What happens when government (HUD) comes into highly competitive markets and floods them with new rental housing while reducing their pricing 50% below market price to achieve 0% vacancy and 100% occupancy rates? Private businesses close. When public or subsidized housing move into a market, existing apartment tenants choose price and walk away from lease agreements knowing their credit will be destroyed in the process. This increases vacancy rates and reduces occupancy rates for traditional landlords and investment holding companies. The end result is the reduction of employee staff, wages, benefits and workers abilities to feed their families. Families tend to blame the employer for not doing more; however it was clearly the government’s actions that caused this problem to occur.
The problem with government agencies undercutting private business is that they do not understand the ramifications, unless creating a dependent underclass is their objective. Government doesn’t understand that if you take away from the producers and undercut them with tax funded programs that cannot be competed with, the results increase unemployment compensation benefit payout and reduce tax revenues for themselves, lose, lose. If government reduces the competitiveness of business and business closes, who will be left to tax? Individuals need jobs to pay taxes; individuals get jobs from businesses, governments need businesses and individuals paying taxes to support existing interests and infrastructure.
There are irrefutable correlations between unemployment, businesses closed and lost tax revenues. When HUD comes in and floods the market with prices that are not compatible with existing market pricing, what could possibly be the end result? The problem is that the thought process doesn’t go that far or they received testimonial support from government grant funded academia that has never had to compete in open market operations against their own government and existing competitors.
Government is the only institution in the United States that can create monopolies and still get away with it; however that is only if nothing is done. Typical losses for these landlords were 25% vacancy rates which resulted in hundreds of thousands of dollars lost yearly. We worked with these landlords and developed a strategy and statistical model that targeted the tenants that would be most likely (95% certainty) to make choices based on price.
Our strategy was to substitute monetary utility and frame the solution to achieve intrinsic emotional tenant satisfaction. It is no secret that crime is synonymous with low income housing and existing home pricing within the low income zones is reduced while crime in these areas sky rocket. If you want to save $400.00 monthly and get mugged, robbed, stabbed or worse, move into government low income housing, misery loves company. By exposing reality and re-framing monetary utility, these landlords are retaining and recovering lost tenants with their targeted strategies. Eliminating customer attrition is the only way to compete in difficult markets.
Noble causes are important; however government’s purpose should be to create growth and prosperity first, not destroy prosperity in the pursuit of a noble cause. Elected officials and government agencies need to adhere to the Hippocratic Oath, “as to diseases, make a habit of two things – to help, or at least, to do no harm.”