Broken Windows: A Theory on Tenant Respect for Property
Sorry, this is not the theory where defenestrating tenants makes them respect you more.
In the late 60s, psychologist Phillip Zombardo did a fascinating experiment. He took a car and parked it on the side of the street in the Bronx, and an identical car in the same situation in Palo Alto. His goal was to see how long it took for someone to vandalize the vehicles. The one in the Bronx got stripped of everything of value within a day.
The vehicle in the Palo Alto was untouched for over a week — until Zombardo himself smashed it with a hammer. As soon as the vehicle showed a single clear sign of abuse, more passers-by decided they would join in, and the vehicle was flipped over and completely demolished in hours. (In both cases, the vandals were primarily clean-cut, white men who appeared to be middle class.)
In the early 80s, this experiment was re-examined and applied to criminal behavior by a pair of social scientists, George Kelling and James Wilson, who wrote this article. It makes this revealing commentary:
Because of the nature of community life in the Bronx—its anonymity, the frequency with which cars are abandoned and things are stolen or broken, the past experience of “no one caring”—vandalism begins much more quickly than it does in staid Palo Alto, where people have come to believe that private possessions are cared for, and that mischievous behavior is costly. But vandalism can occur anywhere once communal barriers—the sense of mutual regard and the obligations of civility—are lowered by actions that seem to signal that “no one cares.”
Since then, the Broken Windows theory has been applied, mostly successfully, to criminology, education, and even…real estate. (Ah ha, we’ve finally hit relevance!) According to this theory, a property that is carefully-maintained will engender an attitude of respect in its tenant, who will treat it better than he would treat the identical but less-well-maintained house across the street.
An Important Note
Before we get into the real estate part, one important point has to be made obvious. When we talk about “a broken window” below, what we mean is “any obvious sign of neglect or abuse that has gone uncorrected.” This is especially true if the neglect or abuse would be easy to correct. So while a chipped tile might not count if the area around it is good, a missing outlet plate is always a broken window.
What Do Broken Windows Mean?
On the surface, broken windows mean exactly what the above example says they mean — they’re a sign that no one cares. Such a sign can be used by any number of real estate people. Investors might want to avoid (or in some cases seek out!) neighborhoods where broken windows are commonplace. Agents (and property managers!) should be reluctant to show a house with a broken window, because of the message it sends to viewers…
…Viewers who are trying to become tenants…
…Tenants who will hear the message that the broken window sends. And decide, based on that message, how they treat the property. Which means you as a property manager should be asking yourself: what effect will the current state of the property have on the future way the property gets treated?
But before you commit whole-heartedly to the program of keeping all of your properties broken-window-free, you should be aware of a few massive mitigating factors.
The Neighborhood Problem
Keeping your home more-or-less immaculate can greatly amplify the tenants’ respect for that home — but there’s a greater picture that has to be taken into account. If the neighborhood around a house sets a context of “no one cares,” there’s no amount of internal perfection that is going to keep tenants from feeling like the home isn’t worth caring about. A spotless house in a squalid neighborhood is basically doomed to become a squalid house in a squalid neighborhood. A painful truth, but no less true for it.
The Pricing Problem
It’s also unfortunately possible to end up in a situation where the rent itself counts as a broken window. For example, if you have a 4-bedroom, 2.5-bathroom, 2,100 sq.ft. house in a midrange neighborhood, just the act of setting the rent to something like $700 can tell the applicants that “no one cares.” Now obviously as property investors that’s not a move you’d generally make — but sometimes, competition or other market forces can make it seem like your best option. There’s no clear-cut rule here, but obviously the greater the property value in the neighborhood, the higher the ‘broken window bar’ becomes.
The Cost-Benefit Analysis Problem
Finally, you have the ultimate question in the mind of any property manager: how does this ultimately affect the margins? It’s easy to think “Eh, it’s only like a buck fifty to buy an outlet plate.” But how much does it really cost to get a handyman to stop at the store, buy a plate, take it to the house, and replace the one that the tenant broke? Is it actually worth paying that much to maintain the ‘broken windows count’ at near-zero? (Keeping in mind: the difference between 0 and 1 is enormous, 1 and 2 is huge, 2 and 3 is small, and once you have more than three clear signs of neglect or abuse, you’ve already left this theory behind.)
All in all, the Broken Windows theory is a great way for a property investor to think about their mid- to upper-range houses in mid- to upper-range neighborhoods. For houses in borderline neighborhoods, or houses that (presumably for budget reasons) already have a couple of broken windows at move-in, or houses with rents that are obviously too low for what they are, trying to keep up with the eternal flow of small problems probably isn’t worth it.