Efforts to increase housing supply without accompanying regulations could fail to address the core drivers of the housing crisis.
This article is part of a Prospect symposium on tackling the housing crisis in America.
Derek Harris works two jobs to afford the one-bedroom apartment in downtown Kansas City he’s lived in for ten years. During that time, the owners have changed and conditions have worsened. The kitchen he used to love to cook in is filled with mousetraps. The wall is streaked with dirty brown stains from plumbing leaks. There is no vent, just a huge hole near the ceiling.
“I’m paying higher rent than I’ve ever paid for a place that feels more like a prison than a home,” Derek announced at a recent rally to launch his tenant union.
Derek’s experience, working multiple jobs and handing over the majority of his paycheck to live in squalor, is not an exception but the new normal for many poor and working-class Americans. Housing is most Americans’ biggest monthly bill. When families are forced to cut back on expenses, cutting back on housing is simply not an option. Today, half of all tenants spend over 30 percent of their income on rent, with more than one-quarter spending over 70 percent. Evictions are at a historic high, most often impacting Black women and their babies. As landlords hike rent and evict tenants, more than 650,000 people sleep outside.
Government housing interventions have taken the form of financing schemes that support private provision of housing.
This election season, rent has emerged as a critical economic issue. The national attention is overdue, but politicians are missing the mark on solutions. In the wake of the election, Biden officials themselves noted how the absence of tangible policy to decrease rents put Democrats in a bind. A postmortem reveals that there was “the economy” according to suits looking at charts, and then there was “the economy” according to working people paying their bills.
The level of real estate capital flowing from around the world and through financial investments has reached a historic scale. This flood of capital has concentrated the market and maximized landlords’ profits. Private equity is the dominant form of financial backing for the 35 largest owners of multifamily properties, resulting in higher rents and worse conditions. During the pandemic, investors flocked to the multifamily rental market to capitalize on low interest rates and the promise of rising rents. Now, the multifamily market is in distress. Landlord business practices are unregulated, and tenants pay the price.
The federal government is in bed with our slumlords. Government housing interventions have taken the form of financing schemes that support private provision of housing. The most significant such maneuver is obscured from public view: Fannie Mae and Freddie Mac provide upwards of $150 billion in annual loan backing to the multifamily rental market, guaranteeing landlords’ loans on lucrative terms and relieving their lenders of default risk, with few strings attached.
These loans back apartments owned by some of the most egregious rent-gougers, like Greystar, Starwood, and AvalonBay. One in four apartment units are financed through Fannie Mae or Freddie Mac guarantees. When we study the numbers, a common story emerges: Landlords leverage favorable loans and relaxed regulations to acquire apartments, and depend on aggressive rent increases and deferred maintenance to pay their debts and turn a profit.
Derek, who lives in a federally backed building called Quality Hill Towers, is one of millions of tenants whose homes are financed this way; his landlord, Sentinel Real Estate Corporation, got $9 million in financing to purchase the property. This building is in distress. Sentinel loses money on Quality Hill every month, but to keep up with mortgage payments, they regularly and aggressively hike rents.
Absent meaningful action from the government, the question is not whether tenants will revolt, but whether the revolt will be from a place of desperation or a place of power. To ensure the latter, tenants are organizing unions, from Bozeman, Montana, to Louisville, Kentucky. Unions are uniting across geography, and aligning through groups like the newly launched Tenant Union Federation, which we launched this year. Drawing inspiration from the labor movement and community organizing, tenant unions reflect the urgency to build a new kind of power to seriously contest the forces of real estate capital.
Tenant unions seek a different system entirely, where homes are not treated as commodities but guaranteed as public goods, and where our lives are not reduced to line items in a landlord’s budget. This vision isn’t a radical fever dream; it is the only way out of this mess. Ultimately, achieving this vision will require rejecting the market as we know it today and creating publicly backed, nonmarket alternatives.
Before we get there, tenants need protections. As tenants build local power within buildings and across neighborhoods, these unions are also demanding a regulatory agenda.
IN CONNECTICUT, TENANTS ARE ORGANIZING for “just cause” eviction protections. In Kansas City, tenants won protections against voucher discrimination. In Los Angeles, tenants are organizing to close eviction loopholes after renovations.
Prior to the election, the Tenant Union Federation released a National Tenant Policy Agenda, which includes national rent caps, anti-eviction protections, habitability standards, and antitrust action to prevent consolidation and collusion in the rental market. Together, these actions would not only bring immediate stability to millions of tenants, but also correct the gross imbalance between landlords and tenants in the rental market. Just as federal agencies regulate food safety thresholds and medical prescription price-gouging, tenants want to see the government regulate the core necessity that is their home, and place limits on unchecked profits that drive bad behavior.
A regulatory agenda for housing is also essential for preserving an adequate supply of truly affordable housing. In the unregulated rental market, we are losing affordable housing faster than we can produce it. In recent years, landlords hiked rents at the fastest rate in decades, and converted affordable units to market-rate housing. Between 2019 and 2021, 14 states “lost” more than 15 percent of their affordable-housing stock. These units were not demolished; landlords increased the rent, without improving the quality or conditions of the homes. And despite multifamily housing production experiencing its largest boom in 50 years, those units are inaccessible to the tenants who need them most.
Tenant unions seek a system where homes are not treated as commodities but guaranteed as public goods.
Efforts to increase housing supply without accompanying regulations could fail to address the core drivers of the housing crisis. These efforts should be thought of as complementary rather than in tension. A regulatory agenda that includes rent caps should not be seen as a silver bullet, and it does not exclude other policy options; it’s a matter of priority and sequence.
Rent caps are the urgent solution that meets the scale of the crisis tenants face in their homes today. And they are also extremely popular, maybe the most unifying economic issue of our times. According to Redfin, 82 percent of Americans, across age, geography, and political party, support rent caps.
The federal government has the power, even without congressional action, to take key steps toward a national regulatory agenda for housing, and tenants are already organizing toward this vision. The Federal Housing Finance Agency (FHFA), which serves as regulator and conservator for Fannie Mae and Freddie Mac, can condition enterprise-backed loans on rent caps and other tenant protections, providing immediate, material relief to millions of tenants and shaping the rental market in the longer term.
For years, tenants have organized to demand protections from FHFA, meeting with director Sandra Thompson again and again, bringing her to federally backed properties across the country to see the realities for herself. The tenants have argued that if the government is in business with landlords like Sentinel, FHFA should be regulating the risk to protect tenants from the fallout.
In the last few months, other federal regulators have recognized their power to support tenants. The Department of Justice (DOJ) and Federal Trade Commission (FTC) have taken important actions to crack down on corporate profiteering in the rental market. The DOJ sued RealPage for colluding to artificially increase rents using a price-setting algorithm, and the FTC issued a settlement with Invitation Homes, requiring this corporate landlord to halt unlawful eviction practices and pay tenants back for junk fees.
Those corporate offenders are not alone. Tenants need a regulatory agenda that takes on the full scope of the crisis, and takes seriously the reality that most landlords’ business models are predicated on tenant instability.
President-elect Trump, a real estate developer, will undoubtedly alter the federal housing finance landscape. The GOP may end the Fannie Mae and Freddie Mac conservatorship, and the industry has called to privatize the enterprises altogether, which would remove potential pathways to regulation.
In the years ahead, tenant unionists will continue organizing, expanding the rigorous practice of building unions through which tenants can exercise their ultimate power: their rent. Those unions will continue demanding local and state protections and alternatives to the existing market; and the collective movement won’t abandon the call for the federal government to correct the imbalance of power between landlords and tenants, and to lower rents for poor and working-class people.
Organized people must determine the path forward. We find ourselves asking: What if tenants wield a new kind of power in this country? What if they do so alongside farmworkers, ratepayers, trade unionists? Could that be a winning team to take on organized real estate capital and all that hurts us? We have to try.
On October 1, as part of a campaign organized by the Tenant Union Federation, Derek Harris and over 200 of his neighbors launched coordinated rent strikes, targeting both their landlords and FHFA. The tenants are demanding national rent caps, new ownership, and collectively bargained leases. These are the first-ever strikes of their kind, and the tenants are already seeing results. Three weeks into the strike, the tenant unions won $1.35 million for long-needed repairs at Independence Towers, another federally backed building in the Kansas City area. On October 31, FHFA invited the unions for an engagement, but failed to commit to bargaining. The rent strikes resumed on November 1, and tenants are organizing in North Carolina, South Carolina, Kentucky, Michigan, Montana, and Illinois, prepared to expand the strikes to escalate the crisis for the owners, lenders, and regulators.
Derek is among the tenants withholding rent for another month. “My rent is my power, and I will use my power with my neighbors until we win what we are owed.”
