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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?

#81

Post by darth_avocado »

baron816 wrote: post #15
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.

There was an article a saw a few weeks ago about some guys based out of Oakland (maybe someone else can find it) who has accumulated 5 figures worth of rental debt. It talks about how he had just moved into an expensive place at the beginning of the pandemic, got laid off, then couldn’t pay for the whole year. IIRC, he eventually moved, but still couldn’t pay rent and started accumulating even more rent debt there. I…

I know the exact article you mentioned. The real story is actually more nuanced. The guy off course got laid off and could no longer afford the rent. But he racked up rent also because even if he moved earlier, his contract would have made him pay a ton of fines to even get out of it. So he decided to stay.

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

#82

Post by TuringNYC »

adolph wrote: post #62
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.

Not only this, but there will be a eviction-moratorium risk premium that tenants will implicitly pay for years to come, to adjust for the added risk and to help keep a virtual buffer for future moratoriums.

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

#83

Post by Frost1x »

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 more modern trend of businesses passing risk sort of flies in the face of the old rationale of business ownership taking on risk which justified the rewards of doing business.

Now you're just doing business wrong if you don't minimize risk or figure out how to shift and transfer risk away from yourself.

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

#84

Post by majormajor »

wpietri wrote: post #64
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…

> 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.

Interestingly, most of the transaction costs hit you when you sell, not when you buy, which is one of the ways the US favors landlordism and sequentially acquiring more and more properties instead of just renting forever, or even just buying one primary residence and sticking with just one.

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

#85

Post by asdff »

lotsofpulp wrote: post #60
ARandumGuy wrote: post #55

Earlier quoted context omitted.

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…

>However, the overall incentive structure is for property owners to keep housing supply low, to increase the value of existing properties with minimal investment. 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 w…

This is actually a good environment for certain parties at play and this is why this status quo is upheld. The way this machine works in LA is that the city councilmember can unilaterally approve or dissaprove development in their district. Certain developers who can gain good favor with the councilmember can have their builds preferentially approved and red tape cut through for them. Commercial real estate investors then look to work with developers with a good relationship with city council.

This sort of setup helps everyone on the inside (the councilmembers, the developers, and the investors), but hurts those on the outside (renters, people hoping to buy one day, real estate companies who haven't yet bought into the machine). However, since those on the inside control the reigns of power, and those on the outside desperately try to work their way into the inside rather than break the system down and build up something more equitable, nothing changes.

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

#86

Post by pdimitar »

ARandumGuy wrote: post #55
pdimitar wrote: post #27

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…

Your analysis is correct. Let's add one more factor:

At one point the prices become so high that people actually start getting out of the cities. That's what started happening in my country although it's going to be at least a decade until the consequences are felt (since the influx of people is still bigger than those who leave). But it did start happening.

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

#87

Post by nostrademons »

sidlls wrote: post #65
nostrademons wrote: post #56

Earlier quoted context omitted.

"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.

That was basically my reasoning when I first came here as well, and so I didn't buy. (Elsewhere in this subthread, I'm arguing exactly that point.)

The part that I didn't factor in was rents basically tripling while I was here, which apparently is not an uncommon occurrence in the Bay Area. In 2010 I was a genius for paying $1400/month in rent rather than $4000/month to buy a condo. In 2017, when rents were $4500/month but that condo payment would've still been $4000 (for a bigger place!) and the condo's value had gone up from $400K to $1M, I was less of a genius.

YMMV. I'm expecting very significant inflation and I've watched firsthand as a lot of my friends got priced out of the Bay Area, so I bought as a way to ensure that my kid will be able to stay in the same school district and remain near family. Time will tell whether that's a fiscally brilliant or fiscally idiotic decision.

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

#88

Post by offtop5 »

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…

That's horrible to hear, I was only able to get my first apartment in California since I could offer a double deposit.

Chicago on the other hand has fantastic housing supply and so many rules on security deposits, most buildings just don't do it. Access to housing permeates every aspect of a culture, people are significantly nicer when they can afford a place to live.

Has your friend been able to get out of California ?

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

#89

Post by Frost1x »

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?

There are probably also ways of justifying a rental through a business expense vs personal assets. I know a few businesses that pay for living expenses for some of their top level corporate staff under certain circumstances.

I've seen it done as a job perk for certain positions which seems like a way of indirectly increasing total comp without increasing taxable income. I'm not rich enough to know all the tax laws and loopholes around this area though.

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

#90

Post by gugagore »

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…

> exacerbates this problem

To clarify, the problem you're talking about is that it's risky to be a landlord, and maybe more so now than a few years ago.

> as landlords adjust the only lever they have left

At least some landlords also have the option of pulling the lever labeled "sell the unit".

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