Two indicators for lowering the rent

Sometimes about really big things, but most times, the little mysteries are the best.

“Our lost and found is currently filled with pants. I don't know what I've never seen this happen.”

This is true. This is true. Mysteries, of every size, each week, this American life, wherever you get your podcasts. 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 whose name is Digby.

Amanda was searching in one suburb in Murphy'sboro, 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. It feels unfair. This feeling of unfairness crosses the political spectrum. The 21st 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 1%.

“So we wanted to know could banning institutional home investors and prove housing affordability?”

Hello and welcome to Planet Money, I'm Darian Woods. And I'm Will and Won. 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.

And we ask how a particular type of ultra affordable housing went from wide spread in American cities to nearly vanished.

But first, we ask our corporate landlords really the villains of the housing market.

Every episode of it's been a minute, MPR is what's happening in culture podcast. Starts by asking three questions. Who, how, why now? If the culture's asking it, we're talking about it. At MPR, we stand for your right to be curious and indulge your cultural curiosity.

“Follow it's been a minute wherever you get your podcasts.”

And we'll break down the zeitgeistie topics that are filling your feed. So let's start with the history. Stephen Billings is a professor of real estate at the University of Colorado Boulder. Stephen starts the story during the 2008 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 and 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 boom for this whole industry because it led to tons of money. It also led to a backlash from people like Commander-Cantrel, the rent or entity to see.

When house prices in general started to rise a lot in the early 2020s, politicians from Democratic Senator Elizabeth Warren to Republican Vice President, JD Vance, would blame institutional investors. Stephen says there's a grain of truth here. In general, the large presence of institutional investors will drive up housing prices a little bit.

But just a grain of truth, because these companies make up such a small share of home purchases nationally, less than 1%. The much bigger drivers of housing prices are low construction and low interest rates. Also, Stephen says corporate landlords actually tend to reduce rental prices by bringing more rental homes into the market.

That matters because about a third of American families rent.

Lori 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. Lori 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 in bulk.

The large 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.

Now, Stephen Billings' 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 spruce up, and they do spend tens of thousands of dollars on quickly tidying them up. They also build a fair share of new home construction. About one and every 12 new houses were built specifically to rent them out in 2024.

Build to rent. So, Lori 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.

Builds for 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.”

Adrian Toddman agrees. She's the CEO of the National Rental Home Council. That's an industry body that represents a lot of institutional homeowners. It 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 been introduced now for built to rent communities. Adrian 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 home owner would perhaps thicker to afford the mortgage, but might find it difficult to also finance the upfront capital

needs that the single family home has. Stephen 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 2% increase in property crime, a 4% increase in violent crime, and a 7% increase in drug crime.

That said, a printing allows low-income families who moved to neighborhoods of better schools and more social support that can pay off hugely for the children. Research from Harvard economist Raj Chetty and others shows enormous benefits for children from low-income families who mix the 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 as 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, Stephen generally supports build to rent housing.

“I mean, it's shocking. I will say this. I think I agree with some of the”

conservatives on this view of let's allow more building of housing. Plus, many tenants have could experiences with big landlords and management companies, Amanda Cantrell ended up going with what? We asked her to write her experience out of five stars. They followed four out of five, we renewed for three years, and then actually we just renewed for the fourth year in our rent went down slightly. Overall, the evidence doesn't show that

institutional investors are a major driver of housing costs. But cracking down on companies building new homes has a good chance of making housing affordability worse. Another place people are looking for solutions, the past, that's after the break. Richard Reeves is unimpressed by online influencers who pedal ideas about hyper masculinity. You're talking about boys and men. Whereas your policy agenda, you're good on podcasts,

but we've actually done a bunch of stuff for boys and men, sorry, what have you done? Ideas about the next era of manhood. That's on the Ted Radio Hour podcast, listen on the NPR app or wherever you get your podcasts. On the upper west side of Manhattan, there's a big brick building that offers clues about how to bring down homelessness. The building is seven stories tall and really wide. It takes up

the whole block length. On one of the floors lives a resident of 15 years. My name is Vera Hill. I'm not going to ask you how old you are. I don't mind telling how. I'm 77. In Vera's room, there's a sofa, a recliner, a white 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, fierce."

Her space doesn't have it all, though. I would love to have our apartment with a kitchen.

“You have to share a bathroom? Yes. Oh, that's, yes.”

Vera Hill lives in what's called a single room occupancy building, or in this era. It's like a dorm, or a long-term hotel room, or a boarding house, and today we're going to use those terms into changeably. These boarding houses used to be really common, but in many places, there were effectively banned. Vera started her career at the Mount Sinai Health System in the admitting office before she was promoted to supervisor and then manager before becoming a nurse aide.

But in her sixties, she struggled to pay New York rent. Things got a little, you know, expensive, so I had come out and go into this shelter. It was really sad. Eventually, the shelter found her a room at this building, Euclid Hall.

It was amazing, because there was a lot of people that was really friendly and

“a staff here is amazing. Euclid Hall is run by a nonprofit called the Westside Federation”

for Senior and Supportive Housing. It operates 22 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. But Euclid Hall is divided up into single rooms, because New York still has these remnants from what used to be a common form of housing. Rebecca Beard-Render reported on New York housing for more than a decade and has written about single room occupancy housing,

or SROs. In the 1950s, the city had more than 200,000 SRO units, accounting for more than 10% of the city's rental housing stock. Yeah, 110 people were staying in one, and there were common in cities like Chicago and San Francisco too. Rebecca traces their boom to the end of the civil war in the late 19th century as more rural Americans flocked to cities and immigration rose.

“Leigh and Lord started to think, "Well, why don't I convert my warehouse, my commercial building,”

even an apartment building with larger apartments into what were then called boarding houses?"

SROs covered the spectrum from long-term stays in high-end hotels to basically

embed in a cubicle with chicken wire on top to stop neighbors from stealing your belongings. And these bare-bones boarding rooms are incredibly cheap. Everything from five to ten cents a night to, you know, maybe at the high end, $50 a night. Okay, and obviously we've had inflation since then, so roughly how much even went to account for inflation, you know, what are we talking? You know, at the low end, maybe $100 a month.

$100 a month, even accounting for inflation. Yeah. Now to be clear, paying $100 a month in today's dollars did not get you a cozy clean place like you could haul. This is more at chicken wire cubicle situation. By the fifties, many 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, where there was a bit of a standoff. In 1977, at three o'clock in the morning, the sheriff and hundreds of riot police approached the international hotel to evict over 110ants and supporters. It housed mostly elderly Filipino and

Chinese people. Within 2,000 protestors tried to stop the evictions. This period was the

height of boarding house destruction. The 1970s saw a million rooms eliminated or converted to other

users. 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 de-institutionalization of psychiatric facilities. The federal government delegating responsibility for mental health care to state and city level. But Rebecca Badremba thinks that the loss of SROs

in New York City in the 1980s said they had previously lived in SROs. Around that time,

“there was a rethinking about what urban renewal really meant. Policymaker Shard to think,”

"Well, what did we do wrong?" And one thing that was very clear is that they had encouraged the destruction of this extremely cheap form of housing that people had previously been able to live in and live independently and safely in a way that they were not able to do in the shelter system. Rebecca says that recent efforts by local policy makers 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 Mondani, just released a housing plan in May that promised to pass legislation to bring back more shared housing. Rebecca's research shows that if SRO construction

had grown at the same pace as other housing in the U.S. and those million SROs had not been eliminated,

there would be 2.5 million more rooms today, far above the homeless population. Paul Freightag runs the west side federation for senior and supportive housing. That's the organization that operates the building that very hill lives in. Paul is supportive of allowing more boarding houses, especially for middle-aged and younger people.

“You know, it can be built inexpensively. I think for a lot of them, they would look to live in an SRO for”

shorter period of time. It really would be something where they might live for a few years as they're getting established. That said, he doesn't want to gloss over their drawbacks. It is a challenging environment in which to age. That as you age, you now need different medical equipment, you might need a special bed, you need walkers, you might have a home health care attendant that comes in and helps you, you might be wrestling within continents. These are all things

that are challenging to do in a dense environment that you have in a SRO. For the more residents, you know, are very prone to communicable diseases and we really saw that in a COVID, but we see it every year with the flu. And so it's not really necessarily the best setting

“in which to age. Even so, Virgil, the 77-year-old former health worker, is happy in his.”

I don't have bad things about living here. Because it's more than a boarding house. Today, SRO still run the gamut from cubicle beds with negligent landlords to luxury hotels. Virgil lives in supported living that happens to have single rooms.

Help is always available to Virgil. Even if she wants to return the favor a lot.

I'm a helper. I go down stairs sometime and I go to the offices and ask if they need my help. They always tell me, Virgil, go sit down. Now it's your time to be helped. Yes, I am a helper. I like helping people. These episodes come from Planet Money's short daily podcast, The Indicator. One faster to the economy explained five days a week, always 10 minutes or less.

Check us out and subscribe. Or, if you'd like to go even deeper, our book, Planet Money, a guide to the economic forces that shape your life, as a really good chapter about how to lower rents and so much more. Find it in bookstores everywhere. The original episodes of The Indicator were produced by Julia Richie, Cupid Katz McKim and Cory Bridges, with her generic by Travis Hagen and Robert Rodriguez.

Though a fact checked by Vito Emmanuel and Sierra Juarez, Kagan Kannon edits the show. The episode of Planet Money was produced by James Sneed with help from Emma Murphy. Alex Goldmark is our executive producer. I'm Darian Woods. This is MPR. Thank you for listening. [MUSIC] The world is a lot, but hearing the right song at the right time can make it all better.

This week in the NPR Music Podcast, listeners tell us about the songs that help them hit reset. Songs that lift them up, change their outlook, or even give their whole life a new direction. Listen on all songs considered in the NPR Music Podcast.