If you've been in the market for a house, whether to buy or to rent, then you already know just how expensive things are out there right now. The same house that sold for $200,000 in 2019 is now selling for over $400,000 on today's market, without any sort of upgrades or remodels. That's just the price that the market demands. Rents haven't risen that high, but they are a lot higher. You will likely pay around $1,800 per month for something that cost around $1,000 a few years ago. A lot of this is driven by a housing shortage, which is especially noticeable in the rental market. There are far fewer homes and apartments to rent these days, which is driving up prices. In Houston, Texas, and all around Harris County, landlords in the state have decided to transform their homes into rental apartments in order to appeal to more people.

The landlords in Harris County aren't doing this for love. With the high prices of homes and the fact that mortgage companies aren't exactly crazy about lending, they assume that they will get a lot more traction if they offer up apartments to rent instead of homes to buy. Historically speaking in America, this really works. However, since inflation hit the economy at the end of 2020, most landlords haven't wanted to invest the money it takes to convert larger homes into distinct apartments. Adding new walls, new plumbing, separate electrical, etc, can cost a whole lot of money, and there is no guaranteed return on investment here. That did not deter a group of landlords in Harris County, however, as they went through with the transformations and are now residing over one of the largest rental districts in America.

Houston's population has risen by around 10% in the past two years, with more and more people moving to the area. Most of them come from California, Oregon, Colorado and other states where real estate costs even more. What they've been finding upon arrival are large homes that have been converted into apartments, and so most of the people in the county now are renters. The landlords have definitely made good on their investment, and they're planning to refit and build even more rental housing and apartments around the area. It's something that seems to be working out well for everyone involved.

Though this sort of transformation from large house to rental apartments certainly isn't anything new in America. It used to happen all the time. It's just that no one's been willing to take the financial risk since COVID hit until now.
 

The Former Section 8 Housing Purge

Back in the late 1980s, the government started to really push forward with the idea that people on Section 8 should be able to live wherever they wanted. This is when the government started to push housing choice vouchers, and many different state governments made sweetheart deals with landlords. Not only would these landlords get the guaranteed full amount of their rent paid on time every month, but some would even receive some tax rebates for giving preference to Section 8 recipients. So, in states like Virginia, landlords decided to tear out the guts of thousands of old colonial-style homes and build apartments inside of them. Your average 2,000 square foot colonial home could hold around four apartments in there. If they were renting each one for $700 per month, that was $2,800 per month in guaranteed income. In only a few years, the renovations paid for themselves and the rest was all profit.

This is a trend that took off in a lot of different states. The reason it ultimately stopped, however, was that landlords still had to be landlords. They still had to show up and fix all the issues in the apartments, and they still had to evict people for bad behavior. Eventually, those profits started to turn to losses, as landlords found it more costly to fix things after tenants left. They figured out that people who get free housing don't value it as much as people who pay out of pocket, and so the trend of doing this with large houses died down after around a decade.

In Harris County, these apartments and town houses aren't being rented out to people on housing vouchers. They're being rented to people who actually have money to pay, who come from states where housing is much more expensive. For right now, it's really working out for them.