How Poor Americans Get Exploited by Their Landlords

Richard Florida
This article was originally published on March 21, 2019, by CityLab

Do the poor pay more for housing?

That’s the question at the heart, and in the title, of a detailed paper published in the American Journal of Sociology on the actual housing costs paid by Americans in low-income urban neighborhoods. Its two authors, Princeton’s Matthew Desmond—who wrote the award-winning 2016 book Evicted—and MIT’s Nathan Wilmers, track the rent burdens and levels of exploitation faced by those living in concentrated poverty. They also uncover the staggeringly high profit margins made by the landlords who own properties in these areas.

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Ultimately, they find consistent evidence that the poor, and especially the minority poor, experience the highest rates of housing exploitation. In their most basic formulations, they find that renters in high-poverty neighborhoods experience levels of exploitation that are more than double those of renters in neighborhoods with lower levels of poverty. Neighborhoods with a poverty rate of less than 15 percent have an exploitation rate of 10 percent—meaning that rents cover 10 percent of the actual cost of that housing. (In other words, the actual cost of that rental housing can be paid off in 10 years.) But in high-poverty neighborhoods, those where 50 to 60 percent of residents live in poverty, the exploitation rate is 25 percent, meaning that 25 percent of the value of the property is paid back in a single year of rent.

The housing-exploitation rate is also higher in majority-black neighborhoods (20 to 25 percent) compared to minority-black neighborhoods (10 to 15 percent). These results are backed up by the study’s more high-powered statistical models.

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Nationally, landlords in poor neighborhoods derive a median profit of $298 monthly, compared with $225 in middle-class neighborhoods and $250 in affluent ones. In Milwaukee, the profit differential is even greater, with landlords in poor neighborhoods raking in $319 per month, more than double the profit ($174 per month) of landlords with properties in non-poor neighborhoods.

And the same basic pattern holds when expenses including maintenance and repairs are factored in. Across the nation, landlords with units in poor neighborhoods average nearly $100 a month in net profit, compared to about $50 in affluent neighborhoods, and just $3 in middle-class areas. In Milwaukee, landlords again do even better, taking home about $150 per month, compared to roughly $20 a month in non-poor neighborhoods.

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