Research; Wilbur O. and Ann Powers College of Business

Tight landlord regs may result in homelessness rise, Clemson study says


CLEMSON, S.C. – Though strict landlord regulation may result in fewer evictions during the COVID-19 pandemic, research by a Clemson University professor cautions that too much protection for tenants could result in fewer and more expensive rental properties, prompting increased homelessness.

Lily Shen, Finance, assistant professor
Lily Shen

The study, “Tenant Rights, Eviction, and Rent Affordability,” was conducted by Lily Shen, assistant professor of Finance in the College of Business at Clemson, Edward Coulson, University of California-Irvine and Thao Le of Georgia State University.

“Our research shows that in order to keep rental housing affordable and sustainable for low-income families, lawmakers have to walk a fine line in determining what will benefit the tenant and what may ultimately be detrimental to them,” Shen said. “On the surface, strict landlord regulation sounds good for tenants, but our paper points out, the solution isn’t that simple. The research suggests that conventional thinking on the issue of more regulation may have the opposite effect on tenants.”

Congress passed the federal Cares Act at the end of March which included a hold on eviction actions until late July due to the economic hardships caused by the pandemic, with no one being put out of their homes until late August.

Nearly one-third of Americans didn’t pay their housing costs in July. But local, state and federal moratoria on evictions originally put in place during the coronavirus pandemic are expiring. Around 30 state moratoriums have expired since May and the federal moratorium on evictions expired July 24.

Shen and her research associates developed a search model which shows stricter regulations on landlords will have unintended consequences. The model shows an increase in eviction costs to landlords will lead to higher rents, a decrease in the housing supply, a lower vacancy rate and a subsequent increase in homelessness. The researchers later verified all the predictions using data from the U.S. Census from 2005 to 2016.

“Though advocating for tenant rights seems noble and the right thing to do, the resulting consequences could have a devastating impact on this vulnerable population,” Shen said. “Our research indicates that if landlords aren’t allowed to evict, rent will likely increase to compensate for their losses. The housing supply would diminish, though the demand would still exist. These landlords may choose alternative investments if owning property is no longer feasible. A reduced housing supply would mean less competition, which would drive up the cost of rent for everyone.”

Shen said her research “didn’t pick sides” on this pressing issue, particularly in the throes of a pandemic, which has caused financial hardship for many.

“What we set out 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 achieve their goal of increasing tenants’ welfare.”

Click here to read the full study.

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