How Poor Americans Get Exploited by Their Landlords

Richard Florida
Mar 21, 2019

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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Wright defined exploitation as occurring when a dominant and more powerful group enriches itself by excluding a less powerful and more subordinate group from a key productive resource, like technology, machinery, or land.

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It is a mistake, Desmond and Wilmers argue, to see slums as a byproduct of the modern city, rundown areas that occur by accident. Instead, they contend that the slum has long been a “prime moneymaker” for those who profit from land scarcity, racial segregation, and deferred maintenance. “If labor exploitation is understood to be getting paid less than the market value of what one produces,” they write, “we can extend this definition to the housing market by operationalizing exploitation as being overcharged relative to the market value of what one purchases, paying more for less.”

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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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The story doesn’t end there. Landlords are making a bundle from poor renters. The poor pay a considerable amount of money in rent: Nationwide, median rents in poor neighborhoods are $511 per month, compared to $674 in non-poor neighborhoods. In Milwaukee, the gap is much narrower: $600 in poor areas versus $650 in non-poor areas. When Wilmers and Desmond control for regular expenses in the form of mortgage payments, property taxes, property insurance, utilities, and property management fees, they find the actual profits that landlords make to be significantly higher in poor neighborhoods.

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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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