Can Stronger Anti-Eviction Policies Actually Be Worse for Residents?

Though the Trump administration recently announced a moratorium on evictions for the remainder of 2020, a new academic paper indicates that if restrictions on landlords are too tight, rental prices will rise, vacancy rates will be lower and supply will decrease. 

Worse, the authors postulate there will also be an increase in homelessness, a concern that should put fear into the hearts of lawmakers in local, state and federal offices throughout the nation.

“On the surface, strict landlord regulation sounds good for tenants, but as our paper points out, the solution isn’t that simple,” said Lily Shen, an assistant professor of finance in the College of Business at Clemson University. “The research suggests that conventional thinking on the issue of more regulation may have the opposite effect on tenants.”

Shen co-authored the paper with N. Edward Coulsen of the Paul Merage School of Business at the University of California-Irvine and Thao Le of the J. Mack Robinson College of Business at Georgia State University. Their study, “Tenants Rights, Evictions and Rent Affordability,” was published in July.

Shen said the paper shows that lawmakers and regulators must “walk a fine line in determining what will benefit the tenant and what may ultimately be detrimental to them.”

The solution, she said, isn’t as simple as blocking all evictions for a certain period or until the virus subsides enough for everyone to return to work.

Shen and her co-authors do not pick sides when it comes to curtailing evictions. Rather, what they want to do is “make people aware of what could result if certain policies are put into place.”

“Though bans on evictions may seem to be helping low-income tenants short-term, you really aren’t helping them in the long run,” she said. “It is essential for policymakers to understand the delicate balance between the strictness of landlord regulations, evictions and rent affordability to achieving their goal of increasing tenants’ welfare.”

To show the impact of evictions on the rental market, or “the significant tradeoff between tenant protections and rent affordability,” the researchers created a “Tenant-Right Index” based on a score of one for each of the top 12 legal provisions that are most important to landlord-resident relations. The sum of all 12 provisions becomes the index, which ranges from zero to 12, with the higher numbers indicating more legal protections for renters than for landlords.

Testing the index against rent affordability, they find that rental units are less affordable in places where residents have better legal protections. Specifically, they maintain that a one digit increase in the index is associated with a 6.1 percent increase in the median rental rate.

Furthermore, they find that the one digit increase also reduces the supply of rental housing by 2.1 percent and the vacancy rate by 8.9 percent. And, they observe, jurisdictions with more substantial resident rights experience more homelessness.

The latter finding, the say, “appears counterintuitive but is simply a result of reduced supply.”

Shen, Coulsen and Le also looked at the effect of more resident-favorable laws in reducing evictions, finding that a one-digit jump in the Tenant-Right index correlates to an 8.9 percent decrease in the eviction rate.

“If the main objective is preventing eviction and the substantial social and economic costs its entails, our study provides support for the use of stringent landlord regulation,” the researchers write. “At the same time, policymakers need to balance this goal against the negative impacts on rent and supply to avoid exacerbating the housing affordability problem that many cities are already struggling with. To the extent that they can even increase homelessness, overly burdensome regulations only counteract the stated welfare-enhancing goals of the laws.”