Effects of the Housing Crisis on Tenants, Resident Owners and Investor Owners

By City Life / Vida Urbana
Jamaica Plain, MA

In discussing what to do about the housing crisis, there is increasingly a debate about how well the for-profit market works to create and maintain affordable housing.

The Real Estate Industry states that they want to use market mechanisms to create more affordable housing. They advocate for further deregulation, fewer zoning restrictions allowing more luxury development for instance. This is supposed to increase the supply of affordable housing because any increase in supply will reduce price, according to the "law" of supply and demand.

Housing advocates in the Boston Tenant Coalition (BTC), City Life and elsewhere counter that we need to move new affordable housing outside the for profit market. The BTC advocates for 10,000 safe, affordable homes to be created by 2005. "Affordable homes" is defined as being permanently deed restricted and available to those making below 80% of median. The BTC argues that the market has totally failed, and that efforts to buy temporary affordability will only end up with a new version of the expiring use problem. Finally, the BTC would point out that in t he real world market, construction of new luxury housing in changing neighborhoods encourages gentrification; it doesn't lower rents.

The Real Estate Industry, especially the Small Property Owners Association (SPOA) advocates for S637, which would gut the few remaining tenant protections. Despite the fact that the overwhelming majority of eviction cases end in quick possession to the owner, they allege a need for further deregulation.

Again, in contrast, the BTC and City Life advocate for new tenant protections. Besides defeating S637, they argue for the HUD Enabling Act bill and a Boston Home Rule Petition with some form of new tenant rent and eviction protections.

This debate over the market is vitally important. It takes place not just between real estate interests and the tenant movement, but enters into the discussions of affordable housing organizations such as GBIO and CHAPA. The BTC argues, for instance, that the proposed GBIO Nehemiah project, because it is on public land with public subsidy, should be permanently deed restricted. Others disagree.

This debate causes some to feel that the difference is between "owners" and "renters". This should not be the conclusion. Mainly this is because all owners are not the same - some ar small and some are large. But, again, there is confusion. SPOA is an organization that directs its message at full time real estate owners, those that do real estate as a business, but who have no staff. SPOA is an organization that addresses the needs of small investors, or small business people. Most people, however, think that the term "small owners" means "resident owners." These are important distinctions, because they are affected differently by the housing crisis.

Tenants lose. Tenants are clearly hurt by the gentrifying market. Every community improvement they help bring about acts to raise rents and values and displace them. Thousands of tenant households are faced with displacement, being forcibly uprooted, from their homes at any given moment. This is not just a crisis. It's a disaster.

Investors win. Investors tend to see buildings simply as a means to a profit, not as a source of homes. Tenants are folks who pay the mortgage for them as well as other expenses and support their return. Small and large investors have generally receive dramatically increased profits as a result of the housing crisis. Larger investors obviously gain more, especially those with the political connections to gain zoning or property tax changes.

Residents owners are affected in a mixed way. Resident owners live in their buildings. Their buildings are their home as well as an investment. Their tenants are neighbors as well as a source of income. The housing crisis is generally raising the value of resident owners' investments, a value they can realize only by selling, however. M-any low to moderate income owners are hurt by the housing crisis because their property taxes rise with values. They are also hurt when the neighborhoods and communities they live in are disrupted severely by market forces.

Understanding these sets of interests helps us formulate non-market strategies which benefit all residents, whether homeowners or tenants. Rent protections, tenant organizing, deed restricted homeownership, permanent affordability, are all things that benefit residents primarily concerned about building secure and sustainable communities.