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Rents for the rich are going down, rents for the poor are going up. Why?

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Re: Rents for the rich are going down, rents for the poor are going up. Why?

#61

Post by MisterBastahrd »

Railsify wrote: post #4
sombremesa wrote: post #3

Earlier quoted context omitted.

> get their high wages Wages? What are you talking about, the working class?

Many rich people still earn a paycheck. YOu can be on payroll making 500k and have a stock portfolio worth 10mill, this is common for boomers who started investing in the 70s and 80s. A portfolio of that size will easily throw off 500k in dividends a year. My point is that a large paycheck does not mean you are not paid wages. I get your point though, billionaires probably are not taking a salary.

This is not common for anyone, not even in SV.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#62

Post by adolph »

outside1234 wrote: post #5

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.

The article does cite eviction moratorium effects, but from a different angle:

Landlords stuck with tenants who can’t pay may try to offset these losses by raising rents on everyone else. Rents in lower-end units tend to already be close to operating costs, Schuetz noted, so landlords may have slim profit margins.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#63

Post by sidlls »

endisneigh wrote: post #43
rainyMammoth wrote: post #32

Earlier quoted context omitted.

Or as explained above it doesn't make sense to buy since it is cheaper to rent.

from my experience, prior to covid, it really hasn't been if you're capable of buying. look at the 2012 to 2016 period for example of rent vs purchase. if you just bought an average condo and sold it you basically could've ended up staying for free vs. renting.

And for the same cash commitment you could have bought 2 - 3 multifamily homes in sane real estate markets that produce $60k - $80k (or more!) net income (rents less management and taxes). You would have diversified your portfolio, lived "free" (i.e. the net is likely about the same as or more than total annual rent in a decent home in the bay area), appreciated somewhat, and positioned yourself for handsome tax deferrals or savings due to depreciation and other strategies.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#64

Post by wpietri »

wideareanetwork wrote: post #9

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?

Ones good at math and likely to move in a few years?

Buying a house has really high transaction costs. ~6% commission, plus more in fees and taxes. And then once you have the house, you've taken on all the maintenance and price risk. That can make sense if you're staying a long time and want the benefits of ownership. But plenty of people with high-flying jobs know that they may move soon enough that the math doesn't work out.

Personally, I could afford to buy a house, but I never have. I like the freedom, and I really like never having to worry about maintenance, taxes, renovations, and the like.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#65

Post by sidlls »

nostrademons wrote: post #56
sidlls wrote: post #33

Earlier quoted context omitted.

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…

"The housing market here is suited best..." 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 st…

All of the cultural items can be had by renting here, too, as my family does, and deploying the rest of the capital in ways that aren't financially illiterate. The decision to buy in the bay area, for the vast majority of people, is damaging to their financial health.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#66

Post by lotsofpulp »

nostrademons wrote: post #45
endisneigh wrote: post #29

Earlier quoted context omitted.

I don't really buy this. if you're going to be at a hot startup for 4 years and can easily afford a house the way the SF bay market has been for the past 2 decades is such that you would've made money in any 4 year period just buying and selling. covid might be the single exception. I think the issue is more that sf people are rich for the country but not rich for the bay area so they just rent.

Opportunity cost. Housing in the Bay Area goes up an average of about 7%/year, roughly inline with the S&P 500. Google stock has increased 13x in the last 11 years, for an average annualized return of about 25%. If you were at AirBnB or Stripe your return is about 100x, making over 100%/year. With leverage the computation gets a bit more complex, but basically you're paying 4.5% interest on 7% appreciation, and not n…

>but basically you're paying 4.5% interest on 7% appreciation, and not needing to pay rent, so you may get 4-5% real returns.

And it's down to 2.5% interest or even lower for 30 year fixed for some people.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#67

Post by trillic »

warent wrote: post #48
powersnail wrote: post #40

Earlier quoted context omitted.

Aren't most rich people living in their own houses? I'd imagine most higher priced apartment renters are middle class.

I think these days high priced apartments are only affordable by the wealthy, unless people are grouping together with multiple roommates, at which point it means they can't actually afford the apartment, so is it really middle class anymore?

If 4 22 year olds making 50k each share a $3,000 4bd 2ba rental "for the rich" I'd say they're middle class and can afford it.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#68

Post by legerdemain »

roguecoder wrote: post #17

While the article is interesting, there is one dynamic it missed: tech debt. Starting around 1975, housing supply stopped keeping up with the growth of housing demand. It picked back up fifteen years later, around 1990: https://www.brookings.edu/research/the-goldilocks-problem-of... (But that is on a national level: in the West, in comparison, housing growth hasn't been sufficient to house the new households formed a…

If cheap housing is expensive housing built 30-100 years ago, we should have had decades and decades of delapidating housing stock left to go before hitting a shortage.

Not to mention your example of housing in Boston built at the turn of the 20th century. A laissez faire policy that makes the poor wait 120 years for housing is hardly any policy at all.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#69

Post by tehjoker »

outside1234 wrote: post #5

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.

It's crazy that we live in an economy where you have to pay just to live somewhere, but when the eviction moratorium ends, there's going to be a huge financial reckoning as there's no way anyone is paying all that back rent.

Biden is going to have to either bail out tenants or landlords and banks. I'll be taking bets on which one he does.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#70

Post by frongpik »

roguecoder wrote: post #17

While the article is interesting, there is one dynamic it missed: tech debt. Starting around 1975, housing supply stopped keeping up with the growth of housing demand. It picked back up fifteen years later, around 1990: https://www.brookings.edu/research/the-goldilocks-problem-of... (But that is on a national level: in the West, in comparison, housing growth hasn't been sufficient to house the new households formed a…

Insufficient housing creates competition among workers and they do more work for less pay, as nobody wants to be an outsider. The number of building permits is set by city councils and those listen to the capital as the latter can choose where to create jobs.
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