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Title: Staying in Place to Get Ahead

Citation Type: Miscellaneous

Publication Year: 2016

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Abstract: Renters today are facing the most serious affordability crisis in U.S. history, particularly low- and middle-income earners. In 2014, nearly half of all renters were paying more than 30 percent of their incomes for housing, including more than 26 percent of renters who devoted over half of their incomes to this necessity.1 With housing demanding so much of their budgets, families have little left for other essentials like food, transportation and health care. When unexpected expenses come up, renters often face eviction, making it difficult to remain in one residence for a long period. In this paper we propose a master lease program that can offer low-income renting families greater housing stability while reducing their costs and helping them build savings. Under this approach, a nonprofit or mission-driven organization would gain long-term access to units in existing buildings through a master lease arrangement a multiyear, fixed-price contract between the owner and nonprofit for control over some or all the units in a building modeled on standard commercial leases. There would be multiple benefits from this arrangement: The master lease would protect the owner against vacancy risk and turnover costs. In exchange for the annuitized cash flow paid out by the nonprofit, the master lease would be priced below market, allowing the nonprofit to price individual units affordably. Because the nonprofits lease would run as long as a decade with known escalations, tenantscould also be offered long-term, multiyear leases with protections against rent shocks. This lease structure would continue to provide tenants the flexibility of renting but also allow them the kind of cost control that is one of the benefits associated with long-term, fixed-rate mortgages. At a time when federal funds for rental assistance programs are disappearing, this unsubsidized program could provide much needed rental housing to low-income families. To the extent that some discounts are needed to make units affordable to tenants, the nonprofit could cross-subsidize by pricing some units at market rates. We believe the model could be particularly impactful for small multifamily properties and in neighborhoods at risk of gentrification that would displace long-time residents. An important element of the model is a savings component woven into the tenants monthly lease payments. A small amount each month we propose $25 would be allocated to a custodial savings account in the tenants name. The goal is to provide a liquid financial cushion that could be called on in the event of unanticipated expenses car problems, medical bills, etc. and would keep the family from having to choose between meeting crisis expenses or failing to pay rent and therefore risk eviction. With the addition of a simple match program, at $25 per month and without any withdrawals, a family would have $600 in reserve after one year, equal to the median liquid savings among low- and moderate-income households.

Url: http://s3.amazonaws.com/KSPProd/ERC_Upload/0101107.pdf

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Authors: Jakabovics, Andrew; Charette, Allison

Publisher: Enterprise Community Partners, Inc.

Data Collections: IPUMS USA

Topics: Housing and Segregation, Other

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