddie Mac, and Ginnie Mae — from assisting certain large investors in financing, and would establish a new tax credit to help affordable housing developers build and rehab homes in low-income areas.

Groups representing institutional investors, unsurprisingly, have come out strongly against the bill. A spokesperson for the American Investment Council, which represents private equity companies, told Vox that “this politically motivated legislation completely misses the mark and won’t help address the real challenges in today’s housing market.”

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David Howard, executive director of the National Rental Home Council, told the Mercury News he believes the bill “will only reduce the availability of single-family rental housing while making it more expensive — ultimately hurting the very people for whom access to affordably priced rental housing is so essential.”

Kristin Siglin, vice president at the National Community Stabilization Trust, a nonprofit that transfers foreclosed and abandoned properties to local housing groups, praised the bill’s inclusion of the neighborhood homes tax credit, which was also included in the Build Back Better bill the House approved last year.

Siglin told me the coalition she leads to promote the tax credit was “really pleased” to see the measure included, and commended the Stop Wall Street Landlords Act for not only including sticks in the form of ending tax preferences for corporate investors, but also carrots, like the tax credit, to increase the supply of homes to sell to owner-occupants. Right now, large corporate investors are often the only entities available with the financing capabilities to make repairs on homes. The neighborhood homes tax credit, Siglin says, can help to fill this gap, and keep more properties out of Wall Street hands.

Khanna’s office said they worked with experts including the Urban Institute to develop their bill. The Urban Institute’s government affairs manager, Victoria Van de Vate, told me she hasn’t read the Stop Wall Street Landlords Act and said her think tank does not suggest bill language or take official positions on legislation. “A team of housing researchers and I met earlier [in November] with Rep. Khanna and his team to discuss policy alternatives to increase rates of black homeownership and the role of institutional investors in the housing market,” she said. “It was a good conversation, and we always welcome the opportunity to share our research, answer questions, and provide evidence-based recommendations about policy.”

Laurie Goodman, the founder of the Housing Finance Policy Center at the Urban Institute, told me separately that she sees Khanna’s legislation as a very “punitive bill” that would deter institutional investors from buying properties in a way that would be unhelpful. The single-family rental industry does a lot of good things, she added, “all of which are ignored by the critics.” Goodman was not familiar with the neighborhood homes tax credit but argued that institutional investors play an important role in financing repairs that prospective homeowners can’t afford.

Dan Immergluck, a professor of urban studies at Georgia State University who has researched the history of institutional investors on housing markets, told me that while he hasn’t had time to closely read the bill, he does not support allowing Fannie Mae and Freddie Mac to help finance large-scale single-family rental operations unless there were “serious strings” attached, like affordability requirements. Immergluck said he’s less convinced simply making it more expensive for single-family rental operators to do business through measures like excise taxes will be effective, “because in places where they already have market power, they could pass those costs onto tenants.”

Where the corporate housing sector is likely going

What about inflation and the much-discussed housing construction slowdown sparked by rising interest rates? Increased building costs have already led to a slowdown in investor homebuying — a decline of 30 percent in the third quarter of 2022, the Wall Street Journal recently reported. Redfin also just closed its own home-flipping business, following Opendoor Technologies, another online house flipper, which just posted record losses.

Khanna told me he thinks his bill would help stabilize some of the rising rents by decreasing demand from institutional investors, which still accounted for 17.5 percent of all home sales in the third quarter of 2022. Even if institutional investors only buy up a small percentage of total housing, their presence in the bidding wars can still lead to higher costs for all buyers. And even though investor sales growth has slowed, experts expect their share of purchases to rise again soon, as builders with unsold homes look to sell to rental landlords. Plus a widely expected recession could raise unemployment and make it even harder for traditional buyers to compete with corporate bidders.

While investment firms began purchasing foreclosed homes after the housing crash, investors more recently have been pouring billions of dollars into new build-to-rent communities in more than 25 states. The National Association of Home Builders reported 13,000 such homes were started in the first quarter of 2022, up 63 percent from a year before. In November the CEO of Tricon Residential, a Canadian real estate company, said on an earnings call Tricon has nearly $3 billion it plans to use to buy and build new homes.

The Stop Wall Street Landlords Act will not tackle the housing shortage, Khanna acknowledged, but maintained it’s a necessary part of the legislative puzzle. “We need to massively increase housing supply, we need to figure out creative programs for first-time homeowners, and we need my new bill, which will stop the financialization of housing.”