Rising Rents Are Pushing More Tenants Past the Breaking Point • Hacker News Board

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#121

Post by billmalarky » Thu, Oct 26, 2017, 6:03 PM UTC

makomk wrote: post #105

billmalarky wrote: post #64

Earlier quoted context omitted.

Hot housing markets are extremely high risk high reward investments. Buying NYC real estate for example, it is practically impossible to use a traditional "buy and hold" strategy and have the rents cover the cost of investment (typically rent covers more like 50% of operating costs in NYC). You pretty much only make money in NYC REI via speculation (ie the property goes up in value) not from paying down the mortgage…

Last I heard, NYC is literally running out of pavement space for pedestrians, let alone vehicles, and increasing the supply of housing still hasn't brought prices down.

NYC has tons of regulations that _drastically_ limit the supply of new housing. New supply hasn't even come close to keeping up with new growth. New supply is a drop in the bucket.

https://www.nytimes.com/interactive/2016/05/19/upshot/forty-...

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#122

Post by pc86 » Thu, Oct 26, 2017, 6:05 PM UTC

vermontdevil wrote: post #42

refurb wrote: post #15

Earlier quoted context omitted.

I guess it depends where you live. Not all landlord make money on their property. I've had two landlords so far that lost money on their properties due to a combination of falling home prices and a depressed rental market. It was actually a wealth transfer from them to me!

They may have lost money but they got their $ elsewhere (tax write offs etc)

That's not how that works. Tax write offs don't magically print so much money you can operate at an economic loss.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#123

Post by corpMaverick » Thu, Oct 26, 2017, 6:05 PM UTC

megaman22 wrote: post #113

moultano wrote: post #44

Earlier quoted context omitted.

Land Value Tax. https://en.wikipedia.org/wiki/Land_value_tax This is distinct from a property tax in that it only measures the value of the soil it sits on, so doesn't punish the landlord for improvements. The value of the land itself is almost entirely outside of the landlord's control, it's determined by the community around it. As a result, this is one of the least distortive taxes.

I don't understand how a land value tax is supposed to make rents lower. It doesn't really compute. As a landlord, I have a mortgage of $X and taxes of $Y, and insurances, maintenance and other liabilities that total up to $Z, for operating costs on a piece of property. For this to make any sense at all, $Rent >= $X + Y$ + $Z. If you increase the taxes $Y (and this would, realistically, be done more or less uniformly…

> I don't understand how a land value tax is supposed to make rents lower. It doesn't really compute

It is an incentive to build. Furthermore, it is an incentive build with higher density.

More density and more houses reduces the cost of rent. It also reduces the building and maintaining infrastructure.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#124

Post by bmmayer1 » Thu, Oct 26, 2017, 6:06 PM UTC

adwhit wrote: post #72

bmmayer1 wrote: post #63

Earlier quoted context omitted.

This comment doesn't stand up to scrutiny. There aren't a lot of available statistics on how wealthy landlords are, but for instance, according to a San Francisco property owners survey[1], median income for landlords is $90k, only 15% higher than the overall San Francisco median income ($77k). And of course a software engineer's median income in San Francisco is higher ($92k). Either way, there is little evidence th…

The point is that the landlord becomes wealthier through improvements to the area, for which s/he is not responsible. i.e. they are capturing public investment. Put concretely, my taxes go towards upgrading the Overground Line which improves the area I live in which increases my rent. I have paid for this improvement twice, my landlord, zero times (their get back their taxes through uplift in property value). Solutio…

The landlord has to pay higher property taxes as their property becomes more valuable, which often go in turn to paying for those improvements. It's not a one-way transfer, there's a quid pro quo. Now you may argue landlords get more than they give, but that's an entirely different point.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#125

Post by cc439 » Thu, Oct 26, 2017, 6:06 PM UTC

vkou wrote: post #48

billmalarky wrote: post #40

Earlier quoted context omitted.

> He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived. The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. This is why offloading the risk onto creditors (ie purchasing real estate with borrowed money under an LL…

> The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. In hot housing markets, the value they provide is having access to the capital necessary to own property. A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and…

Were 30 year old hairdressers ever able to afford a home inside a major metro area? I'm sure one could have afforded a home in Seattle 40 years ago, but the Seattle metro area wasn't even among America's top 20 largest metros until the 70's.
The problem with the assumption that something is wrong with Seattle's housing market is that people's perceptions of what Seattle "is" haven't changed to reflect the fact that Seattle today is as large as Chicago was in 1930. No one expects a hairdresser to be able to have been able to afford property within Chicago's city center at any point in modern history. That's because everyone alive has always known Chicago to be a massive metropolis whereas many long term residents of Seattle still remember a time when the city was an also-ran in terms of size and economic prosperity. Just think of all the towns that were absorbed into what is now called Chicagoland.
People who live as far as 85 miles away from downtown Chicago (Kentland Indiana is part of the Chicago MSA) still consider themselves to live "in" Chicago and they are even included as such in Chicago's Metropolitan Statistical Area. People's perceptions of what constitutes "Seattle" need to change to reflect the current reality of the city's size and influence.

Source: http://peakbagger.com/PBGeog/histmetropop.aspx

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#126

Post by bpicolo » Thu, Oct 26, 2017, 6:06 PM UTC

bspn wrote: post #53

beebmam wrote: post #36

In large cities across the US (and probably most of the world), there is some very large scale foreign speculation in the housing market going on. This is leading to rising rents and rising home prices. In Seattle, for example, many (newly) wealthy Chinese people are buying houses purely for investment purposes. I know some of them. One of them has purchased 10 houses, and lives in only one of them (when they are in…

Here's NZ's proposed (extreme) response to the foreign buyer problem: http://www.bbc.com/news/business-41745129

Seems more sane than extreme. I think it's a pretty reasonable policy given real estate speculation trends in the last few years. It seems reasonable for countries should have strong policies for protecting domestic housing stock, whether those are outright bans or massive taxes.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#127

Post by pc86 » Thu, Oct 26, 2017, 6:09 PM UTC

whathaschanged wrote: post #59

refurb wrote: post #47

Earlier quoted context omitted.

The tax write offs helped, but they still shouldered most of the loss. And we're not talking a few thousand, but rather $100K+. As a renter, it was great to just be able to pack my stuff up, turn in the keys and let them deal with the financial implications.

You're talking about imaginary money. Had they only owned the place where they lived, there is no profit or loss that matters.

You obviously don't own a home. There absolutely are financial implications for the value of your home dropping after you buy it.

A) An already illiquid asset is more illiquid. Not only do you need to find someone willing to buy it, you either need to pay to sell it, or find someone willing to pay above market.

B) Decreased access to capital. HELOCs are one of the few ways the middle class has to access six figures of credit easily and cheaply, and this is eliminated when banks won't go above 60-80% LTV but you live in a house with $x with a mortgage balance of 1.5x.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#128

Post by bmmayer1 » Thu, Oct 26, 2017, 6:09 PM UTC

underwoodley wrote: post #68

bmmayer1 wrote: post #63

Earlier quoted context omitted.

This comment doesn't stand up to scrutiny. There aren't a lot of available statistics on how wealthy landlords are, but for instance, according to a San Francisco property owners survey[1], median income for landlords is $90k, only 15% higher than the overall San Francisco median income ($77k). And of course a software engineer's median income in San Francisco is higher ($92k). Either way, there is little evidence th…

You didn't challenge the statement to GP made, but one he didn't make. He didn't say that landlords are vastly richer than workers. He said that landlords make little or no contribution to the general welfare. Your own comment points out that in SF, the median landlord makes roughly what the median software developer makes. But a software developer in the Bay Area is one of the most productive workers on the planet,…

Why are landlords under some special obligation to make a contribution to the general welfare any more than a plumber is, or a software engineer?

That said, surely renting a property that is unaffordable to own by the renter provides social utility though?

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#129

Post by toomuchtodo » Thu, Oct 26, 2017, 6:12 PM UTC

billmalarky wrote: post #115

mrow84 wrote: post #83

Earlier quoted context omitted.

> The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. Are there any risks that affect only the landlord, and not the renter, other than the possibility of losing ownership? For example, if you rent a plot of land for farming, what risks does the owner of that land face that you do not?

A renter's financial risk is limited to his/her lease agreement. This could be the remainder of the rent due according to the lease (ie if there are 6 months left on the lease agreement you will need to pay 6X rent). In practice typically a renter is usually on the hook for the security deposit or a month's rent, so long as they can find another renter to take over their lease. The owner assumes the total risk for th…

> Odds of having to declare bankruptcy in this scenario are high.

Not at all. If you could not afford your property because of a loss of income, you are eligible for another mortgage after a short sale or foreclosure within a year. If you can't document a loss of income, its only 3 years to get another mortgage.

Temporary credit damage? Indeed, but not necessarily bankruptcy.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#130

Post by kazinator » Thu, Oct 26, 2017, 6:15 PM UTC

pc86 wrote: post #127

whathaschanged wrote: post #59

Earlier quoted context omitted.

You're talking about imaginary money. Had they only owned the place where they lived, there is no profit or loss that matters.

You obviously don't own a home. There absolutely are financial implications for the value of your home dropping after you buy it. A) An already illiquid asset is more illiquid. Not only do you need to find someone willing to buy it, you either need to pay to sell it, or find someone willing to pay above market. B) Decreased access to capital. HELOCs are one of the few ways the middle class has to access six figures o…

Regarding A, do banks ever make "margin calls" when homes drop in value? I mean, force people to sell even though those people have an income and are making mortgage payments? (If so, why, when the mortgage income, if it continues, is worth more than what they can get from the foreclosure?)