Professor Brandon Weiss in his article, Corporate Consolidation of Rental Housing & The Case for National Rent Stabilization, posits that the increasing ownership of rental units by corporate landlords will only worsen an uncertain rental market, with more tenants threatened with eviction or living in poor quality units. As one policy option, he argues for federal incentives to promote the passage of rent stabilization laws.
When signing a lease, a tenant may initially believe that a landlord is a landlord – that it does not matter whether the rental unit is owned by an individual or by a corporate entity. The rent must be paid regardless of who is receiving it. However, that perception may not be accurate. Corporate landlords may more often seek to defer maintenance, raise the rent, or evict tenants.
Corporate ownership of rental housing is nothing new, particularly the ownership of large properties. According to Weiss, what is changing is the increasing ownership of single-family home rentals by institutional investors and hedge funds.
While the tenant may believe a landlord is a landlord, Weiss presents evidence that the corporate owner of rental homes is “a different kind of landlord.” The corporate owner has economic incentives and priorities, such as returns to investors, which often lead to cost-saving measures, ultimately resulting in tactics such as deferred maintenance and rent increases.
Weiss highlights another issue – how modern ownership forms are altering the landlord/tenant relationship. For example, the use of LLCs as a form of property ownership can make it difficult for tenants to identify their landlords. Landlords may be able to maintain some degree of anonymity and avoid accountability for their actions that affect tenants individually and the housing market more broadly.
Real estate investment trusts also can make it difficult to hold landlords accountable. With REITs, the rental unit could be owned by numerous investors who will never manage the property themselves.
According to Weiss, the increasing ownership of rental units by corporate landlords, many with rental projects in multiple states and evidence of their adverse actions towards tenants are reasons for federal government intervention. The particular intervention that he argues for is federal incentives for state and local governments to enact rent stabilization laws.
He notes that the federal government has played a role in housing markets through federal laws such as the Fair Housing Act and the Community Reinvestment Act as well as through the statutes and regulations governing subsidized housing. Thus, federal action on rent regulation would not be unprecedented.
Weiss briefly reviews some of the critiques of rent stabilization. Landlords may argue that the state has no right to limit their property rights. States may incur costs when implementing the laws, such as setting up rent assessment boards.
He responds to the critiques and to the discussion of increasing corporate ownership of rental units. Weiss contends that “if reasonable limits on rent increases or evictions deter some prospective new landlords, those measures can serve as a filter to limit entry into a market in which an investor is also a steward of the home of another.” Id. At 21.
The phrase “a steward of the home of another” encapsulates the fundamental concern that Weiss raises in this essay. The individual landlord, the corporate landlord, the investor landlord: all are stewards of the home of another. However, if the increasing number of corporate and investor landlords is leading to greater housing insecurity for tenants, then federal, state, and local governments must respond to this “different kind of landlord,” that is by nature a different kind of steward.
Weiss has presented one policy response by arguing for rent stabilization laws and for federal incentives to state and local governments to enact such laws. However, the first step may be to convince federal, state, and local governments of the challenges to the rental housing market that arise from landowners using modern ownership forms to become landlords.
