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.
His name is Digby.
Amanda was searching in one suburb in Murfreesboro 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.
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 improve housing affordability?
Hello and welcome to Planet Money.
I'm Darian Woods.
And I'm Waylon 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 and we ask how a particular type of ultra-affordable housing went from widespread in American cities to nearly vanished.
But first, we ask, are corporate landlords really the villains of the housing market?
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 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 boon 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 2020s.
Politicians from Democratic Senator Elizabeth Warren to Republican Vice President JD
Vance would protest. 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.
It's over 40%.
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 spruza.
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 in every 12 new houses were built specifically to rent them out in 2024.
Build to rent.
So Laurie worries the law restricting corporate ownership could backfire and make housing more costly, especially if large institutional investors would hesitate have to sell these newly built homes.
Build 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.
Adrienne Todman 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 being introduced now for build-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 an 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.
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, if renting allows low-income families who move to neighborhoods with 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 with 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, 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 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.
It's 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.
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.
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.
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 old I am.
I'm 77.
In Vera's room, there's a sofa, a recliner, a widescreen 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.
Oh, that was given to me by one of the kids.
I'm fierce.
Her 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.
Vera 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 System in the admitting office before she was promoted to supervisor and then manager, before becoming a nurse aide.
But in her 60s, 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, Euclid Hall.
It was amazing because there was a lot of people that was really friendly and the staff here is amazing.
Euclid Hall is run by a non-profit 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 Baird-Rembaugh 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 200000 SRO units, accounting for more than 10 percent of the city's rental housing stock.
Yeah, one in ten people was 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 19th 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 larger apartments, into what were then called boarding houses?
SROs 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 your belongings.
And these bare-bones boarding rooms were incredibly cheap.
Everything from 5 to 10 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 once you account for inflation, you know, what are we talking?
You know, at the low end, maybe a hundred bucks a month.
A hundred bucks 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 Euclid Hall.
This is more a chicken wire cubicle situation.
By the 50s, 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 3 o'clock in the morning, the sheriff and hundreds of riot police approached the International Hotel to evict over 100 tenants and supporters.
It housed mostly elderly Filipino and Chinese people.
More than 2,000 protesters 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 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 deinstitutionalization of psychiatric facilities, the federal government delegating responsibility for mental health care to state and city level.
But Rebecca Baird-Rember 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 1980s 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 extremely cheap facility 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 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.
Rebecca's research shows that if SRO construction had grown at the same pace as other housing in the US and those million SROs had not been eliminated, there would be 25 million more rooms today, far above the homeless population.
Paul Freitag runs the Westside Federation for Senior and Supportive Housing.
That's the organization that operates the building that Vera Hill lives in.
Paul is supportive of allowing more boarding houses, especially for middle-aged and younger people.
It can be built inexpensively.
I think for a lot of them, they would look to live in an SRO for a 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 with incontinence.
These are all things that are challenging to do in a dense environment that you have in an SRO.
Furthermore, our residents are very prone to communicable diseases, and we really saw that in COVID, but we see it every year with the flu.
And so it's not really necessarily the best setting in which to age in.
Even so, Vera Hill, the 77-year-old former health worker, is happy in hers.
I don't have bad things about living here.
Because it's more than a boarding house.
Today, SROs still run the gamut from cubicle beds with negligent landlords to luxury hotels.
Vera lives in supported living that happens to have single rooms.
Help is always available to Vera, even if she wants to return the favor a lot.
I'm a helper.
I go downstairs sometime and I go to the offices and ask if they need my help.
They always tell me, Vera, go sit down.
Now'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 facet of 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, has 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 Ritchie, Cooper Katz-McKim and Corey Bridges, with engineering by Travis Hagen and Robert Rodriguez.
They were fact-checked by Vito Emanuel and Sierra Juarez.
Cake and Cannon edits the show.
This 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 NPR.
Thank you for listening.
