Professionalism, Technology, and Rental Markets in the US

Planners from the federal to the local level routinely grapple with how to establish an efficient and equitable policy regime for rental housing. In attempting to promote affordability, fair access, and good maintenance of rentals, however, few planners have a good understanding of those who set rents, select tenants, and are ultimately responsible for property maintenance - the rental property owners. This dissertation focuses on these owners and tries to understand if certain kinds of owners behave differently than other kinds of owners, how owners as a group might be changing over time, and the role of technological advances is driving those changes. This is especially relevant because of the changes to the owner population brought on by Foreclosure Crisis, and the likely change in who owns the nation’s rentals that will happen because of the coronavirus pandemic. It also directly engages with the long but currently neglected scholarly conversation about rental property owner “professionalism,” especially how technology fits or does not fit into that lens of viewing owners, and the very much un-neglected topic of single-family rental housing./nFor all of the hue and cry over rents and nefariousness or benevolence of certain rental property owners, there is extremely limited data on rents and who rental properties in the US. I use a range of strategies to deal with this dearth of data. Firstly, I gathered my own data using a large survey of the owners of small rental properties in the US. This survey was sent to over 53,000 owners and I received approximately 1,000 responses from owners ranging from 1-unit portfolio owners to owners with hundreds of properties. I also conducted follow-up interviews with about 160 of these owners. Secondly I joined under-utilized Census data on rental property owners with Census data on rental units and tenants to create a detailed picture of how hundreds of rental property owners set rents in the 1980s and 1990s. Lastly I used data scraped from the web to understand the influence of a specific technology, Craigslist, to measure the impact of the site over time. I feed these diverse data into OLS and logistic models to better understand how rental property owners have behaved and how technologies have changed rental markets across the US./nChapter 1 sets the context for the dissertation, outlining the subjects of the owners of rental properties, professionalism, technology and how these relate to rents and fairness in rental markets. I pay particular attention to small rental properties, which are both distinct from and similar to multifamily rentals and owner-occupied single-family homes in many ways. Chapter 2 examines below-market rent-setting among the owners of small rental properties. There’s been a long-standing debate about the extent to which small rental properties are a site of exploitation versus a site of opportunity for tenants and discerning whether owners knowingly set rents below market is an important part of that debate. I find that about half of small rental property owners do set rents at least $50 below market. The average amount that rents are below market is substantial, about $270 per month. The reasons for setting rents below market rate are diverse. There are economic reasons, such as minimizing turnover costs and attracting and retaining low-cost tenants. There are also social and ethical reasons, such as owners who reported that they “didn’t need” the additional income or set rents based on what they thought their tenants could afford. Lastly there were information reasons, where owners raised rent when they realized the extent to which their unit was below market. The distinction between owners who set rent below market and those who did not didn’t follow the typical dividing lines between professional and amateur owners. Portfolio size had only a very small effect, as did whether the owner held their properties in a corporate entity. Owners who held their property “As future security for family member(s),” owners who perceived their tenants to be low income, and owners who didn’t use technology for property management or rent setting were more likely to report setting rents below market./nChapter 3 keeps the national-scale frame but expands the scope of the analysis to multifamily, as well as small rental properties, and looks across a decade to examine how different landlords set rents. Specifically, I track “rent stickiness,” the owner’s decision to hold rents flat over two years, and “rent shocks,” the owner’s decision to increase rents by 20% or more in a two-year period. From 1985 to 1995 stickiness and shocks were both fairly common. I examine whether these behaviors are correlated the extent to which an owner is a professional or amateur landlord, while controlling for the many other factors that influence rent-setting. Over a given two-year period about a quarter of units’ rents “stuck” while about 15% rose sharply. Stickiness was far more common with continuing tenants (though was still pronounced upon turnover), while shocks were slightly more common at turnover. None of the traditional measures of owner professionalism were strongly correlated with either stickiness or shocks. The role of turnover, however, obscures how some owners might use stickiness to entice tenants to stay put, and shocks to entice tenants to move./nChapter 4 concerns how technology has affected US rental markets generally, from both the supply and demand sides. Many scholars have hypothesized that, as technology makes it easier for buyers and sellers to gather and analyze information, markets, including rental housing markets, should become more efficient. The precise ways in which rental markets may become more efficient, however, is not clear. This chapter focuses on the rise of Craigslist in the mid-2000s and examines whether this particular technology had an impact on various measures of rental market efficiency. The rise of Craigslist appears uncorrelated with changes in vacancy dynamics and does not appear to have generated a rise in non-family households or affected renter mobility. Craigslist also appears to have had little to no impact on the rental vacancy rate. The rise of the site, however, was correlated to an increase in rents. This may be related to the finding from Chapter 2 that owners who consulted online sources for comparables when setting rents were less likely to set rents below market./nChapter 5 discusses the broader implications of the research and identifies promising avenues for further study. Rental housing market are changing on many fronts, from shifts in who owns rental units to changes in how owners manage their properties now that they can access and analyze information thanks to technology. Much attention has been paid to the former change, but my analysis shows that the latter change might be at least as important for rent levels and changes in rents and that the distinctions between owners may need to be more nuanced than the typical metric of portfolio size. Further I argue that planners should view below-market small rental properties as an affordable housing asset in their communities and consider policies to preserve and generate more of this stock.

Advisor: Reid, Carolina