Landlords Who Own Few Units Are a Crucial Piece in DC’s Affordable Housing Preservation Puzzle
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The housing crisis brought about by the COVID-19 pandemic has focused attention on not only renters’ struggles but also the financial challenges of landlords, with landlords who own fewer housing units being particularly at risk. In the District of Columbia, many of these landlords are worried they may lose their properties. Such an outcome could destroy generational wealth for DC families who own these properties while depriving DC renters of a source of stable, affordable housing.
What do we know about landlords of small rental properties in the US?
Available national data describe properties and owners by building size, rather than by the number of units owned, and reveal that many smaller rental properties are owned by individuals. Nationally, 48 percent of rental units are in properties with 1 to 4 units, and 73 percent of those units are owned by individuals. The share of individual owners drops to less than 16 percent for larger properties with 25 units or more, and limited liability corporations and limited partnerships account for more than half of owners of larger properties.
Smaller rental buildings are a significant part of the affordable housing stock, even though many of them are not directly subsidized. Compared with single-family houses, small multifamily properties are more likely be in census tracts with household incomes below 80 percent of the area median (PDF), with more than half of 3-to-4-unit buildings in these lower-income tracts.
Furthermore, people of color make up a bigger share of owner-occupants of properties with fewer units than of owner-occupants with a larger number of units. These smaller properties represent an opportunity to build and transfer generational wealth. A survey of members of the National Association of Hispanic Real Estate Professionals found four out of five respondents owned or managed fewer than 20 units.
What do we know about owners of smaller numbers of unassisted rental units in the District of Columbia?
Urban–Greater DC learned more about owners of DC rental properties by analyzing real property data collected by the DC Office of Tax and Revenue and housing unit counts from the DC Master Address Repository. By matching owner names and property-tax billing addresses, we identified owners of multifamily rental buildings in DC (including single-family conversions) with fewer than 20 apartments in a single property or across multiple properties.
Using data from the DC Preservation Catalog, we removed from our analysis properties that receive project-based housing subsidies, such as federal Section 8 or low-income housing tax credits. Some of these buildings may have tenants who benefit from housing choice vouchers or the DC local rent supplement program (PDF), but publicly available data do not allow us to identify those properties.
We found more than 8,800 multifamily rental properties in DC (about 26,200 apartments) belong to entities owning fewer than 20 units. About 1,100 of these properties (about 5,100 apartments) are owned by corporations, partnerships, or associations, most of them for-profit. The remaining 7,700 properties (21,100 apartments) belong to individual owners.
These properties are located throughout DC, but the largest numbers are in Ward 6 (5,600 apartments) and Ward 5 (4,100 apartments). Properties belonging to individual owners with fewer than 20 units comprise about 1 in 5 rental housing units in these two wards.
About half of properties owned by individuals with fewer than 20 units belong to owners with only 2 units, and another 30 percent have 3 to 4 units. At least 94 percent of these older buildings were built before 1960. Despite their age, only about 20 percent of rental properties belonging to individual owners with few units would seem to be subject to DC’s rent control program, which limits annual rent increases. Although these properties may still be affordable, the lack of rent control means they may need additional intervention to preserve their affordability.
Based on property-tax mailing addresses, more than three-quarters of individual owners of DC’s small multifamily rental housing also appear to live in the district. Another 13 percent have addresses in Maryland, and 5 percent live in Virginia. Only about 5 percent of these properties belong to individuals outside of DC, Maryland, or Virginia. Furthermore, 74 percent of these DC-based individual owners either claim the DC Homestead/Senior Citizen Deduction or use the property as their tax billing address, indicating they likely live in the building too.
What can be done to preserve multifamily rental housing belonging to landlords with few units in DC?
Efforts to preserve affordable housing in DC should include a focus on individual landlords who own few units. Although it is vital to keep protecting renters from displacement as the pandemic’s economic effects continue, policies like eviction moratoria can cause hardships for landlords of small properties unless accompanied by financial relief. Yet current financial assistance may not be effectively reaching these landlords. Because much small multifamily rental housing is neither assisted nor income restricted, changes in ownership for these properties can displace renters with lower incomes.
And though many affordable housing preservation efforts have, quite rightly, focused on federally assisted housing, different strategies are needed to preserve unassisted housing. The DC Housing Preservation Strike Force acknowledged the importance of preserving small properties and, since September 2019, DC’s Small Building Program has been taking applications from eligible property owners of 5 to 20 affordable housing units to fund limited systems replacement and other key repairs.
A recent webinar hosted by the Preservation Compact focused on other cities’ innovative approaches that could DC could consider, such as South Los Angeles’s Local Rental Owners Collaborative, which offers owners of 2 to 20 units financial counseling and access to technology; the Preservation Compact’s preservation strategies for unassisted housing; and the Community Investment Corporation’s variety of financial resources and other tools (PDF) for preserving unassisted housing, including revolving loan products.
Additional data collection and analysis—such as regular surveys of landlords and data that integrate DC government business and housing records for properties and owners—are vital for designing effective policies and programs to assist owners with fewer rental units and to preserve this valuable housing stock. Addressing these landlords’ needs will help DC achieve its affordable housing preservation goals.
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