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What Happens When 10 Million Tenants Can’t Make Rent?

It is a crisis, but it is also an opportunity for a huge expansion in social housing.

Credit...Tom Brenner/Reuters

Gianpaolo Baiocchi and

Dr. Baiocchi is a professor and director of the Urban Democracy Lab at New York University. Dr. Carlson is a postdoctoral research associate at Brown University’s Population Studies and Training Center, and Spatial Structures in the Social Sciences (S4).

What happens when 10 million tenants can’t make rent?

Dire conditions for vulnerable tenants also mean financial distress for landlords. Things have been particularly difficult for “mom and pop” landlords, particularly those who operate in the affordable market. In an October survey of smaller landlords, 30 percent reported increased pressure to sell their property, due to fallout from the pandemic.

Yet investors looking to profit from the fallout have referred to this hardship as the “greatest buying opportunity of the century.” They are already preparing to acquire these distressed properties, sitting on more than $300 billion in “dry powder” for this purpose.

The 2008 financial crisis showed the impact of an enormous transfer of wealth and property out of the hands of families and communities and into the portfolios of Wall Street. To prevent a similarly disastrous outcome, we need to act now and foster a large-scale expansion of social housing.

We propose the creation of the Social Housing Development Authority, a federal agency that would purchase distressed real estate, ensure it is livable and environmentally sound, and finance its transfer to the so-called social housing sector, including tenant cooperatives, community land trusts, nonprofits or public housing.

When a property goes into distress, or when the owner starts missing payments, the S.H.D.A. would have the opportunity to purchase it at market rate. After acquiring the distressed property, the agency would work with contractors to ensure that current and future residents have dignified living conditions — distressed landlords often skimp on or refuse to make repairs.

The agency could also retrofit the housing to meet environmental standards. About 20 percent of the United States’ greenhouse gas emissions comes from our homes, so this would be a significant contribution.

Once the property is stable, the S.H.D.A. would transfer it to eligible entities, with the aim of creating permanently affordable housing for local tenants. A skilled staff with ties to the community would work with these entities to proactively and efficiently pursue distressed properties as candidates for transfer to social housing.

Similar nonspeculative, community-controlled housing models like community land trusts have a proven track record of providing long-term housing. On the whole, land trusts weathered the last housing crisis much better than the private market. The reason is simple: Communities look out for one another in both good times and bad. The success stories come from places as varied as Burlington, Vt.; Jackson, Miss.; and Washington. Many of these projects have worked with previously derelict properties in cities like Boston and New York City.

Today there are grass-roots proposals for social housing from coast to coast. The S.H.D.A would help turn these proposals into projects.

There are already cases where the S.H.D.A. could step in and meet the needs of communities. The city of Santa Fe, N.M., owns a 64-acre property from a defunct college next to a gentrifying neighborhood. After a developer backed out in January, citing economic uncertainty, the city may be considering selling off the property to investors because of its mounting debt. Community organizations like Chainbreaker Collective are pushing to turn the property into a land trust with much-needed affordable housing. Its leaders cite insufficient funding as the main obstacle. The S.H.D.A. could step in to provide funds and technical assistance to get the project started.

Except for corporate speculators, the S.H.D.A. would be a win for all. Landlords would dodge torturous legal proceedings, tenants would avoid uncertainty, and communities would benefit from quality, permanently affordable housing. While its principal focus would be on distressed residential property, the agency could also acquire empty office buildings and convert them into housing.

The S.H.D.A. would be funded, in line with the BUILD Act of 2018, by establishing an account at the Treasury, which would be drawn from and replenished through the agency’s activities.

New programs take time and resources to get off the ground. Policymakers are more comfortable creating incentives for the private sector rather than trying to build new public institutions. But a year’s worth of distress won’t evaporate overnight.

Federal action on this scale is not a far-fetched idea. The United States government has a history, including after the 2008 crisis, of entering the market in times of need — albeit imperfectly, but with important successes. Now is the time for the federal government again to take bold action in the housing sector, and this time with an eye to empowering communities.

An effort like the S.H.D.A. meets needs that predate the pandemic and will only grow in years to come. Direct rent payments are necessary and expedient, but they are only a half measure. Even if they cover every last cent of tenant debt, it will only return us to pre-pandemic days, when one in four renters were already paying half their income to rent and most low-income families had unaffordable housing costs.

Crises are moments of upheaval, but they are also opportunities to look at the ways we’ve done things and ask whether we could do them differently in the future. It is time to make transformative change in a housing system that even before the pandemic was failing too many. Congress and the White House have a chance to create policies that not only help us bounce back from this crisis, but also help prevent the next one.

Gianpaolo Baiocchi is a professor and director of the Urban Democracy Lab at New York University. H. Jacob Carlson is a postdoctoral research associate at Brown University’s Population Studies and Training Center, and Spatial Structures in the Social Sciences (S4).

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A version of this article appears in print on  , Section A, Page 23 of the New York edition with the headline: A Fix for More Affordable Housing. Order Reprints | Today’s Paper | Subscribe

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