Surprise! For Landlords, It IS All About the Benjamins

Last week I closed with the question of why would a potential landlord even consider entering the Housing Choice Voucher Program.  Why get involved in a program that essentially encourages its beneficiaries to lie, cheat and steal? 

If you doubt this, look at it from the voucher holder’s point of view:  The program punishes you for being honest.  If you report an increase in income—even if it’s legal—your voucher amount stands to go down.  Need to take in an extra family member, even temporarily?  Don’t tell the MCHA; that’s changing your “household composition,” and it could cause problems.  Unhappy about how your landlord is treating you?  Better keep your mouth shut if you don’t have the time or the resources it will take to interface with the bureaucracy, because you landlord probably does, at least enough to deal with the likes of you.  All things considered, what’s the reason for being honest, outside of being caught for being dishonest?

That might be your potential tenant’s point of view.   Why rent to the type of people who would cheat the very program that benefits them?  If they would do that, they would cheat you, right?  This is not exactly a formula for a smooth landlord/tenant relationship.

And then there’s the Federal Bureaucracy to deal with, forms to fill out, the additional inspections of your property, and all that.  Why then would landlords want to be in the program, if they have to deal with both low class tenants and the Federal Bureaucracy?

Okay, let’s acknowledge the reliability factor.  A substantial portion of the rent is paid not by the tenant, but by the MCHA directly to the landlord.  The tenant may have more excuses than cash on the rental due date, but the check from the MCHA is going to arrive unless there is a postal strike.

But you know the real reason, of course.  It’s all about the Benjamins.  The HCV Program is a financial boon to those who, in my humble opinion, deserve it the least.  They would be the landlords who own and rent out the cheapest half of the housing in our towns and cities.  That’s because the HCV Program financially benefits the bottom feeders in the urban real estate market.  Housing Choice Vouchers are a guaranteed source of additional income to these landlords, much more than they would make did the program not exist.

This wasn’t part of the plan, but it is a major part of the result.  These low-rent landlords (I mean that as much figuratively as literally) purchase the cheapest houses they can find, all too often in Norristown and Pottstown.  If just rented out, these housing units would not command even the local community’s median rent, let alone that of the county.  If a voucher holder is about to move in a cheap apartment, or if an existing tenant receives a voucher, the landlord can raise the rent, quite legally it seems, as long as it does not exceed the “Fair Market Rent”.  Profit is rent minus expenses, and they know that if they accept HCV recipients, a higher rent is basically forced on them, courtesy of the taxpayers.  Who would refuse such a deal?  Besides, bottom-feeder landlords are not overly concerned with building maintenance, because that eats into the profit.  You don’t think they purchased those old houses to help preserve our irreplaceable stock of existing urban housing, did you?  As I pointed out above, renting to HCV tenants greatly lowers the chance that those tenants are going to complain about substandard conditions.  Unrepentant exploitation of the HCV Program fattens thus such a landlord’s profit from both ends.

This is where the true evil of concentrated Housing Choice Vouchers in specific communities becomes more apparent.  Towns like Norristown and Pottstown suffer from having so many voucher households end up there, some of whom are not exactly a benefit to the community.  On top of that, the concentration imposes a financial penalty on the non-voucher households that live in the community.  That’s because the Housing Choice Voucher Program artificially maintains a higher local rent than the neighborhood and the housing units would otherwise warrant.  The HCV Program’s commitment to the “Fair Market Rate” artificially raises the average rent across an entire neighborhood, affecting everyone.  The MCHA pays the extra for the voucher households, but all other renters in the neighborhood have to pay the difference out of their own pocket.  If you are not on the program and live in the neighborhood, you pay a higher rent because of the program.  All this, of course, in neighborhoods where conditions are already at the lower end of the scale, because that’s where the money is in such a skewed real estate market.  Any landlord with an apartment that is good enough (and located in a good enough neighborhood) to command above the “Fair Market Rent” simply has no economic incentive to enter the program.  His neighbors might not be too happy about it either.  This last can be important in a community that has few (or no) housing choice vouchers.  When the local municipality joins in the exclusion effort (unofficially, of course), the resulting peer pressure helps to keep vouchers out.  Those towns already swamped with vouchers end up getting more; it’s a vicious, self-reinforcing circle, lowering the condition of a community while keeping rental costs artificially high.  When disgusted homeowners leave, the low-rent landlords swoop in, pick up the property for a depressed amount, and look for equally low-rent tenants.  That’s why I bet all such slumlords would sanctimoniously support a funding increase for the HCV Program; much of it will end up in their pockets. 

Yes, the HCV Program encourages its recipients to cheat, but it encourages landlords to cheat more, because they stand to make more.  If landlords properly maintained their properties and exercised care in their rentals, the biggest money leaks in the system would close, and it would make tenant cheating both more difficult and less rewarding.  Of course, if wishes were horses, even beggars would ride, so we will have to take a more difficult approach if we want to actually see results. 

Next week we will simultaneously narrow and broaden our focus and ask the question: What's The Real Problem Here?