In defense of ‘substandard’ housing

Housing ages naturally. As property owners know, it is a constant job just to maintain housing in good repair. Meanwhile, the government sets ever higher standards in its codes, effectively making older housing illegal. On top of this, government regulation allows rent withholding without escrowing, which regularly deprives moderate- and lower-income housing in particular of desperately needed rental income to maintain it. Misguided government regulation accelerates the aging process and produces deteriorated and abandoned housing. The housing of the poor and the not-so-poor is good housing worth saving, needed housing worth preserving. Yet it is at risk.

The downward slide

Brand-new housing, just-built housing is quite probably code-perfect. Maybe there is a missing handrail, or a small crack has opened up. But most likely, it is as code-perfect as housing gets.

From there it all goes downhill. Not right away, but eventually. For a decade or two, new housing will remain in nearly perfect condition. Occasionally a part will break or malfunction. But the advantage of new housing or of gut-rehabbed older housing is that maintenance burdens are very light for quite a few years. Of course, the cost of this new or renewed housing is very high.

Then wear and tear start to set in. Over the years, various parts of housing are degraded. The sun and bad weather beat down on the roof, and shingles crack and leaks develop. The foundation settles, causing cracks in some walls. Faucets and water valves leak or break from frequent use. Moving parts – doors and knobs, switches and plugs – wear down or bust. Heat takes its toll on furnaces, water heaters and stoves. People moving and using the house rub against parts or use them incorrectly, and those parts show the effects of natural wear or accidental stress.

Repaired – or not

Of course, the essential functioning parts of a house must be repaired. Toilets and showers and clogged drains must be fixed. Furnaces, roofs, and broken faucets must be repaired or replaced. Loose electrical fixtures need to be tightened. Exterior doors and windows need to close tight and lock.

But many parts of a house or apartment can show the signs of wear and tear, even outright disrepair, and still leave the house habitable. The wallpaper can peel. The window can be cracked. The screen may have a hole. A few screens may even be missing. Some door hinges may be loose. The stove may miss a knob. The kitchen linoleum may be worn through. But none of these unrepaired items interferes with living comfortably and safely in the housing.

And this general disrepair is what happens gradually over time to all housing. Not that there isn’t variation. Some owners will be persnickety and diligent and keep their housing in better repair. Other owners will be busy, distracted, or just plain negligent. And the housing will show the difference in its state of repair or disrepair.

Rising standards

At the same time that housing suffers ordinary wear and tear, the standards for new construction and all capital improvements to older housing keep rising. New technology comes on line or new, costlier standards of construction become accepted, and all gets incorporated into the building, electrical or plumbing codes – like having electrical outlets no more than six feet apart, or requiring safety glass in windows near doors.

Whenever an owner of older housing seeks to replace some aging component, the cost becomes ever more expensive. The older the systems in the housing are, less “modernizing” has been done and the cost of renovation becomes greater. Given this high cost factor, owners may face the dilemma of doing no improvements at all or doing improvements on their own, illegally, without permits, yielding construction that does not meet the latest code standards.

Not up to code

Whether it’s repaired well or not, all older housing has degraded over time and, to varying degrees, fails to meet the requirements of the state sanitary code or the current building codes. Some violations of the codes may be truly “de minimus,” so minor they hardly count as violations. Other violations are moderate to more serious, but still without making the housing uninhabitable. It is this latter housing that we are calling “substandard,” as not meeting code requirements to a moderate or serious degree. It is this housing that characterizes a good deal of rental housing, housing that has become illegal merely by the passage of time.

But if all rental housing met all codes, it would be extraordinarily expensive, equivalent to the cost of newly gut-rehabbed condominiums. The rents would be extraordinarily high to cover the rehab costs. Fortunately, society does not work in a perfectly rational, consistent manner, and thus housing can be provided at rent levels affordable to people with a broad range of incomes. By overlooking and “grandfathering” older housing, by not having yearly inspections of every single rental property, older housing in various states of repair and improvement is available. It must be this way in order to provide housing to all. But the social cost is the existence of housing that is technically illegal and subject at times to sudden demands to be brought into conformity with the law.

Vulnerable to attack

Especially in low- and moderate-income neighborhoods, the housing tends to be the oldest housing stock in the area and thus in the worst shape physically. It was often once beautiful housing, it may still be historic and beautiful. But because of its physical condition and lack of modernization, the rents are lower and thus appeal naturally to lower-income people. It is estimated that over 70% of households earning less than 50% of area median income live unassisted – that is, without subsidies – in older buildings that contain only one to four rental units.* Unless we were to expect a sudden huge increase in public subsidies – and that is not fiscally nor politically feasible – we should be grateful that this housing exists and serves the large population of the poor and not-so-poor.

But instead, public officials look down on this housing and put it under pressure to upgrade and modernize. And as a result, this housing faces a special challenge. The incomes of the tenants limit what they will pay in rent, and the limit on rent limits how much repair and improvement can actually be done. As one scholar has said: “The ratio between mortgage payments and rental income is such that the residual income is simply not adequate to provide for management and maintenance at a level considered ‘normal’ by professional managers of large [recently built] rental properties,”* nor considered in compliance with codes.

At-risk housing

But if the housing keeps on getting worse and worse physically over time, then it is in a highly vulnerable situation. As the same scholar says: “In the ideal situation, an attentive landlord and responsible tenant combine to provide a well-maintained unit at reasonable cost; in the worst, an irresponsible landlord and/or disruptive tenant result in a poorly maintained unit at risk of abandonment.” Abandonment happens when the needs or demands for repairs exceed the owner’s income and ability to make the repairs.

Another factor puts this housing at risk. The owners of it are almost without fail small property owners, that is, people who own one or more small-sized rental buildings and do the management and even many repairs themselves. These owners are themselves relatively poor and usually have little or no training or experience in housing repair and preservation. A mistake in judgment with limited funds – a cosmetic repair undertaken when a structural repair is critically needed – can also push the housing over the edge into abandonment.

This housing is also at risk from bad government regulation. The requirement to keep housing code-perfect is largely unenforced except when tenants complain. But those complaints, especially when combined with rent withholding under state law, can easily push the housing over the edge: too many repairs demanded precisely at the moment when no rental income is coming in.

Policy change

Not only does there need to be policy change (for example, a rent escrow law to stop the most harmful effects of rent withholding), there needs to be policy discussion of the private rental housing market. There is virtually no political discussion of the private market, nor any significant academic discussion or research. It is remarkable that such an important segment of our society – and one that deals with the housing of most of America’s renters and most of its poorer households – is simply not talked about. Policy makers, our lawmakers, simply cannot make intelligent housing legislation when they will not listen to those of us who are intimately acquainted with the realities of managing housing but instead listen to lawyers who are completely ignorant of housing realities and instead want to focus on an adversarial landlord-tenant relationship.

 

* Alan Mallach, “Landlords at the Margins: Exploring the Dynamics of the One To Four Unit Rental Housing Industry,” Joint Center for Housing Studies, Harvard University, March 2007.