Revisiting Shared Housing as a Solution

This message comes from Avalera. What's it like running a business with Avalera? No thinking about tax and compliance? It's handled calculating, filing, validating, accurately, and audit defensibly Avalera, Aentic tax and compomplliance with Confidence This is Planet Money from NPR A few years ago, Amanda Cantrell was looking for a new house to live with her boyfriend and a friend She wanted to rent a home with a large garage that would take pets. I have a rescue dog, H name is Digby. Amanda was searching in one suburb in Murphreesboro, Tennessee. And she noticed a lot of the houses were owned or managed by big corporations. It seems that those companies own all of those houses in that suburb, but I didn't see one private landlord when I was looking This made Amanda a little concerned for when she becomes a buyer We would like to buy a home in the future and the fact that corporate investors can take all of them feels unfair. The feeling of unfairness crosses the political spectrum. The twenty first century Road to Housing Act is a bill aimed at improving housing affordability. It was passed in a bipartisan sweep and this bill restricts large institutional investors from owning too many single family houses. There are pockets in the country where institutional investors account for a higher share of homeowners But across the country, it's tiny, less than one percent. So we wanted to know, could banning institutional home investors improve housing affordability Hello and welcome to Planet Money. I'mariam Woods. And I'm Wayon Wong. Today on the show, two indicators about lowering the rent. We take a look at the power players and regulations that help and hurt housing affordability. We look at the absolute cheapest of accommodation we ask how a particular type of ultra affordable housing went from widespread in American cities to nearly vanished First, we ask, are corporate landlords really the villains of the housing market This message comes from Schwab. With the new Schwab teen Investor account, teens can gain hands on investing experience. It's co owned by you and your teen, so you can monitor the account while your teen learns how to invest and manage money. Learn more at Swab. com This message comes from Dell technologies. Interruptions will always come up at work, but with the Dell Pro laptop powered by Intel Core Ultra with VPro, built with optimized battery and built in intelligence, your tech won't slow you down Dell. com slash deell dash pro Support for this podcast and the following message come from Active Campaign, the autonomous Marketing pllatform You know that feeling? when you open your marketing tool and instead of marketing, you spend an hour wrestling with a drag and drop builder. Active Campaign built active intelligence for exactly that moment. Describe what you want to accomplish. It builds the campaign, writes the copy, and maps the automations across email, SMS, and WhatsApp. Customers save an average of ten hours per week and make email campaigns eight times faster. Learn more at activecampaign. com Let's start with the history Stephven Billings is a professor of real estate at the University of Colorado Boulder Stepehven starts the story during the two thousand eight Great Recession when homes all around the country were going into foreclosure. We saw a lot of investors see an opportunity to buy things really cheap These investors soon realized that having these regular rent payments coming in was actually more lucrative than selling the homes, flipping them Finance people would take a whole lot of properties with these regular cash flows and sell it as an investment product. Some of these are called real estate investment trusts or REITs. For investors in REITs, it's a way to get skin in the real estate game without needing to do the messy work of actually being a landlord. This became a real Bon for this whole industry because it led to tons of money. It also led to a backlash from people like Amanda Cantrell, the renter in Tennessee. When house prices in general started to rise a lot in the early twenty twenties, politicians from Democratic Senator Elizabeth Warren to Republican vice president JD Vance would blame institutional investors Stehven says there's a grain of truth here In general, the large presence of institutional investors will drive up housing prices a little bit Just a grain of truth. because these companies make up such a small share of home purchases nationally, less than one percent The much bigger drivers of housing prices are low construction and low interest rates. Also, Stehven says corporate landlords actually tend to reduce rental prices by bringing in more rental homes into the market. That matters because about a third of American families ran Laurie Goodman runs the Housing Finance Policy Center at the Urban Institute, a think tank. She's also involved in the housing industry as a consultant Laurie points out that institutional investors tend to buy houses that are in worse condition than average and then fix them up They know exactly what needs to be repaired. They've got a crew that comes in and takes a look at it They can buy the paint, they can buy the air conditioning systems, they can buy the heating systems, they can buy the carpeting B Lge home investors can also finance for renovations in a way that's hard even for homeowners. The denial rate on Home improvement loans for homeowners is just huge. It's over forty percent Stephen Billings's research has painted a more nuanced picture here. He finds that for similar houses, apples to apples, institutional landlords actually apply for fewer renovation permits than other owners. But the point remains that institutional investors do tend to buy up homes in need of a sprusa, and they do spend tens of thousands of dollars on quickly tidying them up They also buil a fair share of new home construction. About one in every twelve new houses were built specifically to rent them out in twenty twenty four, Bill to rent So Laurie worries the law restricting corporate ownership could backfire and make housing more costly, especially if large institutional investors would have to sell these newly built homes Bild to rent activity would stop These are homes that probably would not otherwise be built. I mean, this is a bill designed to increase supply, and you're actually cutting off the activity that is designed to do exactly that, which doesn't make sense. Adrianne Todman agrees. She's the CEO of the National Rental Home Council. that's an industry body that represents a lot of institutional homeowners has a real unintended consequence of really chilling, have a chilling effect to build these units from the get go I've been doing this business for a long time. That is never anything anyone has said to anyone who builds apartment style units But unfortunately, that's the concept that's being introduced now for bu to rent communities Agrient says that rental homes may allow families to live in neighborhoods they otherwise wouldn't be able to afford. These are homes that a average first time homeowner would perhaps they could afford the mortgage, but might find it difficult to also finance the upfront capital needs that the single family home has. Stehven recognizes this advantage, but in his research, he has also seen some negative effects When corporate landlords buy more houses in a neighborhood compared to homeowners, he saw a two percent increase in property crime, a four percent increase in violent crime, and a seven percent increase in drug crime That said, if renting allows low income families who move to neighborhoods of better schools and more social support, that can pay off hugely for the children. Research from Harvard economist Raj Chati and others shows enormous benefits for children from low income families who mix of families from different backgrounds with no detrimental effects for the children from the higher income families. In fact, the CEO of the parent company of a major rental firm Progress Residential, has a similar story. He grew up renting in a neighborhood his parents otherwise wouldn't be able to afford allowing him to go to a better school And he says that's part of what drives him to make more rentals available Balancing all of this, Stehven generally supports build to rent housing. It's shocking. I will say this. I think I agree with someome of the conservatives on this view of let's you know, let's allow more building of housing Plus, many tenants have good experiences with big landlords and management companies. Amanda Cantrell ended up going with one We asked her to rate her experience out of five stars. a solid four out of five, we renewed for three years and then actually we just renewed for the fourth year and our rent went down slightly. Overall, the evidence doesn't show that institutional investors are a major driver of housing costs Cracking down on companies building new homes has a good chance of making housing affordability worse Another place people are looking for solutions Past. That's after the break This message comes from Schwab. With the new Schwab teen Investor account, teens can gain hands on investing experience. It's co owned by you and your teen, so you can monitor the account while your teen learns how to invest and manage money. Learn more at Swab d. com This message comes from Dell Ielled PC's with Intel inside are built for the moments that matter, like a big project that can't be interrupted by an update. With a long lasting battery life, you can stay focused on what matters, buuilt for you Dell. com slash deellPCs. Support for this podcast and the following message come from Active Campaign, the autonomous Marketing pllatform You know that feeling? when you open your marketing tool, and instead of marketing, you spend an hour wrestling with a drag and drop builder. Active Campaign built active intelligence for exactly that moment. Describe what you want to accomplish. It builds the campaign, writes the copy, and maps the automations across email, SMS, and WhatsApp. Customers save an average of ten hours per week and make email campaigns eight times faster Learn more at activecampaign. com On the upper west side of Manhattan, there is a big brick building that offers clues about how to bring down homelessness This building is seven stories tall and Really wide, it takes up the whole block length. Heo. H. My name Daran. One of the floors lives a resident of fifteen years My name is Vera Hill And I'm not going to ask you how old you are I don't mind telling how old I am. I'm seventy seven. In Vera's room, there's a sofa, a recliner, a widide screen TV, and lots of photos on the walls My brother, my sisters That's my mom over the clock There's also an artwork that says in all Capital letters, Oh, that was given to me by one of the kids Fears The space doesn't have it all though. I would love to have an apartment with a kitchen. You have to share a bathroom Yes, Oh that's Yes Vivera Hill lives in what's called a single room occupancy building or an SRO. It's like a dorm or a long term hotel room, or a boarding house And today we're going to use those terms interchangeably. These boarding houses used to be really common, but in many places they were effectively banned. Vera started her career at the Mount Sinai Health systemystem in the admitting office before she was promoted to supervisor and then manager before becoming a nurseaid In her sixties, she struggled to pay New York rent. Things got a little You know expensive so I had to come out and go into the shelter It was really sad Eventually, the shelter found her a room at this building, Eucclid Hall. It was amazing. 'cause there was a lot of people that was really friendly and the staff here is amazing Euclid Hall is run by a nonprofit called the Westide Federation for Senior in Supportive Housing It operates twenty two properties across New York and provides social support. Not all the buildings are dorm style. Most have studios, you know self contained units of kitchens and bathrooms Lluded Hall is divided up into single rooms, because New York still has these remnants from what used to be a common form of housing D Bd Rember reported onew York Housing for more than a decade and has written about single room occupancy housing, or SROs. In the nineteen fifties, the city had more than two hundred thousand SRO units accounting for more than ten percent of the city's rental housing stock. Yeah, one in ten people were staying in one. And they were common in cities like Chicago and San Francisco too Rebecca traces their boom to the end of the Civil War in the late nineteenth century as more rural Americans flocked to cities and immigration rose. Landlords started to think, well, why don't I convert my warehouse, my commercial building, even an apartment building with largeer apartments into were then called boarding houses. SRO's covered the spectrum from long term stays in high end hotels to basically a bed in a cubicle with chicken wire on top to stop neighbors from stealing their belongings And these bare bones boarding rooms were incredibly cheap Everything from five to ten cents a night to, you know, maybe at the high end, fifty dollars a night. Okay And obviously we've heard inflation since then. so roughly how much even once you account for inflation? you know, what are we talking? you know, at the low end, maybe one hundred bucks a month. one hundred bucks a month, even accounting for inflation. Yeah But To be clear, paying a hundred dollars a month in today's dollars did not get you a cozy clean place like Eglid Hall. This is more a chicken wire cubicle situation. By the fifties. manyany of these SRO units, SRO buildings were getting pretty run down. They were not well maintained. which was one reason cities really started to think that these were not acceptable forms of housing for people There was a sense among some that the buildings themselves were causing outcomes like disease, theft, and violence. And so under the guise of urban renewal, lawmakers acted Cities gave incentives to landlords to convert their buildings. They wrote increasingly stringent housing regulations for sunlight, heating, fire safety, and minimum unit sizes Some of this was motivated by charitable intentions. Some was not in my backyard pressure Some, as critics of urban renewal have emphasized, was classism and racism. Whatever the cause, this contributed to a wave of boarding house destruction. A lot of landlords decided it was more profitable to convert their buildings into something different San Francisco had one hotel in particular, the International Hotel Wh there was a bit of a standoff. In nineteen seventy seven, at three o'clock in the morning, the sheriff and hundreds of riot police approached the international Hotel to evict over one hundred tenants and supporters. It housed mostly elderly, Filipino and Chinese people. More than two thousand protesters tried to stop the evictions This period was the height of boarding house destruction The nineteen seventies saw a million rooms eliminated or converted to other uses But the evictions at the international hotel led to a congressional report released months later The report talked about how SRO closures had contributed to a rise in homelessness Still, there were other forces brewing around the same time. You had the inststitutionalization of psychiatric facilities, the federal government delegating responsibility for mental health carere to state and city level An bad Rber thinks that the loss of SROs was a big driver of America's growing homelessness About half of men entering homeless shelters in New York City in the nineteen eighties said they had previously lived in SROs. Around that time, there was a rethinking about what urban renewal really meant. Policymakers started to think, well, what did we do wrong? And one thing that was very clear is that they had encouraged the destruction of this reame with cheap. form of housing that people had previously been able to live in and live independently and Uh, safely in a way that they were not able to do in the shelter system. Rebecca says that recent efforts by local policymakers to bring back single room occupancy accommodation have been fairly piecemeal and ineffective. She points to zoning changes in Washington State and Oregon that have been among the strongest moves to legalize building new SROs The mayor of New York, Zoran Mandani just released a housing plan in May that promised to pass legislation to bring back more shared housing A's research shows that if SRO construction had grown at the same pace as other housing in the US and those million SRO's had not been eliminated, there would be two point five million more rooms today, far above the homeless population