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American landlords derive more profit from renters in low-income neighborhoods

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Re: American landlords derive more profit from renters in low-income neighborhoods

#161

Post by zaroth »

iguy wrote: post #155
zaroth wrote: post #151

Earlier quoted context omitted.

> Rent is set by supply and demand. There's no law - economic or otherwise - saying that it is necessary for landlords or anybody else to yield a return on capital. Investment opportunities are also a market with supply and demand. The demand for a high risk investment with low expected return is approximately zero. If there are more attractive investment opportunities (higher expected return with lower risk) then mo…

> rental properties must provide a positive return on capital To new investors. GP's point is that the causality is from rent to sale price. In any year any owner (or agent) more or less tries to charge the rent they can get. If this declines, there's nothing an individual owner can do about it. Badly wanting more doesn't open up any new channels to charge more rent (and may even lead you to play your hand sub-optima…

I am definitely not saying that it’s impossible to lose money renting. But if you can’t charge enough rent to cover your costs, then eventually you sell and go buy a unit somewhere else that is profitable, or stop renting entirely, or declare bankruptcy, or....

This puts downward pressure on real estate prices in areas which are unprofitable by increasing inventory and decreasing investor demand for rental property.

Market equilibrium will tend to drive prices to the point where units can be profitably rented, and rent will be higher in areas that are depreciating rather than appreciating. This is not a law in the sense of a inviolable law of physics, but I believe it is generally accepted macroeconomic theory.

Re: American landlords derive more profit from renters in low-income neighborhoods

#162

Post by zaroth »

bunderbunder wrote: post #139
FireBeyond wrote: post #130

Earlier quoted context omitted.

> it is necessary for landlords or anybody else to yield a return on capital. In my town there is a proposal afoot called The Missing Middle,to improve availability of medium density / multi family dwellings. A vocal group is furious. Furor that the economic impact study showed that their current and predicted home values over the next ten years is expected to decrease from an 11% year over year increase, to a 7% yea…

This also highlights a simple, mathematically inevitable truth: Homes cannot be both affordable and a good investment at the same time.

If home prices were perfectly stable, adjusted for inflation, they could still be a good “investment” in the sense that rents would be much higher, for the tax benefits, due to artificially low mortgage rates, or as a vehicle for forced savings.

I do wonder if the average family could afford to own a home, even at 3.5% interest, if it’s value did not appreciate. And I wonder if the rent had to cover the entire investment return for landlords, what would that do to average rental rates?

Re: American landlords derive more profit from renters in low-income neighborhoods

#163

Post by iguy »

zaroth wrote: post #161
iguy wrote: post #155

Earlier quoted context omitted.

> rental properties must provide a positive return on capital To new investors. GP's point is that the causality is from rent to sale price. In any year any owner (or agent) more or less tries to charge the rent they can get. If this declines, there's nothing an individual owner can do about it. Badly wanting more doesn't open up any new channels to charge more rent (and may even lead you to play your hand sub-optima…

I am definitely not saying that it’s impossible to lose money renting. But if you can’t charge enough rent to cover your costs, then eventually you sell and go buy a unit somewhere else that is profitable, or stop renting entirely, or declare bankruptcy, or.... This puts downward pressure on real estate prices in areas which are unprofitable by increasing inventory and decreasing investor demand for rental property.…

Yes absolutely. My objection is only to people claiming the opposite causality; apologies if I misread you earlier.

Re: American landlords derive more profit from renters in low-income neighborhoods

#164

Post by zaroth »

tgb wrote: post #107
zaroth wrote: post #82

It’s a well known fact that as property value rises the yield on rental income decreases. A $180k townhouse can rent for $1600/mo but a $1.8m McMansion isn’t going to rent for $16,000/mo. The economics of this has to do with marginal utility mainly and nothing to do with exploitation . There’s also the calculation of fixed rental costs which derive a larger portion of the monthly payment the lower the payment gets. I…

I'm confused. If the marginal utility of a mcmansion is not ten times that of the town house, then why does the mcmansion sell for ten times the price? Are you saying it's being used as a store or value or investment or something?

Is social status a factor in marginal utility?

If it is, is there a better term to reflect the value of comfortable shelter and diminishing returns to increasing square footage per occupant? That sort of thing.

Re: American landlords derive more profit from renters in low-income neighborhoods

#165

Post by jessaustin »

coldtea wrote: post #138
jessaustin wrote: post #69

Earlier quoted context omitted.

I don't live there, but I've been to the places we're talking about. They don't have grocery stores, and the few stores that sell food cost a lot more than the stores I'm used to, for food that isn't so nutritious. The people there don't make exorbitant amounts of money, but they'd be better off if they had better access to affordable products. They are poor because the areas they inhabit have high costs of living. H…

They are poor because they don't make enough money. And they can't arbitrarily move, because they can't find jobs just like that, or afford another place, just like that. They're not some middle class people who because poor because their only store is a Dean and Deluca.

I never suggested that they move; that would have been presumptuous. It's still a fact that their income would go farther if they had access to the wide range of shopping options to which many other Americans have access. To which I and my neighbors have access, and many of them have very low incomes. Nobody here would ever consider any zip code in NYC to have a low cost of living.

I guess I'll just be confused as to why we're so eager ITT to follow the lead of someone who admits to working for these landlords and continue to blur the distinction between "this area has a low cost of living" and "poor people live here". The words we use when discussing such issues matter, and this Overton window should go no further in this direction.

Re: American landlords derive more profit from renters in low-income neighborhoods

#166

Post by closeparen »

RugnirViking wrote: post #122
closeparen wrote: post #83

Earlier quoted context omitted.

Attributing the situations in Evicted to inequality or differences in household wealth is pretty off base. It's Milwaukee, not San Francisco. Competition from wealthier households has minimal to zero weight as a factor in the price of low-end housing. Rather, a bunch of people have incomes that are below or precariously close to the carrying and maintenance costs on the cheapest possible shelter. You can tell that th…

so let me get this straight: We are saying that there are some people who are doing okay in one place, and in another place, they have poverty. And this is not inequality? Honestly though, its been far more clear to me living and working in a country with much better income inequality how much the state of some places having rampant poverty and other places in the same country having massive profits. It seems like a…

Sure, there is inequality. You can remove it by destroying all housing wealth and evicting every American every month. But that makes the situation worse, not better. So the inequality is not the interesting or problematic aspect here.

Re: American landlords derive more profit from renters in low-income neighborhoods

#167

Post by pytester »

zaroth wrote: post #161
iguy wrote: post #155

Earlier quoted context omitted.

> rental properties must provide a positive return on capital To new investors. GP's point is that the causality is from rent to sale price. In any year any owner (or agent) more or less tries to charge the rent they can get. If this declines, there's nothing an individual owner can do about it. Badly wanting more doesn't open up any new channels to charge more rent (and may even lead you to play your hand sub-optima…

I am definitely not saying that it’s impossible to lose money renting. But if you can’t charge enough rent to cover your costs, then eventually you sell and go buy a unit somewhere else that is profitable, or stop renting entirely, or declare bankruptcy, or.... This puts downward pressure on real estate prices in areas which are unprofitable by increasing inventory and decreasing investor demand for rental property.…

>This puts downward pressure on real estate prices in areas which are unprofitable by increasing inventory and decreasing investor demand for rental property.

Yep, and when this happens it opens up a new market - prior renters who were priced out of the mortgage market before can now become homeowners.

There's no economic law stating that middlemen have to take a large cut.

Re: American landlords derive more profit from renters in low-income neighborhoods

#168

Post by magnetic »

bequanna wrote: post #145
magnetic wrote: post #42

Earlier quoted context omitted.

Is there a public database of section 8 rentals/properties?

It doesn't really work that way. Any landlord can decide at any time that they will accept Section-8 for a given apartment. If they do accept and a tenant that receives Section-8 assistance is interested in moving into the property, the property must pass a standardized HUD inspection before payment is made from HUD to the landlord. Re-inspections typically occur annually.

But there are some websites such as https://www.gosection8.com that will let you search section 8 housing.

I'm curious where they get their data from. Do you know?

Perhaps these sites require the landlord to advertise their properties on it (like Craigslist), and there is no public database.

Re: American landlords derive more profit from renters in low-income neighborhoods

#169

Post by dang »

everybodyknows wrote: post #136
hejdnrndk wrote: post #119

Earlier quoted context omitted.

I guess a troll is going to troll, but the idea that some coded message was in my comment is just insane. I unequivocally deny any use of “triple parens”. Full stop.

Could an admin with access to edit history please straighten this out?

Alright, I checked the logs. There were never any parentheses in that comment. kjbfojbejib made two edits, but only to add to the text. Both additions were to the part about other businesses in the same neighborhoods, i.e. they were not part of the disputed text.

Re: American landlords derive more profit from renters in low-income neighborhoods

#170

Post by dang »

krapp wrote: post #109
hejdnrndk wrote: post #105

Earlier quoted context omitted.

I wrote that comment using a new account to avoid being outed at work. To be very clear: your accusation is false, there was never any special parentheses, and I invite an admin to confirm that if they can.

>To be very clear: your accusation is false, there was never any special parentheses, and I invite an admin to confirm that if they can. There were, I saw them, other people saw them, they were copied into eli_gottlieb's comment. His comment is flagged now, but it's still visible to some users. Whether an admin can or does confirm it is irrelevant. You made a green account, and you screwed up with some 4chan nonsense…

I'm sure you wrote this in good faith, but there weren't parens in the original comment. They only appeared in https://news.ycombinator.com/item?id=19470714. The odd thing is that eli_gottlieb was making an unrelated point at the time (a strange and almost endearingly paranoid one, but that's another story).

This looks like a case of the internet snark trope where people use quotation marks to put nasty words in others' mouths, leading to misunderstanding and unfairness. That's why we've long asked users not to do that: https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme.... It has never been in the official guidelines but it's been a bit of case law on this site for a long time.

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