
A dilapidated apartment complex in the Carrick section of Pittsburgh, which had been shut down by the county health department, in 2014. The Pennsylvania state attorney general filed a lawsuit against the then-landlord, saying he rented unsafe and uninhabitable apartments, many of them to refugees. Photo by Keith Srakocic/AP.
Ultimately, they find consistent evidence that the poor, and especially the minority poor, experience the highest rates of housing exploitation. In their most basic formulations, they find that renters in high-poverty neighborhoods experience levels of exploitation that are more than double those of renters in neighborhoods with lower levels of poverty. Neighborhoods with a poverty rate of less than 15 percent have an exploitation rate of 10 percent—meaning that rents cover 10 percent of the actual cost of that housing. (In other words, the actual cost of that rental housing can be paid off in 10 years.) But in high-poverty neighborhoods, those where 50 to 60 percent of residents live in poverty, the exploitation rate is 25 percent, meaning that 25 percent of the value of the property is paid back in a single year of rent.
The housing-exploitation rate is also higher in majority-black neighborhoods (20 to 25 percent) compared to minority-black neighborhoods (10 to 15 percent). These results are backed up by the study’s more high-powered statistical models.
With the detailed Milwaukee data, the researchers find that an increase of 10 percentage points in neighborhood poverty increases the rate of housing exploitation by more than 2 percentage points overall, and that a 10-percentage-point increase in black residents increases the housing-exploitation rate by nearly 1 percent.
The story doesn’t end there. Landlords are making a bundle from poor renters. The poor pay a considerable amount of money in rent: Nationwide, median rents in poor neighborhoods are $511 per month, compared to $674 in non-poor neighborhoods. In Milwaukee, the gap is much narrower: $600 in poor areas versus $650 in non-poor areas. When Wilmers and Desmond control for regular expenses in the form of mortgage payments, property taxes, property insurance, utilities, and property management fees, they find the actual profits that landlords make to be significantly higher in poor neighborhoods.
Nationally, landlords in poor neighborhoods derive a median profit of $298 monthly, compared with $225 in middle-class neighborhoods and $250 in affluent ones. In Milwaukee, the profit differential is even greater, with landlords in poor neighborhoods raking in $319 per month, more than double the profit ($174 per month) of landlords with properties in non-poor neighborhoods.
And the same basic pattern holds when expenses including maintenance and repairs are factored in. Across the nation, landlords with units in poor neighborhoods average nearly $100 a month in net profit, compared to about $50 in affluent neighborhoods, and just $3 in middle-class areas. In Milwaukee, landlords again do even better, taking home about $150 per month, compared to roughly $20 a month in non-poor neighborhoods.
Those are whopping margins, and the reason for this discrepancy is that rental markets have very different dynamics in expensive cities like New York and San Francisco than less expensive cities like Milwaukee. In low-cost cities, landlord profit rates rise steeply alongside neighborhood poverty. But in expensive cities, the reverse is true. In expensive cities, landlords make money through appreciation and gentrification (which is bad enough for the poor). In lower-cost, more economically hard-hit cities, they make it on the backs of the poor.
“If exploitation relies on the exclusion of a disadvantaged group from a productive resource,” Desmond and Wilmers write, “that resource is housing located outside of poor neighborhoods.” They add, “Renters in poor neighborhoods are excluded from both home ownership and apartments in middle-class communities on account of their poverty, poor credit, eviction, or conviction history, or race (through discrimination).” Ultimately, they conclude, “renters are exposed to exploitation on account of their reliance on housing and their lack of options for securing it.”
When all is said and done, the poor suffer not only in the labor market. They suffer again in the rental housing market, paying more of their lower incomes for housing, and facing the double whammy of labor and housing exploitation.
CityLab editorial fellow Nicole Javorsky contributed research and editorial assistance to this article.