A Master Lease Program Could Increase Stability for Low- and Moderate-Income Renters

A master lease program could benefit rental property owners, nonprofit affordable housing providers, and low- and moderate-income tenants, according to Andrew Jakabovics and Allison Charette of Enterprise Community Partners. The master lease model involves a nonprofit housing provider engaging in a long-term lease with a property owner for control of a block of rental units. Under this agreement, the nonprofit would assume property management responsibilities for those units and would lease these units to low- and moderate-income renters. These leases provide stability to both the property owner and the tenant. The owners get dedicated cash flow, and the tenants get affordable housing with additional protections. As public resources for housing programs are scarce, this low-subsidy program could expand affordable options. Jakabovics and Charette also call for the nonprofit to institute a savings program in which a portion of tenants’ rents would go into an account that builds their emergency savings funds. The account will provide the tenant financial security in case an unexpected expense comes up. With almost half of renters paying more than 30 percent of their income on rent and 26 percent of renters paying more than 50 percent, the master lease model provides a more affordable housing option for renters in the medium term because this model only requires repurposing units, not new development. The increased stability provided by master leases could provide substantial benefits for tenants, with additional benefits for the community.

Key take-aways

• The property owner receives rental income regardless of occupancy status and is immune to turnover costs by leasing a block of units to a nonprofit housing provider over the long term.
• The nonprofit housing provider would be leased the block of rental units at a below-market price because of the benefits of a long-term lease.
• Tenants could engage in multiyear leases with the nonprofit, which would provide them housing stability and safety from rent shocks.
• Tenants would receive housing cost control through long-term leases similar to that of homebuyers who have long-term, fixed-rate mortgages, but the tenants would retain the flexibility of renting.
• A portion of tenants’ rents would go into an account that builds their emergency savings fund.