this post was submitted on 13 Feb 2025

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The Housing Loophole That Lets Wealthy Investors Raise Rents on Poor Tenants (www.propublica.org)

submitted 6 days ago by [email protected] to c/news

4 comments fedilink hide all child comments

Four and a half years ago, a newly formed corporate entity purchased a low-income housing complex with 264 apartments in Phoenix. The property had received more than $4 million in federal tax credits and, in exchange, was supposed to remain affordable for decades.

The company then used a legal loophole that stripped the affordability protections from the apartments. The maneuver appears to have been lucrative for the company, which bought the property for under $20 million and flipped it two years later for $63 million. Today, advertised rents there have gone up by around 50%.

Some 115,000 apartments in the United States have lost rent restrictions as a result, according to one estimate. Experts say these conversions are exacerbating the nation’s shortage of affordable housing, which has intensified in recent years. One report recently concluded that the country has nearly 5 million fewer housing units than it needs. The problem is most acute for those with low incomes.

The loophole has remained open for decades despite widespread agreement among regulators and advocates about its harm. Congressional efforts to repeal the provision have failed — most recently in 2023 — though state reforms have trimmed its effects. President Donald Trump has pledged to lower housing costs, but some advocates for reform are skeptical that his administration or a Republican-controlled Congress will strike a statute that can be lucrative to the real estate industry. (The White House did not respond to a request for comment.)

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[–] Delta_V 33 points 6 days ago

The loophole:

The program offers developers a tax subsidy worth potentially millions of dollars in exchange for keeping units affordable and renting them only to . . . households making below 60% of the area median income . . . Rent and income restrictions are supposed to last at least 30 years. But, after just 14 years, property owners may ask their states to find buyers . . . States can only sell at prices set by a formula that almost always overvalues the properties. As a result, buyers are rarely found. If states can’t find buyers within a year, owners are free to raise rents . . .

[–] extremeboredom 14 points 6 days ago (2 children)

Landlords are parasites. The rest of us are expected to work for our money. Landlords simply use their capital to absorb wealth from those without capital. Free money for no work. It's disgusting.

[–] [email protected] 9 points 6 days ago* (last edited 6 days ago)

I have extra property that I inherited and I'm trying to offload. The sane rent price would be maybe $500-$600/mo to pay for upkeep, time to drive out there and check on it, etc, but in this market it'd probably easily go for $1200/mo. I wouldn't want to rent it for $1200/mo because I KNOW it isn't worth that. I know myself well enough to know that I cannot be assed with being an attentive landlord, especially for a property that far away. That just leaves me with selling the place.

All that to say that I just absolutely cannot relate to these fucking people doing this. It's like our whole system is the banality of evil writ large.

[–] Landless2029 3 points 6 days ago* (last edited 6 days ago)

I don't think it's landlords.

Its corporate land barons.

This is just plain greed. I've lived in apartments all my life and never had an issue with rent rasing or repairs.

There's also the middle class owning a multi family trying to get into home ownership.

Call it what it is. This is yet another attack in the class war that's supported by Republicans and obviously Trump.