Baltimore County’s proposed “Source of Income” legislation forces owners of rental housing to accept government-funded vouchers for rent payments. Organizations advocating for the needy suggest that landlords and housing providers are against providing housing for the poor, most of whom, in our area, are minorities. Housing providers, landlords, reply that “it is not the source, it is the strings” attached to the program to which they object.
There is nothing discriminatory about a person who has invested their life savings in a rental property deciding that they do not want to lose two month’s rent while waiting for a voucher holder to be approved and move in before they begin seeing rent; or from refusing to sign a federally mandated 12-page lease addendum; or from being subject to the whims of government funding for approval for how much rent might be paid; or from being subjected to annual inspections that are unpredictable and inconsistent, where the government will stop paying rent if the rental unit needs repairs, even if tenants abuse and damage the property.
Various Baltimore County, federal and state laws already prohibit discrimination in housing based on a person’s race, religion, color, creed, sex, sexual orientation, national origin, ancestry, family status, marital status, handicap or age. And my analysis of an Urban Institute study shows a 90% reduction in racial housing discrimination since 1977.
In May of last year, Johns Hopkins University and The Poverty and Inequality Research Lab produced an in-depth study for the U.S. Department of Housing and Urban Development. The researchers interviewed 127 landlords in Baltimore, Cleveland and Dallas and analyzed 1.5 million administrative records on landlords and tenants in the HCV program. Roughly 40% of the landlords in the study were black, and 13% were non-black minorities; 60% of the landlords owned 30 or fewer units, with 20% owning fewer than 5 rental units.
The report found evidence suggesting that administrative and procedural factors deter landlord’s participation, not racial discrimination (“It is not the source, it is the strings,” decry the landlords). The study also found evidence that administrative and procedural requirements are key factors deterring landlords’ participation, not profitability or social biases that many tenant advocates claim.
Researchers interviewed and studied a sub-set of housing providers who choose a business model centered on providing housing to Housing Choice Voucher recipients. These specialists hire and train staff, design procedures and systems, and build relationships with HCV bureaucrats, to design their business models around the particulars of renting to voucher recipients. This is a choice in business model that some landlords have chosen, and we in the housing industry applaud these specialists.
More than half of all rentals in Baltimore are in small properties, mostly single-family homes and duplexes owned by small “mom and pop” owners with varying degrees of capital and expertise. Researchers found that less than 40% of small owners reported positive cash flow and only those properties owned without a mortgage are viable. Only 25% of mortgaged properties had a positive cash flow.
What housing providers cannot figure out is why it is equitable to force landlords to participate in a voluntary federal government subsidy program, which is the stated purpose of “Source of Income” legislation. Let’s examine some other government-subsidized programs.
According to the Kaiser Family Foundation, 72% of physicians accept Medicaid, the government-funded health care program for the poor; 75% of food retailers, including grocery stores, convenience food stores and farmer’s market retailers, accept SNAP, more commonly known as food stamps. Food retailers voluntarily sign up and agree to the rules and regulations of accepting money from the federal government.
Likewise, Life-Link provides free cell phones and free minutes/text message plans to low-income residents with voluntary participation by cell phone providers. Verizon provides discounted cell phone plans (not free cell phones) in only four states. AT&T provides discounted service, but not free phones. T-Mobile does not participate in the program. There must be some rational business reason Verizon, AT&T and T-Mobile, the three largest providers in the country, have decided not to participate in this federally funded program.
Just like with medical care, food and cellphones, many providers choose participation in government programs as a part of their business model while others choose to avoid the bureaucracy, rules and regulations by serving only private-pay customers. As business owners, landlords should be free to make the same choice.
Ben Frederick III is president of Ben Frederick Realty Inc.; his email is email@example.com.