BROOKE GLADSTONE From WNYC in New York, this is On the Media. Bob Garfield is away this week. I’m Brooke Gladstone with the third in our four-part series, The Scarlet E: Unmasking America’s Eviction Crisis.  In earlier episodes we’ve punctured some entrenched eviction myths about where it happens and why, and traced the roots of the current crisis back as far as the nation’s founding. This episode, called Tenants and Landlords, explores the low end of the rental market and the mechanics of eviction -- what it costs, and how it can pay. Once, local mom and pop’s ruled the rental biz -- now huge outside investors steadily encroach on their turf. But no matter the size, in high-eviction states the laws bend like rainbows to benefit landlords. Let's talk about landlords... what you think the main question we should present to landlords is.

MATTHEW DESMOND I want to know how much is too much..how much profit is too much.

BROOKE GLADSTONE Matthew Desmond is the author of Evicted: Poverty and Profit in the American City and founder of the Eviction Lab at Princeton, and our partner in this series. He’s noticed that many of us, in the media and out, harbor ideas about eviction not borne out by data.

MATTHEW DESMOND You know we house most of our poor families in the private market. The people that are doing housing in the private market are not social workers. They're business people. And for that market to work, they have to make a living. Do they have to make a killing. Are they making a killing. And I think that really matters because the way we talk about the housing market is often bloodless. It's like mechanical… you know if you just expand supply, rents will go down.

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MATTHEW DESMOND If you peel back the zoning and regulations costs will go down. But it's not mechanical… There are actors involved... Some of them are criminal, you know, some of them are wonderful, but I just want to know how much is enough, you know? What is a decent fair return on housing.  

BROOKE GLADSTONE The U.S. Bureau of Labor Statistics found that over the last 18 years, real hourly wages rose between just five and 25 percent (depending on where you started) while the cost of renting a primary residence soared more than 70 percent. So more of the nation has less cash left over for everything else. Of course, the denizens of Wall Street do okay. Even during the Great Recession a decade ago, they did okay.

MATTHEW DESMOND.when I was in Milwaukee which was at the height of the foreclosure crisis the landlords that were going under were the small landlords, the mom and pops. You get into property ownership to help pay for junior's college fund, poof,  goes under. So that's who I think were losing those properties. But it was a great opportunity to be a landlord - because foreclosed homes on average dropped by 27 percent in value after foreclosure. But rents in most cities did not go down. You know you had x homeowners flooding the market, so you had this opportunity to buy houses below market value and rent them at normal price. But, and here's the other piece of the puzzle, there is an insolvency crisis right? One landlord I met told me, Matt, banks went from stupid to stupid. They gave out all these people loans and then they gave out no one loans. You had to put 25, 30 percent down. So then the question is who has the opportunity to take advantage of this market. The answer I think is larger landlords or private equity; people that have capital. If that's what happened then it's something like the Walmartization of property ownership, right? The idea that property gets consolidated in fewer and fewer hands. And so then the house -- the most intimate of spaces the most sacred, protected of spaces -- the house becomes a pure commodity and it becomes something that's driven completely by a market logic.

BROOKE GLADSTONE And market efficiency....

[CLIP]

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MALE VOICE Point. Click. Evict.

BROOKE GLADSTONE Point click evict. Explain as simply as possible how it works.

CHRIS CRAWFORD Sure. Nationwide eviction is the nation's largest eviction processing platform.

BROOKE GLADSTONE Chris Crawford founded Nationwide Eviction to enable big landlords to file evictions in a standardized way while complying with local laws. His platform processes about a quarter of a million eviction filings a year, across 38 states.

CHRIS CRAWFORD Large companies particularly who operate in multiple states don't want the local property managers making decisions on who to evict or when to evict. They want those decisions made at a company portfolio level. The reality of the situation is that most evictions and I mean like 93 percent of evictions are simply for failure to pay rent.

BROOKE GLADSTONE But there are countless reasons why there's a failure to pay rent.

CHRIS CRAWFORD Yes there are.... So. The industry needs to treat everyone equally. You don't really want an individual property manager deciding I'm going to file on this person based on their circumstance and I'm not going to file on this person they're usually not qualified to make that decision and it ends up being inherently not fair. The same reason why you want a standard fair housing process for accepting applications. So whatever the policy is on collection of rent, it needs to be standard. So what happens when distant landlords file automatic eviction notices on tenants who are indistinguishable by design?

MATTHEW DESMOND We've got some preliminary evidence coming out of our research team that suggests that corporate landlords are much more likely to use eviction as kind of a debt collection strategy.

BROOKE GLADSTONE Essentially the Eviction Lab has found that filing an eviction notice is not always a frantic landlord’s last resort --  often it’s a first resort, and one that does not result in an actual eviction. Crawford suggests it’s a landlord’s version of tough love.  

CHRIS CRAWFORD Let's say they don't file evictions as a first resort. So they wait. 15th comes, rent hasn't been paid, they wait a little longer… the fifth of the next month comes, they can't wait any longer. They file eviction….. Now that resident is two months behind on their rent. If they had filed at the beginning, and they had gotten their notification they still were in a position to possibly pay their rent and stay in the unit. When I say 70 percent of the evictions on our platform end up being dismissed because the resident comes in and pays, that's because our managers are using a standardized process. When it's not standardized and then they just make arbitrary decisions on when to file, the tenant gets so far behind that inevitably they end up losing their homes That is the real tragedy. The filing is bad enough. Losing your home? Way worse.

BROOKE GLADSTONE I’m just trying to work out the business strategy that results in 70 percent of the evictions filed on his platform being dismissed. The reasoning seems to be:

Most low-wage tenants spend half or more, sometimes much more, of their pay on housing, so a bit of bad luck may force a choice between rent and antibiotics, or a crucial car repair.

Crawford seems to suggest that an eviction has a way of clarifying priorities. But it can pay off in another way too. Research on landlords in Baltimore, Dallas and Cleveland found that some owners see the late fees they impose prior to eviction as extra income. In states where it’s cheap to file, the same tenant can get slammed with eviction notices over and over. And so-called serial eviction yields yet another benefit too: A late-paying renter, forced by limited housing options to rent a place she can barely afford - is thus transformed into a perpetual debtor. Never able to catch up, her power to demand basic services or repairs, to complain about anything at all, dwindles from little to nothing.

MATTHEW DESMOND So this is how it works. Let's say you're my tenant, Brooke, you're a waitress and you could make rent every month but maybe not predictably by the fifth of the month. So I know that about you. But the fifth of the month rolls around and you haven't made rent. I'm still going to file an eviction against you. Let's say I live in South Carolina, it costs about 50 dollars a file an eviction. I'm going to file an eviction on you and then I'm going to charge you late fees and then you have to pay your court fees. Say your rent is 500 dollars. You make that up. But if you want to stay, which you absolutely do, you don't want that eviction record trailing you around, it's really hard to move. You're going to have to pay you know 50, 100, 150 dollars more on top of that.

BROOKE GLADSTONE So it's possible that Brooke the waitress, who by the way was fired from about six different waitress jobs, might get slammed with an eviction notice every month?

MATTHEW DESMOND Every month. Gosh what a stressful thing. Right. January, February, March, April, but it also exacts a pretty strong financial toll. So on average if you are part of this kind of serial eviction pattern, you pay about 22 percent more every year in housing costs because of the added fines and fees.

BROOKE GLADSTONE How common are serial evictions?

MATTHEW DESMOND They're very common. In my lab, a researcher named Lillian Leung pulled this pattern out and said look at this, you know I’m seeing people getting evicted over and over again every month  ...And so in South Carolina for example I think one in two eviction cases involve a serial eviction.

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MATTHEW DESMOND I remember giving a talk once and the landlord stood up in the audience and he said, ‘if a tenant falls behind in rent, what else can I do other than evict a tenant?’ And you know, I said, ‘you know sir there's a like a hundred things we can do... Can we help them get plugged into social services? Would it be possible to take a little less that month if it means you can avoid all the costs of an eviction and vacancy and turnover? He landlord came up to me after the talk and he seemed to be earnest and well-meaning, but he just said, ‘So you want me to talk to my tenants?’ You know, it's true, serial evictions do cost tenants more money. But I think the profit motive is just part of the story. The other part of the story is the social distance. And landlords not having an intimate relationship with their tenants.

DESTINY Hey Eve. Listen,...Wondering, um, you know what's going on with this journalist.  I don't know what I'm going to do this time Eve. Like, I really don't know.

BROOKE GLADSTONE That’s Destiny calling our producer Eve Claxton. They met in Housing Court in Camden, New Jersey last year, after Destiny received an eviction notice. The journalist she refers to is me. She was a case manager who helped clients facing homelessness. And she wanted to tell her story, because it’s so familiar, but to so many Americans, invisible.

DESTINY I'm really on the verge of losing my place, and if I'm going to go through all of this, I would rather be a part of a solution for other people as well. Just, give me a call back. Bye.

BROOKE GLADSTONE In her large housing complex, you see eviction notices on plenty of doors. Here, if you miss the fifth of the month, you pay a late fee. Miss the 15th and no matter the amount or the reason, you get an eviction filing.The first time Destiny misses the fifth, she pays the fee, and then catches up in time. But, she’s in a car accident. She gets a concussion and blackouts. Forced to take time off work, she falls behind again. So she gets another notice, then another.  She’s gone to court as required, repeatedly, each time amassing fees and missing work. When she learns that her job is ending, she quickly finds a new one, but funding for the new post stalls.

DESTINY I was expecting to be working already because my resume is good. That's one of the main reasons I was not about to let them fire me. This is my name you're talking about...and I wouldn't have been able to get unemployment anyway because I wasn't on the city's contract for that long. Like I've been working for them for a long time, but I was the subcontractor.

EVE CLAXTON How much do you owe Destiny?

DESTINY Well, with October and November, it's about $1700. But...by the time I go to court, we're going to be coming into December. So that’s probably going to be another $800 plus their legal fees.

EVE CLAXTON It's like you never got caught up.

DESTINY Takes a lot, for you to bounce back. I had to use my income tax money catch up here. But... I'm going to get it... I'll probably talk to you and I’ll be out. And we'll laugh about this, we’ll smile about this.

BROOKE GLADSTONE Destiny can’t work out a payment plan with her landlord, Washington Park Management LLC, because like many limited liability companies, it’s as inaccessible as a ghost. Corsa Management operates her complex, and thousands of other units in New Jersey, New York, Pennsylvania and elsewhere. But Corsa declined to speak to us. However, the paper trail suggests that Corsa’s president, Carol Richards, owns Destiny’s apartment because Washington Park Management LLC lists Richards as an “agent” and “member,” and she owns the house where the LLC is registered. From 2013 to 2017, Washington Park Apartments filed more than 11-hundred eviction notices, 77 percent of which were filed repeatedly against the same tenants. Camden County is poor, roughly a third of its residents live below the poverty line and yet Washington Park Management still managed to file serial evictions at nearly twice the county rate. We don’t know if Destiny could have caught up if she’d rented elsewhere, but she sure couldn’t catch up here.

DESTINY When they lock the door tomorrow. I've got one day to tell her when I'm going to come get everything. All the furniture and all that — where in hell am I going to put it. I'm going to start all over again.

EVE CLAXTON So I want to I want to come tomorrow, is that okay?

DESTINY That's fine I just don't know where I'm gonna be at. I'm not going to sit there and wait for them to lock the door -- oh my god. [crying].

EVE CLAXTON Oh Destiny, I'm so sorry.

DESTINY I think that's the first time I've really cried. See, I know that something great is going happen - it's not gonna to be here, but I know something big is about to happen. It's just the *ing process to get there. Alright, I'll be okay.

BROOKE GLADSTONE After two years of feeding a churning maw of late fees, court costs, rent debt -- marathon-running with brief help from of a couple agencies - to stay literally in the same place-- Destiny was heaving...

DESTINY You just feel like a ton of bricks...on your chest because it's very difficult to you know get a place after you have an eviction. But you know, I feel bad for other people because, you know, some people don't have a support system like I have. And that pressure can really cause you to get so desperate that you go out there and you do something strange for some change or--you know, that's what they call it. You know single parents, single moms, single dads, they don't know what they're going to do. And then if you are out there and you're homeless and you can't get in a shelter, now they are going to come try to take your children, you know? Or your children gotta get seperated… one got to go over here and another one got to go over there… sometimes when you look at stuff on the news, 'oh why are they selling drugs in that community, or why is she somewhere on the pole dancing when she should be home with her children.’ And the answer is if they feel desperate, if they feel like I need to get a security deposit. I'm going to go out there and make it happen.

BROOKE GLADSTONE Eve asked Destiny about her four year old kid, Messiah, who has the sweet swagger of a little boy who, just having conquered toddlerhood, now is ready for anything…

DESTINY I didn't tell my son --I just said, 'we gonna--we're going to move, OK? But he didn't really hear me, I just want to get this ball out my chest and I will explain it to him as we go along. I just shut the door to my apartment and it's--well, it's not my apartment anymore and I'm leaving...leaving it behind. And that's it.   

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BROOKE GLADSTONE Last we checked, Destiny and Messiah were couch-surfing --  unsustainable and inevitably bruising, but preferable to the alternative. So, this is an example of the standardized process that Chris Crawford of Nationwide Eviction says ensures  fairness. But it doesn’t seem fair. Why can’t Destiny and her little boy find a decent place to live that doesn’t fleece her of every spare dollar, or trigger eviction by algorithm if she falls short on the 15th now and then? Up next, we sound out some small landlords and stare down some big ones. This is On the Media. This is On the Media, I’m Brooke Gladstone and this week in our series The Scarlet E, we probe landlords, and the business of eviction.

MATTHEW DESMOND Every landlord I've met has this kind of story.

BROOKE GLADSTONE Matt Desmond.  

MATTHEW DESMOND I used to be nice... but then. And the things that follow the “but then,” they’re real issues. But then, tenants got mad at me they stuffed socks down the sink, turned the sink on, then left. Shareena, the landlord that I write about in Evicted, her office was firebombed once. I  think that those situations...can change you, right? Those situations can harden you. You know, the more I think about landlords I mean they're obviously a group in and of themselves. We have to understand their perspectives. I'd like to understand their bottom lines you know I wanna understand their business model…but I also think they're mirrors, actually.

MALE VOICE God forbid you have to go through an eviction process -  is it going to be a pain in your butt? Ot are you going to be able to move a tenant out there quickly. …So today I want to go through five of the most landlord friendly states.

MATTHEW DESMOND They ask us like how we in our daily life, take advantage of certain tax breaks, enjoy certain schools, have certain privileges that aren't just different from the less fortunate members of our cities or our nation, but they're related...

MALE VOICE Number three on the list the great state of Colorado. It is fantastic for landlords…. they allow landlords to basically run the table.

MATTHEW DESMOND And I think all of us have moments where we've participated in evictions so to speak, or an incarceration so to speak, or the denial of food stamps to a family. In a way. We're all in this together. I want the landlords to not just be objects of our inquiry or whatever, you know I want them get us to ask ourselves how we're implicated in the poverty story in America too…

MALE VOICE Where I actually own the bulk of my rental portfolio is the state of Indiana. The judges are favorable for landlords. Before the year 2002, it was actually illegal for a for a property manager or landlord to hold a person’s security deposit past that 45 day window. Now if you do that, no big deal.

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BROOKE GLADSTONE We went to Indianapolis to see how smaller landlords address Matt’s questions Why there? Because according to the Eviction Lab, Indiana hosts three cities in the top 20 for large city evictions, Fort Wayne, South Bend and Indianapolis. And also because we found some landlords there who would actually talk to us.

[MUSIC CLIP] Back home again in Indiana and it seems that I can see, the gleaming candlelight, still shining bright, through the sycamores for me...

BROOKE GLADSTONE Currently (though it may change soon) the minimum wage here is seven dollars and 25 cents, which amounts to an annual income of roughly 15,000 dollars.

The average one-bedroom rental here runs about 10,000 dollars. Which means low wage workers must seek out below-average rentals, sometimes way below. But even those won’t save them much. Here, as in most of America -- outside the hottest markets -- there’s not much difference in rent between good apartments and bad.

[MUSIC] Back home again in Indiana and it seems that I can see, the gleaming candlelight, still shining bright, through the sycamores for me…

BROOKE GLADSTONE A recent research paper by Matt and MIT’s Nathan Wilmers used a large-scale survey and other data to show that nationally, landlords extract twice as much profit from poor neighborhoods than from wealthier ones. They set rents far above market value both to account for increased risk -- and because they can. Simply put: poor people have to live somewhere. If  they must spend half their pay on rent, that’s what they’ll do, even if they skimp on food or meds or heat to do it. And if they do it - that must mean their rent is affordable, right? Until they’re evicted.

[MUSIC] Then I long for my Indiana home.

BROOKE GLADSTONE I put the issue to Chris Crawford of Nationwide Eviction. You remember….

MALE VOICE POINT. CLICK. EVICT!

BROOKE GLADSTONE There are many places where there is no housing crunch, and yet people are getting evicted a lot. The reason seems to be rents are just too and inappropriately high.

CHRIS CRAWFORD Are we saying that we want to have a group of investors who are willing to take less returns than they could otherwise get? Which is fine if that's what we're saying we want. And if that is what we want, what are we willing to do to facilitate that? What would have sent you Brooke, if you were a property owner, what would have sent you, personally, to take less on your rental property than you could otherwise get?

[MUSIC UP + UNDER]

BROOKE GLADSTONE Our trip to Indianapolis was eased considerably by Barb Getty, a single mom who took to landlording to raise her kids. We first encountered her through her videos and book called The Landlord Chronicles, which focus on renting B-minus to C-minus properties. C minus being just what you’d imagine, clean, functional, and ...that’s about it.

BARB GETTY I needed income, the purchase price needed to be low and I quickly learned that the difference between the rent that you get in a say C property, C-minus, isn't much different than in a B property… it didn't take me long to realize I needed to go in the low income market.

BROOKE GLADSTONE Why do you put your rents for a C-minus property very similar to what you would for a B property?

BARB GETTY Because what I've found is that they can pay that, and I try not to raise the rents. ... you know I have people who rented for me five years ago who kept my number and they'll call me back and say ‘Do you have anything empty right now?’ So I feel like my rents are about right.

BROOKE GLADSTONE And yet, Barb has evicted dozens of people. Some officially, some unofficially in what are called “cash and key” evictions. There are lots of those, but since there’s no paperwork, they can’t be tallied. Barb has another name for them.

BARB GETTY Uh, Bribery. But seriously if someone is really behind in their rent and they realize it's not going to get better I'll either say ‘this is Tuesday if you can be out by Sunday and leave the place clean and empty I won't file eviction on you’ or I'll offer them a hundred dollars if they leave it clean and empty. And that's also pretty effective.

BROOKE GLADSTONE You said in the book that you had to go through a period in which you were taken advantage of because people lied or they were really messy or dirty in their habits. But what do you do about the people who just who work as hard as they can and if it were 50 bucks less or 100 bucks less they could afford it. I mean how do you handle that?

BARB GETTY Well when they move in I just make sure that they're OK money-wise, that it's not going to strap them. And sometimes when things happen, they do get behind. And I let them stay.

BROOKE GLADSTONE Still?

BARB GETTY  Yeah, still. Not everybody.

BROOKE GLADSTONE You talked a little tougher in the book but in real life, not so much?

BARB GETTY Well I used to allow people to get thousands of dollars behind. I'm ashamed to say that. But I had to have a little come to Jesus meeting with myself because I was having a hard time paying my bills. So I did toughen up, and I just I don't let people stay as long now without paying - if there's not a specific plan that they can implement.

BROOKE GLADSTONE Indianapolis has some nice old buildings and some shiny new ones, but the areas she rents in look pretty faded and bare. Reggie is a long-time tenant, paying 265 dollars every two weeks for a basement unit. For this, C-minus might be too high a grade, but he’s grateful. He struggles to walk, his joints grind and ache, his nerves are pinched in his back, and there’s some serious trouble with his feet. He says he’s starting a job that involves more computer work part-time. But training up for that has been tough, although it’s gotta be better than what he’s been doing up til now, moving stuff in a warehouse.

REGGIE Yes. Pounds and pounds of stuff. Three, four, five hundred pounds.

BROOKE GLADSTONE How do you do that?

REGGIE I had to do it I got to live don't I? I got hundreds and thousands of dollars of hospital bills. I don't know what I would do about them. I can't stay working long enough to pay em.

BROOKE GLADSTONE If you won't pay em, what are they going to do?

REGGIE Right garnish me and I will be homeless but I will have Ms. Barb because I don't know how imma pay em. If they garnish me I'm done.

BROOKE GLADSTONE How's the housing situation here in Indianapolis?

REGGIE It's OK, but needs a lot of good people like Ms. Barb to support people when they can't work and get down money get slow. She works with you. A lot of people don't do that once you get sick and get hurt. Miss a couple checks - you're done.

BROOKE GLADSTONE Then where do you go?

REGGIE To the streets.

BROOKE GLADSTONE Are there a lot of people living in the street in Indianapolis?

REGGIE It's a lot of them… go down by Washington Street by the zoo. Go to that bridge and go under there. It’s a lot of them there I tell you another place you can go find them I see them every day. The 465 bridge. You can follow it around. People live under there. That's where they're at…

BROOKE GLADSTONE Barb has had plenty of challenges in her life. She not a faceless corporation, just a person who happens to have the power to repossess the roof over someone else’s head. She copes with this, I think, by compartmentalizing. She tells her tenants she’s the manager, not the landlord. And when they ask for leniency, she says she’ll plead their case to the owner, though the owner has already decided.

BARB GETTY When I know that they need to leave I know that they need to leave… most the time people don't ask me if I own the place. But when they do I just respond by saying I manage the property… And truly, I mean if they had issues with me, they could go online and find out that I'm the owner.

BROOKE GLADSTONE It's just this weird quirk where it's easier to deal with the emotional part by pretending that you're not.

BARB GETTY It is easier.

BROOKE GLADSTONE Psychologically?

BARB GETTY Yeah.

BROOKE GLADSTONE And practically.

BARB GETTY And practically. I hate to put people out. I don't like that part of my job. But I have to. And the physical safety is an issue as well because I'm five feet tall. I just felt like that made my job easier and safer. My girls are older now, but they still need me a lot. So you know once you're a mom you're always a mom.

BROOKE GLADSTONE So Barb’s the mom (minus the pop) in a “mom n’ pop” rental business. In this context, she’s a firm but reasonable mom. On the other hand, there’s Dean Parsons, a landlord who manages over 300 dwellings in Richmond, Virginia. His tenant Winter Whittaker complained about rodents, and fleas and especially leaks. Apparently too much. She recorded this exchange and it hit the local news.

DEAN PARSONS You do what you gotta do to get the hell out of my goddamn house. The quicker the better.

WINTER WHITTAKER I ain't gotta get out until my lease expire.

DEAN PARSON -- goddamn thing. Shut the f*ck up and leave me alone.

WINTER WHITTAKER You're going to fix what you supposed fix.

DEAN PARSON You ain't nothing but a goddamn tenant and that's all you gonna do --

WINTER WHITTAKER And you're nothing but a goddamn slumlord! You're nothing but a slumlord.

DEAN PARSON Then you're just going to run your goddamn mouth. Is that all you wanna do?

WINTER WHITTAKER Yeah, I’ll see you in court then.

DEAN PARSON I don't give a good goddamn. You're just another dumbass n* I gotta go to court with and I go to court every damn day with them.

WINTER WHITTAKER Okay, well I'll be there.

DEAN PARSON It ain't a big damn deal to me.

BROOKE GLADSTONE Dean Parsons sounds like Big Daddy on a bender, but in allegedly failing to provide a safe rental, he’s not unusual, certainly not in Virginia, which is home to five of America’s 10 highest-evicting large cities.

One reason, among many, is that tenants here must give landlords written notice that their rental is uninhabitable. (It’s a very obscure law). But without a written notice, they must keep up the rent even if the place has blown away. Otherwise they risk eviction, and with a scarlet E on their record, good luck finding a new landlord.

MARTY WEGBREIT Now other states I used to practice law as a student lawyer in Michigan decades ago and there was a warranty of habitability.

BROOKE GLADSTONE Marty Wegbreit, Director of Litigation of the Central Virginia Legal Aid Society, says that in Richmond, high eviction rates are closely correlated with building code violations, basically it’s cheaper to evict than to fix.

MARTY WEGBREIT I could go into court in Michigan with my tenant being behind in rent and not having given written notice. But I could show that there was oral notice given and I would walk into court with literally my bag of paint chips in one hand and my jar of dead rats in the other hand and if I could prove that what the tenant has already paid was at least what the property was worth, tenant wins, landlord loses. I can't do that in Virginia.

[MUSIC UP + UNDER]

BROOKE GLADSTONE The fact is, landlords could not exploit tenants so efficiently without local and state laws to ensure that the playing field remains totally unlevel. So next we go to Richmond - and the endless, infuriating nightmare of Cedar Grove. This is On the Media. This is On the Media, I’m Brooke Gladstone and this is the part about LLCs, the faceless, placeless, traceless rising stars of the rental business…

MATTHEW DESMOND You know I go around the country and I listen to folks in housing, and people say you know, you know the Russian oligarchs are buying everything up.

BROOKE GLADSTONE Matt Desmond…

MATTHEW DESMOND You go to London and it's these Russian oligarchs, they're buying everything up and you know you go to Orlando and New York and you hear - it’s just like gosh how many Russian oligarchs are there? You know, it seems like there's a lot of Russian oligarchs. And you know asking basic questions about who's buying our properties. Who owns our cities, they’re actually much more complicated than they should be. And the reason is companies and landlords have done a really good job of using LLCs and other kind of shell companies to really mask ownership.

MALE VOICE First thing you do is you create your LLC with a nominee manager and then after it’s filed he resigns and you become the undisclosed manager. Once this entity is set up, then you can start creating your LLCs in various other states. Let's assume they look at this piece of property where the tenant is alleging that there is mold and they’re not feeling well and they want to know who’s behind it. It’s not gonna be you. What they’ll see is that this entity is owned by this entity.

CHIP NUNLEY The harder somebody fights to prevent disclosing who they are, the more it makes me wonder what it is they're hiding.

BROOKE GLADSTONE Here in Richmond, Chip Nunley is a corporate lawyer with powerful clients, who also represents powerless tenants pro bono. But to him, one case, a recent one, stands out as an atrocity among atrocities. It begins with a heart transplant survivor who repeatedly complained to her landlord that her ceiling was leaking...

CHIP NUNLEY Ceiling started actually to bow in her kitchen because it was retaining water.  And the kitchen ceiling collapsed - fell in on her. She was taken to hospital and really went into a downward spiral after that. She really became the first person who was willing to stand up and take these guys to court.

BROOKE GLADSTONE She was that rare tenant who knew about Virginia’s (quote) Tenant’s Assertion, where you give your landlord written notice of a problem and a reasonable time to fix it and if it’s not, you divert your rent payment to a court. Chip says the provision is known by few lawyers much less tenants, and poor tenants would be unlikely to use it because with the staggering shortage of affordable housing, a leaky roof is better than none. These are often very vulnerable people, he says, especially the poor who lived in the 900 units that made up the Flats at Ginter Park.

CHIP NUNLEY There are a lot of veterans there with PTSD. Lots of single mothers with children. Lots of elderly, lots people who have either emotional or mental limitations.

BROOKE GLADSTONE People too cowed to complain, except the heart transplant patient Miss Brown. She went to Chip and told him how the manager promised to supply her with another apartment while they cleaned up her place, now a field of debris, and they did neither. She was shuttled from one 68 dollar a night hotel to another, without money, without mail, without a center. That’s why she was spiralling down… but she had some fight left, so they kept returning to court.

CHIP NUNLEY The judge actually at one point got so frustrated with the landlord for not having the apartment ready for her to move into, that she said ‘I'm coming out to the apartment to see whether or not it's prepared.’

BROOKE GLADSTONE That was an unusual judge, right?

CHIP NUNLEY  I think it spoke to the level of frustration that she had with the landlord here. Something else I think is important for you to know, and this is maybe a little bit in the weeds - but the local face of this organization was called the flats at Ginter Park. But once we got into this what we found out was that the flats were owned by 11 different LLCs which were formed in Delaware. And they did that because Delaware has one of the most restrictive LLC laws in terms of finding out who owns the properties.

BROOKE GLADSTONE Not even this fancy corporate lawyer could penetrate that fog, nor could the judge, who slapped the LLCs, called Cedar Grove, with multiple contempt citations for ignoring an order to supply an owner to face Miss Brown in court.

CHIP NUNLEY No one ever came.

BROOKE GLADSTONE So, what happened?

CHIP NUNLEY So this is an interesting twist… the bank that held the note on these properties picked up on the fact that the owners were doing such a bad job managing the properties that the bank's collateral -- which were the buildings themselves -- were being devalued.

BROOKE GLADSTONE Ultimately the bank persuaded a circuit court judge to push Cedar Grove aside, put the whole property into receivership, and sell it. And here’s the crazy part, the property was sold, and there was a million dollars left over.

CHIP NUNLEY Now there's still an open issue what's going to happen to that million dollars. Is it going to go back to Cedar Grove or is it going to hopefully remain available here for tenants who make claims. Because what you need to understand is of those 900 units, about a quarter of those units were condemned by the city. And when the city condemns a unit, it means the tenant has to move out.

BROOKE GLADSTONE And they don't get any recompense for that.

CHIP NUNLEY They're supposed to… you should get whatever remaining rent is due, you should get your security deposit back. If it's because of the landlord’s negligence that the property has been condemned, you should get your moving cost.

BROOKE GLADSTONE They were condemned because there were gas leaks and a real risk of explosions. But Chip said the inspectors actually felt bad about it, because where were all those people gonna go? The bank got all it was owed. The tenants got nothing.

CHIP NUNLEY I mean you had tenants from whom the landlord collected rent in October knowing full well that the property was going to be condemned in that month.

BROOKE GLADSTONE Why doesn't the legal system work for the tenants?  

CHIP NUNLEY This isn't so much a fault of the legal system as much as it is the outcome of someone who knew very well what they were doing - and I'm talking now about Cedar Grove when they structured this organization. They were very careful not to have any assets available in Virginia other than the buildings that tenants who got judgments could collect against. Normally what would happen is you could sue the landlord... You could go after the landlords bank account… But here, once Cedar Grove decided to get out of Virginia they left no traces.

BROOKE GLADSTONE So why is there no why is there even a question about what happens to that leftover million dollars?

CHIP NUNLEY Um, I have to tell you in my mind this shouldn't be a question. We have a hearing on March the 26th to address that very issue.

BROOKE GLADSTONE Why does the law not apply to these people?

CHIP NUNLEY I think the law in Virginia on this issue is pretty unclear. I've been doing pro bono housing law cases since 1985. Most of the cases up to Cedar Grove for me were local landlords. The inspector for the city has said that far and away, this is the worst situation they've ever seen - both in terms of just the severity of the problems and the number of units involved. One of the reasons that landlords like Cedar Grove can do what they do is because there are not many options… And I think unless we want people living in cars and under highway overpasses and sleeping with boxes over them on the street. How do we find a way to make housing affordable.

BROOKE GLADSTONE You know, you - you beg a question there. You say unless we want people to live in boxes or what if we just don't give a damn?

CHIP NUNLEY Now I'm not there. I'm really not there. I think that a lot of people just don't realize what's going on.

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BROOKE GLADSTONE So after that hearing in late March, I called Chip for an update. He had argued to the circuit court judge to put a portion of that million dollars into a fund that tenants could collect against, if they brought their cases to court and won.

CHIP NUNLEY You know look this is a very, very unusual situation. I don't think that I've I don't know that I've ever seen anything like this happen on so many different levels.

BROOKE GLADSTONE The Virginia circuit court awarded the million dollars… to Cedar Grove.

BROOKE GLADSTONE The courts - wherever there's high levels of eviction act - as bill collectors for banks and landlords but they never act as bill collectors for the tenants.

CHIP NUNLEY Well I guess what I would say there Brooke, is when the laws are being written the banks and the landlords are probably at the table but the tenants were not.

BROOKE GLADSTONE So what of the tenants, the elderly, disabled, vets, kids, the defrauded and dumped?

CHIP NUNLEY Look there's so many different points of tragedy here this is another tragedy. These apartments are what I would consider to be apartments of last resort. Ine bedroom apartments that rent for five hundred and fifty dollars a month. You're not going to find an apartment that's cheaper than that. So when these people get dispossessed - and you're talking about people who are on disability or very limited income, they go to another apartment and the apartment wants two months worth of rent and they want a security deposit. These people can't come up with that, and they certainly can't come up with it if their previous landlord’s not returning their security deposit. It's collecting rent up to the moment that they're dispossessed. So the answer to your question is a lot of them probably either went to relatives if they had those... they went into shelters... I'm afraid some went to cars - and some probably just became homeless.

BROOKE GLADSTONE Chip actually did win judgments for a few tenants, but there’s no way to pay them, thanks to the magical vanishing power bestowed on LLCs registered in Delaware.  

CHIP NUNLEY To me, one of the most telling conversations I had during the course of this representation is I spoke to the gentlemen in New York who has identified sort of as the as the manager of this entity. I explained to him what I was saying in terms of the conditions the tenants were living in, and ultimately at the end of the conversation his comment to me was, ‘you have to understand, for us this is just a financial decision.’ I mean that, in that moment he was being absolutely honest with me. It was just a financial decision.

BROOKE GLADSTONE Meanwhile, Cedar Grove has bought up thousands of units in the Carolinas. And that Cedar Grove rep Chip reached, who said they were just making financial decisions? We found him, emailed him, finally phoned him, and reached him.

AARON Hello?

BROOKE GLADSTONE Hi, is this Aaron?

AARON Yeah.

BROOKE GLADSTONE My name is Brooke Gladstone, and I work at a public radio program called On the Media. And I wanted to talk about Cedar Grove? And particularly, what happened at the flats at Ginter Park.

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BROOKE GLADSTONE Hello? There’s something rotten in the business of housing low-wage people. For tenants it’s too unstable, too demeaning and catastrophically costly, but just poke your head in, and you’ll smell something sour merely in the enterprise of owning.

Apartmentlist rentonomics, using data from the IRS and HUD determined that that homeowner’s mortgage interest deduction costs the government more than twice what it spends on rental assistance through section 8 vouchers. That in fact, the government spends more than $1,500 on high income households and well under 500 dollars on low income ones. Meanwhile, last month HUD secretary Ben Carson went on Capital Hill to defend a budget proposal to make substantial cuts in his own agency’s budget. Again. And to answer questions about HUD’s proposal, made last year to boost the rents of people who live in subsidized housing by up to 150 percent.

As Jacob Riis wrote in How the Other Half Lives, about Manhattan’s tenements in the 1890’s, “New York’s wage earners have no other place to live, more is the pity. ...waxing poorer in purse, as the exorbitant rents to which they are tied as ever serf to soil, keep rising.” Riis condemned the landlords of his day for extracting profits of up to 40 percent from the poor. If only those landlords knew how the government paves the way for their profits today, and how hard the working poor still labor to make their America great again.  

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BROOKE GLADSTONE The Scarlet E is produced by Eve Claxton, Jon Hanrahan and Katherine Simon. Our technical director is Jennifer Munson. Our editor is OTM executive producer Katya Rogers. Our original score was composed by Mark Henry Phillips. We had more help from Emily Mann, Greta Rainbow and the Eviction Lab team. And thanks to WNYC Archivist Andy Lanset.

UNDERWRITING Support for The Scarlet E is provided by the Bill Melinda Gates Foundation, the John S. and James L. Knight Foundation and The Melville Charitable Trust. Additional support is provided by the Economic Hardship Reporting Project and Chasing The Dream with WNET initiative reporting on poverty and opportunity in America. Support for On The Media is provided by the Ford Foundation and the listeners of WNYC Radio.