He is 100% right. All occupying owners should be paying market rent. Including him if he lives there!
You should get a market renter in there, and live somewhere else. Then
File suit, alleging that he's been cheating you out of your share
He is supposed to give you 75% of proceeds and you are responsible for 75% of expenses including a property manager's fees. He should deposit all gross rents into the shared account, pay himself a reasonable, market rate as he says fee for property management, pay expenses out of the shared account, and every other time he takes money, he must give you 75% of what's taken out and keep 25%.
But that is not what has been happening. He has been running a business and embezzling from it, and obfuscating this by not keeping adequate and proper records. He may be doing this passively, but passive neglect of books + greed = embezzlement.
The "lawsuit" won't actually go anywhere in the courts. Filing is merely to "wake him up" and allow you access to discovery, to compel his cooperation with an audit. That is your real weapon.
There is a legal standard for how good his records have to be, and how he must account for the services he takes.
He must pay his rent, at least on the books, and he's quite right, the rent needs to be booked at market rates. He does get to chargeback for his property management services, but this too is market rate only: overcharging is embezzlement.
Then actually do bring in a third-party property manager
And both of you pay rent to him. And he pays expenses and splits the proceeds 75/25.
Since you paid cash, there is no mortgage lender involved, and you really should have set up an LLC wrapper and learned how to do those things.
There is nothing wrong with subsidizing your brother
However, there is something seriously wrong with doing it "behind the curtain" of a business that is dysfunctional and effectively a sham, that is manipulated to look and feel (internally and externally) like an honest business arrangement.
Obviously, this is being done for the brother's vanity. He is effectively taking a $1500-ish check from you every month, without the humiliation of his wife and community seeing him do so, and without feeling the shame. Even though, in his heart of hearts, he knows it, and that is why it is so damaging
It damages you as well, since you are a party to it. It is an impediment to the success of both of you.
Remember, this isn't nothing. The capital you have tied up in the house could be serving you in other ways. Averaging 5-6% a year in the stock market, which is a sure thing over >20 yeat spans (go look up the S&P 500 in the year you bought that house, whatever the ratio is to today's S&P, that would have been your gains, it is that simple). Or invested in a different house producing real rental income, instead of stuck in this house. Tying up your capital is robbing you of its due income.
So you settle up the revenue stream and ownership, make it legal and financially a square deal.
Now, if your brother still needs subsidy to make ends meet, you write him a check.
Of course, it is a huge part of American lore that a man provides. Your brother may find direct subsidy humiliating. But more likely than not, this will make him step up and actually live to the level of his self-definition.
One more thing: taxes
When he takes more than his share, that is income to him. He must pay taxes on it. Make sure he gets a 1099 for that amount.
However, if you run your accounting books cleanly, and you use the "hand him a check because you love him" method of subsidizinghis lifestyle, that is a gift. You can donate up to $30,000 a year ($2500 a month) to him and his wife without him paying any taxes on it. And your wife can do it again.
You cannot call his embezzling "a family gift" because it isn't structured as a gift.