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Saturday, August 07, 2021

Strong real estate markets, lack of supply have extranormal negative effects on low income households: confirmation by research

This isn't news exactly.  In the blog for years we've discussed how the strong residential real estate market has many effects, including (1) a repricing upward of Class B, C and D housing and (2) persistent demand for sub-standard housing, allowing property owners to stint on maintenance ("Understanding the DC housing market: demand for urban living, not the construction of new housing, is the driving force").

19. In the rental market, because of the demand-supply mismatch, substandard housing (Class B, C and D) rents for higher prices than would prevail in a weaker market. (This phenomenon of higher prices for less well maintained housing bleeds across the DC border into Prince George's County.)

Illustrating this fact, NPR reports ("Housing Conditions In This Low-Income Neighborhood Pushed Tenants To Sue The Landlord") in Prince George's County Maryland, that predominately Latino low-income tenants, with the support of CASA de Maryland, are suing the property owner and managers of the Bedford Station and Victoria Station apartments in Langley Park, for lack of maintenance.  

Comparatively speaking, PGC doesn't have a particularly robust set of tenant protections.  

In the past, there was a neighborhood stabilization program under previous County Executive Rushern Baker, called the Transforming Neighborhoods Initiative, and it included the Langley Park area.  I don't know what the status is of that program under his successor.  But Langley Park and additional neighborhoods were removed from the program, switched to a community led initiative rather than the more top-down TNI program, which shifted its focus to the most distressed communities in the program.

The NPR article mentions a journal article, "Do the Poor Pay More for Housing? Exploitation, Profit, and Risk in Rental Markets," published in the American Journal of Sociology (124:4, 2019), detailing the effects of strong housing markets on low income households.  The research results discussed in the article confirms my hypothesis as laid out in Item 19 above.  From the article:

This article examines tenant exploitation and landlord profit margins within residential rental markets. Defining exploitation as being overcharged relative to the market value of a property, the authors find exploitation of tenants to be highest in poor neighborhoods. Landlords in poor neighborhoods also extract higher profits from housing units. Property values and tax burdens are considerably lower in depressed residential areas, but rents are not. Because landlords operating in poor communities face more risks, they hedge their position by raising rents on all tenants, carrying the weight of social structure into price. Since losses are rare, landlords typically realize the surplus risk charge as higher profits. Promoting a relational approach to the analysis of inequality, this study demonstrates how the market strategies of landlords contribute to high rent burdens in low-income neighborhoods.

Code enforcement.  While often used as a displacement mechanism, some communities use regular inspections of rental properties as a mechanism for ensuring quality maintenance.  In Prince George's County, the incorporated city of Hyattsville does this, although I don't know if it is done every year, upon renewal of the rental license.

Upping code enforcement requirements on rental properties in the unincorporated sections of PGC would be an important tenant protection mechanism. 

Inequality in sociology and planning.  The journal article is devastating in its discussion of inequality as an area of study in sociology. 

It quotes extensively from a review by famed sociologist Arthur Stinchcombe of the book Inequality by Jencks et al.  Stinchcombe criticized the book for focusing on inequality as a failing of individuals as opposed to the result from power differentials between the well off and the impoverished, and class.

This schism -- personal failings versus power differentials -- shapes how inequality is addressed to this day in policy differences between Republicans and Democrats, the idea of the "deserving poor," and discussions of "structural racism," "multi-generational poverty," and investments in people or place versus people and place.

-- "Equity planning: an update," 2020
-- "St. Louis: what would I recommend for a comprehensive revitalization program? | Part 1: Overview and Theoretical Foundations," 2021
-- "St. Louis: what would I recommend for a comprehensive revitalization program? | Part 2: Implementation Approach and Levers" (forthcoming)


3 comments:

  1. WRT rental housing and inspections, Pew report on Philadelphia finds that the city only inspects 7% of units annually, most triggered by tenant complaints.

    https://www.inquirer.com/real-estate/housing/philadelphia-rental-inspections-licenses-department-landlords-20211118.html

    https://www.pewtrusts.org/en/research-and-analysis/reports/2021/11/rental-code-enforcement-in-philadelphia

    From the article:

    "Some policymakers worry that cracking down on enforcement of rental housing standards could burden landlords who have been struggling during the pandemic, leading to higher rents and displacement of tenants. They “see a trade-off between making rental properties safer and maintaining affordability for the city’s large low-income population,” Howell said."

    “We acknowledge these concerns and tenant advocates also do,” she said, “but they say that failing to enforce basic rental housing standards for all perpetuates a dual inequitable housing market with one set of standards for households with low incomes and another for everyone else.”

    Pew examined rental code enforcement in nine other cities that, like Philadelphia, have large inventories of rental housing with a high percentage of units built before 1980 and/or located in single-family or duplex homes. It found that enforcement varies widely but that Philadelphia and others are exploring new ways to ensure landlords meet rental standards.

    Some cities, such as Baltimore, aim to inspect properties around the time they are registered as rentals and periodically afterward, according to Pew. New York and Chicago join Philadelphia in depending on resident complaints, but tenants can be hesitant to complain for fear of retribution from landlords, which is illegal.

    Howell suggested Philadelphia officials consider conducting periodic inspections of all rental units rather than waiting for complaints. But in 2017, L&I told City Council that it would have to spend $3.4 million annually to employ 52 additional people to inspect every rental unit every five years. The department already has trouble recruiting. ...

    Pew found through interviews with landlords that whether they maintain their units depends on the amount of rent they receive, the probability and severity of consequences for noncompliance, and the market demand for even units in poor condition, driven by tenants’ low incomes and prior evictions, which limit choices.

    "More Philly landlords are selling properties and deferring maintenance, which threatens the supply of affordable housing"

    https://www.inquirer.com/real-estate/housing/philadelphia-rental-assistance-phl-landlord-sell-maintenance-20210907.html

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  2. The Philadelphia Inquirer has a bunch of articles on rental property issues.

    https://www.inquirer.com/opinion/editorials/unlicensed-rental-properties-philadelphia-20211222.html

    "As homeownership declines, Philly must address unlicensed rental properties"

    2. "Philadelphia inspects only 7% of its rental units each year, Pew says"

    https://www.inquirer.com/real-estate/housing/philadelphia-rental-inspections-licenses-department-landlords-20211118.html

    Rental Code Enforcement in Philadelphia
    Pew Charitable Trusts

    3. "City Council wants Philly to pay for urgent property repairs and bill the owners"

    https://www.inquirer.com/real-estate/housing/property-repair-landlord-philadelphia-licenses-inspections-li-20211028.html


    https://www.pewtrusts.org/en/research-and-analysis/reports/2021/11/rental-code-enforcement-in-philadelphia

    4. "Philadelphia’s affordable housing strategy depends on repairing existing homes"

    https://www.inquirer.com/real-estate/housing/home-repair-grant-loan-philadelphia-affordable-housing-20201107.html

    Philadelphia has created the "Restore, Repair, Renew" loan program, 3%, 10 year term, $2500 to $25000.

    https://www.inquirer.com/real-estate/housing/philadelphia-home-improvement-loan-program-restore-repair-renew-credit-score-lenders-20190313.html

    "Philadelphia to launch low-interest loan program that will help residents fix aging homes"

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  3. Across Iowa, tenants of subsidized Truverse apartments frustrated by lax maintenance, confusing fees

    https://www.desmoinesregister.com/story/news/2022/02/13/tenants-blast-iowa-company-runs-subsidized-apartments-toledo-truverse-low-income-housing-usda/6566730001/

    Note that the article is locked, but available through library newspaper articles databases.

    It's another example of low income residents, having no other choices, are stuck living in places that are poorly maintained, but stay because they are "cheap."

    ReplyDelete