Thursday, August 7, 2014

Selection, Matching, and the Rules of the Game: Landlords and the Geographic Sorting of Low-Income Renters

by Eva Rosen
Meyer Fellow
In recent years, federal housing policy has shifted toward a system that is increasingly reliant on tenant-based subsidies. Of the five million households across the country that federal housing programs now assist, over half are housed in privately owned properties. The Housing Choice Voucher (HCV) program has been expanded to house 2.2 million low-income households nationwide, with the intent to provide opportunities for poor families to escape disadvantaged neighborhoods and access desirable ones. But even though a voucher can be used in any neighborhood with an affordable unit, recent research shows that voucher holders are concentrating in neighborhoods with moderate to high poverty rates, and black voucher holders live in poorer and more segregated neighborhoods than white voucher holders. This raises an important puzzle: why don’t voucher holders move to better neighborhoods when they are provided the opportunity to do so?

In order to answer this question, previous research has considered explanations that focus on the residential choices of the voucher holders themselves, such as housing preferences, social networks, and perceived discrimination. Research has also shown how policy shapes the supply and distribution of affordable housing. For example, voucher holders are more likely to live in distressed areas when this is where affordable units are concentrated.

However, we know surprisingly little about an important intervening force related to both supply and demand: the landlord. My new working paper proposes that landlords are a missing piece of the puzzle. Recent work has revealed that landlords affect residential instability and the reproduction of poverty through eviction. But how do landlord practices serve to sort residents into homes across urban areas? Landlords function as gatekeepers, affecting where people end up on a simple and fundamental level. Every renter who wants a home must go through a landlord.

I spent a year in Baltimore talking to and observing landlords to better understand their role in sorting low-income renters across the modern metropolis. I draw on ethnographic observation and in-depth interviews with twenty landlords, and sixty-two residents in Baltimore, over a fifteen month period.

Selection, Triage, and Retention
Since 1992, the number of public housing units in Baltimore has significantly diminished, while the number of vouchers has nearly doubled. Baltimore has one of the highest rates of voucher use in the country, where it makes up almost ten percent of the rental market. The advantages of the voucher program in recent years have prompted landlords to strategically orient their businesses towards attracting voucher holders. I find that these strategies are linked to residential sorting patterns through three steps:
  1. Selection, where landlords favor certain types of tenants, for example voucher holders over market-rate tenants;
  2. A matching process, where landlords cherry-pick certain types of tenants for certain types of units;
  3. The selective retention of tenants who do not have the means to leave. 
These decisions can have an important impact on which voucher holders end up in which properties, and how long they stay.

There’s a tenant for every house
Landlords have a range of properties across different types of neighborhoods, some of which are distinctly harder to keep occupied. One landlord, Oscar, highlights the key to his strategy for finding tenants for these hard-to-rent units:

"The thing is, you don’t need a lot of help when it’s a good area. But in the bad area, that’s when it’s hard. The key is, you got to understand that everyone needs somewhere to live. There’s a tenant for every house. You’ve just got to find the right tenant."
Finding the right tenant for a property means matching tenant characteristics – such as age, family size, race, voucher status, and financial risk – to property characteristics – such as size, condition, and location. For example, it can be can be hard to find and attract market tenants who pay their rent reliably in disadvantaged neighborhoods. This provides an incentive for landlords to find voucher tenants to occupy units in these areas.

Together, these tactics of selection, matching and retention form a powerful instrument that sorts and at times even traps voucher holders where they can be most profitable to landlords. These happen to be the very neighborhoods that policymakers would like to provide them the opportunity to leave. The voucher case demonstrates the ways in which landlord practices can intervene to pervert the process of residential choice, revealing the limits of a market-based solution to a complicated and entrenched social problem.

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