Using Incentives to Engage Landlords: Risk Mitigation Funds
It takes more than one housing strategy to end homelessness. Alongside a solid affordable housing development plan, creating partnerships with private market landlords is critical to moving people out of homelessness quickly and to fully utilizing local, state, and federal subsidies.
When I was in Portland, Oregon last month moderating a panel on landlord incentives to a large group of providers from Oregon and Idaho, Toeney Flowers, the program lead of the Landlord Recruitment and Retention Program at JOIN, spoke honestly about trying to build landlord relationships in a tight housing market. He asked people in the room to raise their hands if they had a 401K or retirement plan and then asked if any of them would allow one of their program participants to manage that retirement fund.
He said that this is how many of the landlords he works with feel about renting to someone they consider “high risk”— someone with multiple evictions, low or no income, and a criminal history. He said that most of the landlords they work with are considered small “mom and pop” landlords, not large property owners with thousands of units. They usually have a handful of rental properties, and these properties are part of their life savings — their retirement plan — and they need that investment to be secure. The risk, perceived or real, of renting to tenants who have experienced homelessness means that communities must continue to be creative in bringing landlords in as partners in the work to end homelessness.
One popular incentive used to engage new landlords — from “mom and pop” landlords to larger property management companies — is a landlord mitigation fund (also called a landlord guarantee or risk reduction fund). A mitigation fund is essentially an added protection for landlords who are willing to reduce screening criteria to rent to someone with limited income, a poor rental history, or a criminal history. If there are excessive damages to the unit, lost rent, or legal fees beyond the security deposit, landlords can be reimbursed for damages up to a specified amount.
The availability of risk mitigation funds can be a game changer in a community’s ability to engage new landlords. In order to support communities exploring landlord incentives, we have compiled examples of four communities — Portland, OR; Denver, CO; Seattle, WA; and, Orlando, FL — that created landlord mitigation funds to expand access to housing in the private rental market.
The four communities represent a variety of investment amounts, management structures, and population focuses. All, however, came about as communities recognized a need to find innovative ways to secure additional affordable units and decided to add risk mitigation funds as one more tool in their toolbox. To help you build out your toolbox, we will be exploring other landlord engagement strategies in the coming months.