Angela Pretorius's Shortform

Angela Richardson

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I'm curious about the long-term effects of eviction laws on homelessness rates.

I have a an intuitive argument (below) that removing eviction laws and making no-fault evictions really
easy would allow the housing market to clear and cause lower rents and (in the long term) a drop in
homelessness rates.

Does anyone here know whether there have been any empirical studies into the long-term effects of eviction
laws on homelessness and whether or not they have borne out the conclusion that eviction laws increase the
rate of homelessness? If not, are there any good theoretical arguments as to why eviction laws may or may
not increase homelessness rates?

Here is my argument:

Most rental accommodation stands empty for long periods of time. Why would landlords prefer to let rooms
stand empty than to lower their rents and get their rooms filled? And why do so many landlords refuse to
rent to people of certain demographic groups? For example, I many know of landlords who refuse to rent to
construction workers, black people or people who claim benefits and would rather lose money by letting
their accommodation stand empty. Even where there are anti-discrimination laws to prevent this from
happening, in practice the anti-discrimination laws are impossible to enforce.

The reason is that every time a new tenant moves in, the landlord has to trust that the new tenant will pay
their rent and won't cause property damage or complaints from the neighbors. Because it is so difficult to
evict a 'problem' tenant, the landlord will not rent to demographic groups that he/she perceives as
containing a higher proportion of problem tenants.

In addition, because tenants of lower socioeconomic status are more likely to become 'problem' tenants,
landlords deliberately keep their rents high to discourage those of lower socioeconomic status from renting
from them. As an example, £1000 per month for a property and having it stand empty half the time brings in
an average of £500 per month, whereas charging £800 per month for a property and having it occupied 90% of
the time brings in £720 per month, but if the sort of tenants who can afford £800 per month are more likely
to become problem tenants than the sort of tenants who can afford £1000 per month, and if eviction laws
make the cost of taking in problem tenants very high, then it will be more profitable to charge £1000 per
month.

One other point that needs to be made is that the people who are most at risk of homelessness tend to be
those who are impulsive/heavily discount the future. Imagine a tenant who values the pleasure of engaging
in a certain problem behavior at 10 units and values being evicted and made homeless now at -50 units, but
discounts the future heavily and only values being made homeless in five months time at -5 units. If there
are no eviction laws and engaging in this problem behavior will lead to immediate eviction and
homelessness, then this tenant will decide not to engage in this problem behavior and will not become
homeless. On the other hand, if there are strict eviction laws and engaging in this problem behavior will
lead to a 50% chance of eviction after five months of court cases then this tenant will decide to engage in
the problem behavior.

I think one of the big difficulties around rent is the high transaction cost on both sides.

Your proposal helps address some of the friction that makes it costly for landlords to take a risk on tenets, and having lived places where eviction is generally fairly easy (Florida, where you you can evict someone in between 3 and 10 days) and where it is fairly hard (California, where you can't really evict someone in less than 30 days and 60 to 90 days is more realistic) I can say that the rental market certainly felt more efficient where eviction was easier rath... (read more)

7Dagon6y

It should be possible to find natural experiments as local laws change, but I don't know of any studies. And it's _very_ hard to study longer-term effects, as such laws tend to change because of demographic changes, not in advance of them. I think your motivational model for landlords is fairly accurate - they would prefer to leave a unit empty over renting to a (percieved) risk. In the longer term, this also applies to the supply of rental housing and whether people choose to become (or cease to be) landlords. If the income for a property doesn't make up for the hassle and expense, maybe the landlord is better off converting to a condo or meth factory. I think your risk and cost estimates are somewhat naive. Even if evictions are not legally restricted, they never get truly easy. In the case of "problem tenants", the eviction can increase the chance or magnitude of damage: revenge destruction is not unheard-of (it _is_ uncommon, but perhaps wouldn't be if more impulsive tenants were more easily moved from room to room). More importantly, the damage is done by the time the decision to evict is made. Evicting a problem tenant doesn't undo the expense, it just stops the bleeding. I suspect it will remain the case, regardless of policy or law, that the easiest eviction is not to have rented in the first place. And the easiest way not to take a loss on rental property is not to be a landlord in the first place. I don't know any good solutions, unfortunately. There are partial solutions, for some populations, but they can make it worse for other groups. Required renter's insurance that indemnifies the landlord is a possibility - GREAT for those who appear risky to the landlord but have a solid track record that the insurer can see. Crappy for the reverse - those who appear worse than they are to the insurance company. Fractional ownership (condo model, but with landlord as part-owner) is another - instead of a deposit, require an investment of a significant percenta