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

washingtonpost.com

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

#71

Post by renewiltord »

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…

And you realistically have access to a 2x-3x lever on margin anyway.

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

#72

Post by gnicholas »

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.

Interestingly, if landlords were allowed to use larger security deposits, some would choose to do this instead of raising the monthly rent. My friend is looking to rent out an ADU, and the first idea was to have a sizable security deposit in order to filter applicants who fully intended on paying rent from those who would be more likely to use the eviction moratorium.

But apparently California tightened the rules around security deposits in 2020, which actually exacerbates this problem. Landlords used to be able to ask for up to two month’s rent as a security deposit, but now they can only ask for one month's rent.

This leads to upward pressure on rents, as landlords adjust the only lever they have left. I wonder if applicants can/do offer to prepay several month's rent, to signal that they are serious long-term tenants who have the ability and interest in paying rent (even if they legally could avoid payment).

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

#73

Post by jandrewrogers »

powersnail wrote: post #40
jakelazaroff wrote: post #22

Earlier quoted context omitted.

Who is renting higher priced apartments if not the rich?

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

No, quite a lot of the rich live in rental property, at least part of the time. There are disadvantages to owning, even if you can afford it, and not everywhere you want to live may be for sale.

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

#74

Post by andreilys »

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.

You're neglecting to mention opportunity cost. That money could've been invested in stocks, crypto, etc. and you would've made out a lot better (and avoided the headaches that come with owning property)

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

#75

Post by WalterBright »

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?

> What sort of rich person rents a house

One who doesn't want to bother with maintenance, insurance, taxes, etc. One who wants to leave whenever they feel like it, instead of having to go through months of a sale process.

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

#76

Post by imperfectcats »

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…

Purely economically motivated decisions are rare. We all have reasons beyond the financial to live wherever, including something as simple as our wife/husband wants to live there.

There is also an inertia bias. Life has to get pretty expensive for many people to want to undergo the hassle of moving cities / states, which includes leaving behind loved ones, and learning everything new (including leisure things like where you like to eat).

Going meta, NYC and California/The Bay Area make the bulk of their tax revenue from very few industries. The tipping point at which they lose a financially significant portion of their tax base, and the flow on affects of that for government workers and the multiplier downstream, has likely been reached.

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

#77

Post by gph »

warent wrote: post #46
rogerdickey wrote: post #13

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.

I thought it was a well known problem that in the US class disparity (i.e. the gap between middle class and upper class) is increasing. The middle class is evaporating, becoming very rich or borderline poverty. Am I confused? WaPo isn't really saying anything new or controversial.

It's more like the middle class is bifurcating between upperish middle class and lower-middle class. In-demand tech workers, doctors, high-level admins/managers, etc. are getting higher and higher wages while other professions that used to be middle class as starting to stagnate and fall behind such as low-level office workers, journalists, teachers, mid-to-low level managers, etc. I wouldn't consider either group to really be upper class, but I guess there's always going to be differences in how people are sorted into those categories.

I think the issue is that the article is inflammatory click-bait because it makes it seems like rich people are getting a break while poor people are getting shafted. It's not until you've read through most the entire article that they finally get to the point, which is that 'rich' people are buying houses in the suburbs/exurbs now that they can work remotely. Unsurprisingly this means prices are spiking in those areas while rent for high-end apartments are shrinking as demand dries up. So rich people aren't really catching a break so much as exiting the rental market in major cities and redirecting their spending to the suburban housing market.

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

#78

Post by Railsify »

MisterBastahrd wrote: post #61
Railsify wrote: post #4

Earlier quoted context omitted.

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.

common among the rich people whose mansions are not selling well or have taken price cuts to get them sold.

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

#79

Post by hsitz »

tehjoker wrote: post #69
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.

??? In what economy do most people not have to pay just to live somewhere?

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

#80

Post by TuringNYC »

gnicholas wrote: post #72
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.

Interestingly, if landlords were allowed to use larger security deposits, some would choose to do this instead of raising the monthly rent. My friend is looking to rent out an ADU, and the first idea was to have a sizable security deposit in order to filter applicants who fully intended on paying rent from those who would be more likely to use the eviction moratorium. But apparently California tightened the rules aro…

This comment is spot on. Rent premiums are often not greed, but just a risk premium and buffer-collection for a catch all of issues from future non-payment to other BS.
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