Rich Girl Roundup Wades into the "Ethical Landlord' Debate

Katie: Welcome back, Rich Girls and Boys, to the Rich Girl Roundup weekly discussion of The Money with Katie Show. I'm your host, Katie Gatti Tassin, and every Monday morning we are gonna dig into an interesting money dialogue. But before we do, here's a quick message from the sponsors of this episode. 

All right, before we get into it, this week's upcoming main episode on Wednesday is about why we—we, meaning my husband and I—decided to continue renting in 2023, because we actually considered buying with our move to Sacramento. But we looked at the numbers, we looked at the landscape, and we thought, you know what? Not for us, not the time. So we are gonna talk through a lot of things to consider when you're making this choice for yourself. Maybe a lease is ending in the next few months or you're moving somewhere else and you're like, all right, I gotta run this analysis anew. So we've got a great guest, actually from Zillow, as a matter of fact, which I'm excited about, but okay, onto the Roundup. Henah, how you doing? 

Henah: I'm good. I actually was inspired by this question, because you and I are both in the state of moving. So the question this week is, “Is there such a thing as an ethical landlord?”

Katie: I love it. And all the feudal, all the, what is the, like serfdom? 

Henah: Yes. That is actually part of what I was gonna talk about.

Katie: Is that in your notes? The word “serf”? 

Henah: Well, not the word “serf.” The underlying premise of this entire question in landlordship is, is that in itself inherently unethical? Is owning property immoral, and are landlords themselves the ones who are unethical, or is it the whole premise in general? So there's lots to unpack here.

Katie: Hmm. Okay. I'm trying to refrain from making my entire opinion based on my own anecdotal experiences, and trying to think about it more objectively, because I've only had positive experiences with the people I've leased from. I was thinking about it more broadly and I think it's a bit of a chicken or egg, because on the one hand I think of housing as consumption, as a product or service to be consumed. And I think that different people have different preferences about how they consume housing. Renting is no longer an option if everyone has to be an owner in order to have a home.

But it's chicken or egg in the sense that if there are fewer landlords, housing is more affordable. So if everyone is only ever allowed to own one home, prices would be lower overall, and maybe renting wouldn't be the more attractive option in the cities that we've lived in. For example, in 2021, 20% of all new home purchases went to investors, whether mom and pop or institutions. So kind of stands to reason that if 20% of the inventory that year—and I don't know how that extrapolates over time, that was just the last one that I was able to pull numbers for—that it's influencing prices, right? And so I think my personal experience as someone who enjoys renting and would prefer to be a renter than a homeowner is that I've had really good experiences with landlords and I don't want to own the place that I live. So I need a rental market in order to do that. But I do think that when you break down long-term versus short-term rentals, that's where the conversation, I think, is more a lot more open to an ethical gray area. 

Henah: I do think that from a more tactical standpoint, you and I, Katie, have rented for most of our adult lives. 

Katie: Yeah. 

Henah: I have had experiences that run the gamut. I can share a couple of those examples, where I've had horrible rental experiences, and then really fantastic ones. 

Katie: You know what, let's come out the gate strong. Give me a nightmare scenario. 

Henah: We have moved six times in the last eight and a half years, in the time that my husband and I have been together. We had this basement apartment; they had turned it into an Airbnb rental above us. And I guess that they had messed up with the piping or whatever. And at one point we came home from vacation and there was a four-foot gaping hole in our bedroom ceiling. And so obviously we text our landlord and we're like, “Hey!” 

Katie: “Hey, what's up with the hole?”

Henah: Leaking, like hole, like huge. I can include a photo in the show notes for people who are curious. I'm talking huge. And it took them eight months to fix it and address it and they kept being like, “Well, the leak had all this moisture; it needs to dry out.” And it was a lot of runaround, and I was just like, I don't know, call me crazy. But for I think it was $1,900 at the time a month, I should have a bedroom that has a ceiling, like a full ceiling in it. 

Katie: Did you pursue legal recourse in that scenario? 

Henah: We threatened it. We also threatened to just fix it ourselves and charge them. But they kept being like, “Well, we're gonna do it. Someone's gonna come by; my contractor's gonna come.” And like yes, they would come, but nothing would be fully fixed. And then I've had experiences that were really, really fantastic. So I think that I am staunchly still kind of in the middle, but what was your gut feeling when you saw the question? 

Katie: When rental market vacancy was one and a half percent in New York City in 2022, there were more Airbnbs in New York City than long-term rentals that were available for residents. At the end of the day, housing is a fundamental need. Everyone needs it. And so if it's too commodified as an asset class, then that is directly at odds with what's actually best for society, to the benefit of maybe a select few.

And so I think that that Jerusalem Demsas article in The Atlantic really nailed it, where she wrote, “housing policy in the US is a paradox,” because we are simultaneously trying to make it a piggy bank that is supposed to make you rich and be a store of wealth and appreciate faster than inflation. And also we are trying to make it affordable for everyone. Well, guess what? You can't do that. You can't have both. And so I think we're really coming to a point in history where we're gonna face a bit of a reckoning, but I have an easier time arguing that just renting out your primary residence because you're gonna move and someone else is gonna live in it and you're not gonna try to price gouge them, I don't think that that is unethical. However, if a city that already has very little affordable housing and a homelessness problem and you own 50 Airbnbs that make you a million dollars a year, that is definitely a different situation, I think.

Henah: There's someone very close to me, actually, who's a landlord, but he doesn't believe in raising rent for no reason. When Covid was happening, they kept rent the same, I think they've marginally raised it 3% or 5% in the last three years that their tenants have been there. They believe in timely responses and repairs. I don't think that it's a pre-req that a landlord has to be predatory or unethical. And I think this person is proof of that.

But I do think given my own experiences, but just in general when we have a lot of these large-scale property management conglomerate-y places that are charging you at every little corner, or they're making rent prices unaffordable, or they're buying the available things that are out there, to your point about one-fifth of homes going to investors, I think that's where it becomes really gray for me. So I don't think that there is a clear-cut answer here, but there are ethical approaches to landlordship, and then also really community-driven approaches like group equity housing and housing co-ops and that kind of thing. That's two separate things. But in terms of ethical landlordship, what do you consider to be an ethical landlord?

Katie: I don't know that it's up to me to say; I don't know that I could give you a list of things, because I think it's one of those things where it's probably pretty obvious. Like you shouldn't have to be told that you should not leave a hole in someone's ceiling for eight months. I think it's pretty clear what's shitty and what's not to do, as someone that has human beings living in a place that you live, right? 

Henah: I mean a lot of it is state-mandated, but I think that a lot of people's… 

Katie: Okay, so that's actually where I wanted to go, is I don't think it should be up to the subjective person. I think, rather than being like, it's up to you and the goodness of your heart to do right by people, I think you just need better policy in place to be like, what do we all agree is a reasonable expectation for a property owner that's gonna rent it out to tenants? And that's part of what makes this question tough. Anytime you're talking about the ethical intersection of a financial decision and people who ultimately also have to live in the system under which that might be their only option. I know that that sounds crazy, but I personally know people who were making $40,000, $50,000 a year working as social workers or teachers and because they were able to save up for a down payment to buy a duplex, they were able to build wealth because they were house-hacking or something. And I just think that it becomes a slippery slope too.

Henah: I think it opens the can of worms of, well, if we just paid those kinds of roles more. But yes, continue your point. 

Katie: Yeah, I think that that's totally fair. That would also be a solution, but I don't think it'd be fair to look at a teacher who's making $50,000 a year and is house-hacking and be like, that's actually unethical because you're taking…that person is no better off than probably the person that they're renting to at that point. So I think that ultimately everyone has to do what they have to do to get by and get ahead in the construct that they exist. But I think that yeah, there are probably both shitty and upstanding ways to do that.

Henah: Yeah, I think fundamentally there's nothing wrong with it, but it's more of your approach to renting out that kind of makes all the difference. And I think it is then impacted also by levels of scale and greed, honestly. 

Katie: Yeah, that's tough. It almost gets into, I think, nimbyism, zoning, regulatory stuff, as far as, you know, in 75% of San Francisco they're not allowed to build apartments. Is that not more impactful to the housing prices than someone owning two homes? I think that that's where I almost think you have to get into root causes, I guess. Or I think having Airbnbs or being a rental property investor, I think, is more of, to your point about, well, would this problem be fixed if you just paid people more? I think they're almost reactions to, or symptoms of larger problems rather than the root cause of those problems. But I don't know, that's just a hunch. 

Henah: I think you're spot-on. I think the housing crisis has gotten to this point because of a bunch of different factors: income inequality, nimbys. I think the way that certain neighborhoods were even laid out, like if you look at Los Angeles and the ways that the highway that goes in between was separating specific classes. It all comes down to all those different factors. But I think your reflection that it's sort of a symptom of or response to is a hundred percent accurate. But I also, it's funny when you search “ethical landlord,” or I've seen people debate this online; it's like, well, you're a communist if you believe one thing and you're a conservative if you believe another thing, or you're a socialist. I just think that people have very strong feelings on it. 

Katie: For sure. And I think ethics is even harder to pin down, even just the very fundamental premise of the question. Even ethics are not black and white. There are entire fields of study that aim to understand, what even is the definition of some…? Is it like “Do no harm”? Is that the standard? Is it the golden rule? What is the benchmark that you have to clear to be considered ethical in your behavior? And every religion or worldview has a different standard as well. So this was another fun one. I know if you missed last week's Rich Girl Roundup, we talked about deservingness and worthiness and earning things, and I do think that this kind of falls into that same category of, it might honestly raise more questions than it really answers. And we didn't go into this episode hoping to come to a very clear-cut conclusion. 

But it definitely was something that got me really thinking about not just property ownership but wealth ownership in general, and is it ethical to hoard wealth, too? Not just…it's like resource hoarding all around. It's those larger, bigger-picture, life purpose, resource questions of what do you owe to your fellow man? What do you deserve to have yourself? I think that these topics are actually super connected, which is really interesting. And I think people have to come to those levels of comfort with themselves. I do believe that it is possible to have a net positive outcome and that it doesn't have to be a zero sum game. But I do think that when taken to extremes, it's pretty obvious how hoarding of anything can be a net negative for everyone. 

Henah: Yeah. It's the difference between hoarding profits, hoarding property, hoarding this, and being able to say, “I have enough and I don't need to take any more than that because it will benefit other people.” 

Katie: Yeah. And I def…I have mixed feelings about it because I think people should be able to build wealth, and I really believe in women, especially, building wealth and having optionality. I think we had that question once that was like, “What is enough? At what point is it no longer ethical for you to build wealth?” And I'm like, I don't freaking know. Is the question itself, is the premise valid? You have to decide for yourself what's enough and if what you're doing is hurting someone else, and I think at extremes it's easier to recognize. But if you're just a regular person that's working your job and maybe even has a rental property and you're like, “Well, crap, I don't know. I'm just trying to retire before I'm 60,” it's tough. It's a hard question to answer. 

Henah: Yeah, I think I'm gonna come back to my answer before, which is that I think it matters when it starts to get at scale, and how you define scale is up to you. But for me, I think I'd have my own boundaries, and Katie, you'd probably have your own, et cetera. So what a fascinating topic. We covered so much within this question. Yeah.

Katie: Lots of ground. Yeah. Okay, well, that's all for this week's Rich Girl Roundup, and we will see you on Wednesday to further the housing convo and talk about the very tactical angle of renting or buying in 2023, and all the numbers to run, things to consider, et cetera, before you sign another lease or put down a down payment. Bye.