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It's not "rents for the rich" it's "rents for higher priced apartments" and it's basic supply & demand. This headline stokes unnecessary class conflict. WaPo should be ashamed.
Who is renting higher priced apartments if not the rich?
Because by definition rich means “can buy house”, and poor means “no choice but to rent”. What sort of rich person rents a house, except whilst between selling old and new? It’s a strange question to ask .... who doesn’t see this as self evident?
Think apartments, not houses. Think young single people in tech making $100k+.
It is a huge risk right now to take on someone that is poor as a renter because of the moratorium. It is completely unsurprising to me that landlords have priced this risk factor in.
That, however, reduces their chance in getting tenants so it becomes a vicious self-feeding closed circuit process?
Because by definition rich means “can buy house”, and poor means “no choice but to rent”. What sort of rich person rents a house, except whilst between selling old and new? It’s a strange question to ask .... who doesn’t see this as self evident?
Buying has costs too. Mortgages are an obvious example, but even if you could afford the house without debt the money could also have been invested in something that yields income like stocks or bonds. If the amount you'd receive in income from investing the house price can cover the rent of an equivalent house, it can make sense to rent as you come out ahead overall. It does not surprise me at all that rich people (…
Earlier quoted context omitted.
Which is pretty inevitable with our system of housing development. If you're a large property owner and you want to make more money, you have two options: A) Build more housing, to create more units you can rent out. B) Don't build more housing, and use the reduced supply to raise the rent on your existing properties. Since option B has a lower risk and a higher return on investment, is it really surprising that most…
Honest question: is choosing option B proven to lead to higher return on investment? Is there data showing it? Where I live periodically raising rent and evicting people to invite the higher-paying tenant has a limit that's reached pretty soon so maybe US dynamics escape me.
However, in a general sense, rent prices are affected by supply and demand, like most other things. Having a housing supply lower then the demand benefits landlords, as they can raise the price without making improvements, and they can more easily fill vacant units. If supply surpasses demand, then landlords are left with empty units they need to fill, and the prices go down.
Obviously, this can only go so far. At a certain point, prices can get so high that few renters can pay for it, or the math becomes more favorable to build more housing. However, the overall incentive structure is for property owners to keep housing supply low, to increase the value of existing properties with minimal investment.
Because by definition rich means “can buy house”, and poor means “no choice but to rent”. What sort of rich person rents a house, except whilst between selling old and new? It’s a strange question to ask .... who doesn’t see this as self evident?
I recently won the IPO lottery--went from nearly zero net wealth to a solid seven figure net wealth. I could buy a house in the bay area and give up > 50% of my cash for it, or I could give up 15-25% of my net wealth with a down payment on a a mortgage and pay (PITI) 110% or more of what I could pay in rent for a similar home. Or I could continue renting and put that 15% - > 50% of my net worth in appreciating assets…
Or people who've put down roots here. Some people value family, friends, and community more than economic maximization. The Bay Area has excellent schools, being nerdy makes you cool, immigrants and people with different skin colors are accepted, there are a wide variety of cultural attractions, the weather is always nice, and you can get out in nature quickly.
If I were still a single guy I probably would've moved back home after winning the stock option lottery, but my wife's family is all here, my friends are here, my kid won't get bullied for being nerdy, etc. That's really why people stay, and they pay a premium to do it.
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You can't get the same leverage nearly as safely or as easily in the stock market, which is why so many people start to play landlord with second, third, etc, properties that they finance. What changed in the last year is that people want a lot more space which is pulling them out of the "expensive apartment" market and into the "house" market, while also being less concerned about commute distance. So the expensive…
Even with the leverage, it is in most cases still not a good investment. There are a lot of calculator out there that shows you the break even point between renting and buying. You forget all the horrible fees that come with owning a place (HOA, maintenance, property taxes, 6% lost to agents at every transaction)
My rent means that there are tens of thousands of dollars a year that I'll never be able to invest in anything. So even if I had a better investment option than taking a 5x (or more!) leverage multiplier on a downpayment, it would still have to overcome a pretty big disadvantage right there to come out ahead in the long run.
Because by definition rich means “can buy house”, and poor means “no choice but to rent”. What sort of rich person rents a house, except whilst between selling old and new? It’s a strange question to ask .... who doesn’t see this as self evident?
Housing experts say other factors may be at play, too. Some lower-income areas were gentrifying even before the pandemic, leading to higher rents.
Earlier quoted context omitted.
Honest question: is choosing option B proven to lead to higher return on investment? Is there data showing it? Where I live periodically raising rent and evicting people to invite the higher-paying tenant has a limit that's reached pretty soon so maybe US dynamics escape me.
I think it would be hard to prove it one way or the other. There are a lot of variables that go into profit for landlords and property owners, and building one property affects the possible rent on other properties. However, in a general sense, rent prices are affected by supply and demand, like most other things. Having a housing supply lower then the demand benefits landlords, as they can raise the price without ma…
For single non commercial property owners. This would be news to the commercial real estate investors that keep trying to develop residential areas and apartment buildings. If you're in a city with high rents and land costs, see who is trying to build and who is trying to block. It's all public information.