[HN Gopher] Rents for the rich are plummeting. Rents for the poo...
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Rents for the rich are plummeting. Rents for the poor are rising.
Why?
Author : ece
Score : 75 points
Date : 2021-03-22 18:57 UTC (4 hours ago)
(HTM) web link (www.washingtonpost.com)
(TXT) w3m dump (www.washingtonpost.com)
| wideareanetwork wrote:
| 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?
| vagrantJin wrote:
| Some poor people just build houses slowly over several years in
| less than ideal places ofcourse. If the world decides to spit
| me out, I'll have a pretty big hiding hole.
| nerdponx wrote:
| _What sort of rich person rents a house, except whilst between
| selling old and new?_
|
| Think apartments, not houses. Think young single people in tech
| making $100k+.
| rainyMammoth wrote:
| That's a weird comment. Plenty of people are rich by your
| definition (could easily buy a house) but don't do it because
| it makes no sense financially. Most good investors are better
| off renting and getting higher returns in the stock market.
| Renting also allows you to move very quickly and you don't
| spend your time fixing things (i let my landlord handle it all)
| majormajor wrote:
| 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 apartments
| fall in demand while the houses go through the roof, without
| effecting the lower end of the rental market at all.
| rainyMammoth wrote:
| 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)
| majormajor wrote:
| For me, those calculators tell me I'm better off buying
| if I'm gonna stay for at least 5-7 years. Which is... not
| a terribly long amount of time, honestly. If I'd made the
| buying decision 5 years ago, I would've actually been
| much better off by then, because my rent went up way more
| than predicted. So of course there's a lot of uncertainty
| there. Maybe purchase prices will crash soon. Or maybe we
| hit a new normal and individual homes or spacious
| townhomes never come back down in price, due to shifts in
| demand.
|
| 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.
| alisonkisk wrote:
| Buying is a near perfectly good investment (sadly).
| Selling is almost the only way to lose money in real
| estate.
| sidlls wrote:
| 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 and income producing investments.
| Even better: I could move my family to a place where people
| aren't paying $2M for a home that's worth $250k.
|
| The housing market here is suited best for people with
| absolutely no money sense at all, or those VHNWI and UHNWI who
| can buy into genuine investment grade real estate out here. It
| makes zero sense for the vast majority of people to buy here,
| especially people who more or less win a lottery with some
| options from a company that makes an exit. In almost every case
| their money would be put to better use renting here and
| investing elsewhere (assuming they're tied down here, e.g., due
| to work).
| nostrademons wrote:
| "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 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.
| imperfectcats wrote:
| 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.
| sidlls wrote:
| 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.
| nostrademons wrote:
| 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.
| WJW wrote:
| 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 (who can take
| the time to shop around because they are not at risk of getting
| evicted) manage to get a better deal than someone who
| represents more credit risk for the landlord.
|
| Of course pulling this type of thing off requires that you can
| find investments that will yield more than the rent price,
| which may not be easy to do in the long term as high yielding
| investments can often carry unforeseen risks. Also because a
| significant amount of people already know this, when renting is
| "cheap" enough compared to buying the demand for renting will
| increase and prices will rise. This means that the condition is
| unstable and will often disappear on its own.
|
| Still, there are sometimes very valid monetary reasons to rent
| instead of buy. Then there are nonmonetary reasons to rent
| instead of buy that make sense even for quite rich people. If
| you're a NYC banker and you get seconded to London for 2 years
| to set up some new division, it is probably not worth the
| hassle to buy a house there.
| rainyMammoth wrote:
| I am with you. There is a huge lobby to make people buy
| houses. Not enough people question if it is a good
| investment. The opportunity cost to buy vs rent is huge.
| WalterBright wrote:
| > 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.
| Frost1x wrote:
| 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.
| terio wrote:
| In some markets, e.g. San Francisco, it does not make financial
| sense to buy and renting is a better option.
| Mc_Big_G wrote:
| There's a high percentage of "rich" people in the Bay Area who
| rent because even a run-down, small, shitty house is $1mm+.
| wpietri wrote:
| 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.
| majormajor wrote:
| > 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.
| nostrademons wrote:
| "What sort of rich person rents a house, except whilst between
| selling old and new?"
|
| There are quite a few techies who move to SF, work for the hot
| unicorn for 4 years, and live extremely cheaply. They don't buy
| housing because they don't intend to stay in SF (and besides,
| who wants to buy a house in SF?), but when they "retire"
| they've got a few million in stock options. They _can_ buy a
| house, they just don 't want to, because their living situation
| is temporary.
|
| I suspect that a lot of the housing boom going on around the
| country now is because the rich techies in SF no longer have to
| stay in SF.
| endisneigh wrote:
| 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.
| rainyMammoth wrote:
| Or as explained above it doesn't make sense to buy since it
| is cheaper to rent.
| endisneigh wrote:
| 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.
| andreilys wrote:
| 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)
| sidlls wrote:
| 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.
| rainyMammoth wrote:
| Are you picking the bay area as an extreme example?
|
| As an example if you invested in tech stocks only from
| 2012 to 2016 you would have had enough money to buy 3
| condos.
| mikeyouse wrote:
| "Just" buying and selling also has a higher bar now than
| ever before -- Median sales prices are around $1.5M for
| peninsula / SF locations. Even on extremely generous tech
| salaries, it'll take some time to build up enough savings
| to get a loan.
| endisneigh wrote:
| I completely agree, my point though is if you are legit
| rich, even for the bay area, it makes no sense to ever
| rent. someone with a net worth upwards of 20M isn't going
| to save any money renting even if they stay a paltry 5
| years (though covid and WFH might change things of
| course, but this pattern has held up decently for the
| past couple decades).
| nostrademons wrote:
| 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 needing to pay rent, so you may get 4-5% real
| returns. Lever up 5x with a 20% down payment and you get
| about 25% returns - competitive with Google, but in the
| same ballpark, and you've taken on the risk of foreclosure
| or being underwater if there's a housing bust (which happen
| periodically in the Bay Area and take prices down 10-40%).
|
| The stock is a lot more liquid, you can take it anywhere,
| you can sell it whenever you want, you can move in with a
| girlfriend and keep it. If you haven't made a conscious
| decision to _stay_ in the Bay Area, the stock performs much
| better.
| renewiltord wrote:
| And you realistically have access to a 2x-3x lever on
| margin anyway.
| lotsofpulp wrote:
| >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.
| quickthrowman wrote:
| Low rates just mean you pay more to the seller for the
| asset, and financing costs less. If rates were 5%, you'd
| pay less for the asset but more in financing costs. The
| monthly payment probably wouldn't change substantially.
|
| Sort of how a bond's value moves inverse to yields.
| nostrademons wrote:
| I'm comparing it to historical returns over the last
| decade, though. Mortgage rates were about 4.5% in 2010,
| so that's the figure I'm using.
|
| I honestly don't know what the next decade will bring. I
| would personally bet on high inflation, so that 2.5%
| mortgage rate will likely be a negative real interest
| rate. (Hence, I bought.) Stock returns may or may not
| equal the previous decade's, as well.
| airhead969 wrote:
| As a point of reference: where I'm at is rapidly gentrifying with
| phony, corporate clone office workers while hundreds of homeless
| people are living in tents visible outside next to the highway.
| There isn't enough affordable housing and the % set-asides are a
| joke because they're so few and far between.
| numpad0 wrote:
| Shrinking market means prices move towards average
| roguecoder wrote:
| 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 at any time in the last 70 years and so the problems run
| deeper.)
|
| Normally, cheap housing is housing that was expensive housing
| 30-100 years ago. Think of all of the post-war apartments in NYC,
| or the Boston multi-family houses built around the previous turn
| of the century.
|
| Since many cities currently lack the recently-aging housing that
| would normally be filtering down market right now, the elasticity
| at the top is affecting housing too new for developers to be out
| of debt on, and thus we are unlikely to see it translate into
| lower prices on the low end until another 20-25 years pass and we
| get out of this housing doldrum.
|
| (Not the West, though. Sorry San Francisco: you just have to
| build more places where people can live.)
| legerdemain wrote:
| 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.
| roguecoder wrote:
| And many cities did, which is why the trend has been getting
| slowly worse.
|
| I didn't talk about any "laissez faire" policy, and as far as
| I know no city in the US is pursuing a laissez faire policy.
| I also don't know why you think it is bad to have housing
| stock that lasts; having lived in a number of those turn of
| the century homes, they were better and cheaper than the
| "affordable" new apartment options. They were well-built
| luxury homes that are comfortable to live in, but didn't have
| the modern status symbols the new luxury apartments had. It
| isn't a universal thing, either; it was specifically because
| the luxury housing from the time was _nice_. I looked at
| cheap apartments in 1970s cement bunkers and always went back
| to living in a beautiful Victorian with vaulted ceilings,
| even if they were dustier & colder.
|
| Affordable housing will always compromise on something, and
| personally I preferred finding roommates & buying space
| heaters to living in a shoebox.
|
| As someone below noted, these dynamics vary dramatically by
| local. California, much less San Francisco, is a whole
| different kettle of fish. But because we stopped building
| housing for a while, we are at best going to face a period of
| catch-up, no matter what we do.
| kelp wrote:
| At least for San Francisco, the seeds of the current shortage
| started as early as 1912 with the establishment of the
| planning commission.
|
| See this amazing twitter thread with images of historical
| news paper clippings.
|
| https://twitter.com/enf/status/753435745272995840
|
| Later on, in 1978, most of the city was down-zoned, and in
| the EIR (Environmental Impact Report) written at the time, it
| was clearly predicted that this would result in a supply
| shortage and increased prices. Unless the city made a point
| to increase density and development in the industrial parts
| of the city. That didn't really happy to the scale the EIR
| said was needed.
|
| See: https://twitter.com/enf/status/775185946941591553?s=20
|
| So here we are.
| frongpik wrote:
| 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.
| totalZero wrote:
| > the latter can choose where to create jobs
|
| Jobs such as "city councilman," for example.
| Lammy wrote:
| > Starting around 1975
|
| Guess what happened in October 1974:
| https://en.wikipedia.org/wiki/Equal_Credit_Opportunity_Act
| bathtub365 wrote:
| Can you explain the significance of this correlation?
| endisneigh wrote:
| this kind of thing will never end until there's national zoning
| laws that override local ones. however something like that would
| be challenged probably up to the supreme court.
|
| it's a tough hill to die on.
|
| it's a never ending cycle -> if you're poor you're more likely to
| rent -> if you rent you're more likely to be affected by a
| recession -> if you're laid off others are also laid off ->
| landlord risk increases so rent increases commensurately ->
| repeat.
|
| the only way to end this vicious cycle is to just buy your house
| as you're more insulated from rent increases and moratoriums are
| a bit more generous, but zoning laws...
| outside1234 wrote:
| 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.
| tehjoker wrote:
| 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.
| imtringued wrote:
| It's crazy that we live in an economy where all you have to
| do to live until 80 years is pay to live somewhere. We don't
| even have to hunt our own food.
| hsitz wrote:
| ??? In what economy do most people not have to pay just to
| live somewhere?
| gnicholas wrote:
| 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).
| alisonkisk wrote:
| How is prepaying rent different from a larger security
| deposit?
| gnicholas wrote:
| It has a similar signaling effect, but someone could prepay
| 6 months rent and then just stop paying. With a security
| deposit, you have that as a buffer until the person leaves.
|
| Perhaps the best way to accomplish this without having the
| landlord perpetually hang onto large amounts of tenant cash
| is to have a large deposit that slowly decreases over time,
| as trust increases. So perhaps it would be 5 or 6 months of
| deposit that is used to offset every 3rd month of rent
| during the first year.
| offtop5 wrote:
| 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 ?
| gnicholas wrote:
| Chicago does have a large supply of housing and land that
| can be converted into housing. This helps keep the cost of
| housing closer to the cost required to construct units.
|
| In CA, the cost of a home has almost nothing to do with the
| input costs other than land. There are areas that could be
| built up (tons of land just west of 280), but which is
| protected by environmental laws or restrictions. Full
| development of this land would lead to traffic nightmares,
| for sure, but one could imagine that some of it could be
| developed as we move toward more efficient modes of
| transport.
| roguecoder wrote:
| San Francisco also has 26 skyscrapers to Chicago's 130.
| 80% of the Bay Area is zoned exclusive for single family,
| to Chicago's 41.1%.
|
| It's not landscape and it's not rocket science: it's
| zoning. San Francisco could build up, letting people live
| closer to their work & be much better for the environment
| than encouraging sprawl, but chooses not to. Y'all
| decided to make housing expensive, so it is.
| TuringNYC wrote:
| 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.
| imtringued wrote:
| Prices are negotiated. Two parties must agree on the price.
| If there is a "greedy" landlord overcharging people there
| must also be a person "willing" to pay the overpriced rent.
| Of course there are cases of vacant properties but I don't
| think this is a problem for most rental markets.
| gugagore wrote:
| > 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".
| silvestrov wrote:
| wow, that's not much in case the apartment is damaged.
|
| Denmark allows for 3 months deposit plus 3 months rents
| upfront, so you have to be able to come up with 6 months rent
| total to get an apartment.
|
| (market here is very hot, so rental apartments have no
| problem getting 6 months rent)
|
| When you "quit" living in the apartment, you can use the 3
| months prepaid rent, so you don't have to pay rent the last 3
| months.
| gnicholas wrote:
| For sure. Think about the damage that can be done to
| hardwood floors during move-out, for example. That's one
| easy way that a unit can be accidentally damaged, even by a
| tenant who is generally very careful.
|
| Of course, you can still recover payment by suing, but
| that's obviously more difficult (especially if the former
| tenant has moved to another city/state).
| baron816 wrote:
| 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 can't imagine
| who would rent an apartment to that guy.
| stevula wrote:
| Five figures is $10,000. It only takes 2-3 months of rent to
| reach that in an expensive Oakland apartment.
| darth_avocado wrote:
| 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.
| adolph wrote:
| 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._
| TuringNYC wrote:
| 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.
| pdimitar wrote:
| That, however, reduces their chance in getting tenants so it
| becomes a vicious self-feeding closed circuit process?
| an_opabinia wrote:
| Occupying a home reduces its value. Letting someone live
| somewhere "for free" (to them) is still worse to the owner of
| the house than leaving it vacant.
| foepys wrote:
| It's probably because of speculation. If there is a chance
| that the moratorium will end in July it's better to not have
| any tenants for a few months than bad ones you cannot evict
| and will trash your place. Also, unoccupied properties are
| always more valuable.
| imtringued wrote:
| Is it really speculation if the government turns tenants
| into net negative customers?
| Frost1x wrote:
| 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.
| insert_coin wrote:
| You try to minimize all risks, not only in business but in
| all aspects of life. That has always been the case. The
| caricature you presented has never existed.
| adolph wrote:
| _One likely explanation, Schuetz and others say, is that when the
| economic crisis hit, more people decided to move down the housing
| ladder to save money. There was already a shortage of affordable
| units, though. So, this surge in demand for lower-price-point
| homes ended up bidding those rents higher._
|
| _Housing experts say other factors may be at play, too. Some
| lower-income areas were gentrifying even before the pandemic,
| leading to higher rents._
| jokethrowaway wrote:
| > Rents for the poor are rising
|
| Because of the economical impact of locking down the economy and
| giving money to everyone.
|
| > Rents for the rich are plummeting
|
| Because they don't need to live in expensive central hubs to get
| their high wages and there is less demand for their luxury flats.
|
| Also, this lax definition of rich people is exactly how the
| richest 1% can stay hidden.
| sombremesa wrote:
| > get their high wages
|
| Wages? What are you talking about, the working class?
| Railsify wrote:
| 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.
| MisterBastahrd wrote:
| This is not common for anyone, not even in SV.
| Railsify wrote:
| common among the rich people whose mansions are not
| selling well or have taken price cuts to get them sold.
| scottm01 wrote:
| >A portfolio of that size will easily throw off 500k in
| dividends a year.
|
| Where are you "easily" getting 5% dividends? Are those
| mythical W2 boomers suddenly into sketchy crypto "funds"?
|
| Vanguards "Dividend Growth" fund is yielding 1.71%. Total
| stock 1.33%
| lotsofpulp wrote:
| >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.
|
| What is your definition of "common"? Less than 1% of people
| have savings of $10M at retirement age, surely more than 1%
| of people started investing in the 70s and 80s.
|
| https://dqydj.com/retirement-savings-by-age/
| ab_testing wrote:
| > YOu can be on payroll making 500k and have a stock
| portfolio worth 10mill Or working on FAANGMULAT type of
| companies for the past many years.
| rogerdickey wrote:
| 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.
| secondcoming wrote:
| Those clicks won't click themselves!
| jakelazaroff wrote:
| Who is renting higher priced apartments if not the rich?
| [deleted]
| powersnail wrote:
| Aren't most rich people living in their own houses? I'd
| imagine most higher priced apartment renters are middle
| class.
| jandrewrogers wrote:
| 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.
| warent wrote:
| 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?
| trillic wrote:
| 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.
| oh_sigh wrote:
| If higher priced apartments lower in price, doesn't that make
| it more affordable for more people? Isn't that a good thing?
| warent wrote:
| 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.
| gph wrote:
| 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.
| m463 wrote:
| I think affordable-level housing will always be competitive, and
| super-luxury stuff will be white elephant stuff that's subject to
| compromises.
|
| It's kind of amazing that they raised the rent. Is it because
| people stopped paying rent and they tried to get it from other
| renters?
| aeternum wrote:
| Often this is due to laws that limit annual rent increases. If
| landlords don't increase the rent by the allowed amount each
| year, it greatly increases the risk they will be unable to
| 'catch up' to market rates in the future.
|
| Luxury housing is often not subject to these limitations, so
| landlords are forced to compete and respond to market dynamics.
| asdff wrote:
| Landlords in big cities always raise rent because they can.
| They'd rather push a current tenant out than work with them,
| because with the high turnover they are sure to get a new
| tenant pretty soon at the higher price anyway. Its this sort of
| unscrupulous taking, of maximizing profit because its 'leaving
| money on the table' to not do so, is why we have rent control
| ordinances which work by capping the maximum yearly % increase
| in many of our big cities (although this cap is typically
| higher than the median wage increase so landlords still beat
| the economy with their investment and with rent control
| ordinances applied, despite some sentiments online about rent
| control).
| insert_coin wrote:
| > Its this sort of unscrupulous taking, of maximizing profit
| because its 'leaving money on the table' to not do so, is why
| we have rent control ordinances which work by capping the
| maximum yearly % increase in many of our big cities
|
| No, the reason is because cities don't want to build more
| houses.
| lotsofpulp wrote:
| >because with the high turnover they are sure to get a new
| tenant pretty soon at the higher price anyway
|
| Only if coupled with insufficient construction of new
| housing.
| ARandumGuy wrote:
| 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 metro areas
| have a big housing shortage?
| lotsofpulp wrote:
| Bringing new units online in a high demand market earns
| far more money than simply raising rents.
|
| It's not large property owners that are opposing new
| housing, it's existing small (usually single) property
| owners opposing new housing, usually so their way of life
| doesn't change due to changing demographics of newcomers,
| increased traffic, etc. and possibly to restrict supply
| and increase their property's value.
| pdimitar wrote:
| 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.
| ARandumGuy wrote:
| 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 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.
| pdimitar wrote:
| 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.
| lotsofpulp wrote:
| >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 who is trying to
| block. It's all public information.
| asdff wrote:
| 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.
| Ericson2314 wrote:
| Maybe not, but pretty sure the wealth of an urban area is
| a superlinear function of density and size (super linear
| on both axes), so choices based on the marginal RoI to
| land barons will lead to suboptimal outcomes either way.
| asdff wrote:
| In the U.S. there is no limit as long as you aren't a
| strong outlier relative to mean market rent. People in LA
| might pay like over half their income on rent, for
| example. For the working poor, they also typically can't
| finance a move to a cheaper apartment since they lack any
| savings, so they cram more people per bedroom or end up
| living in their car or on the street. It's a sad state of
| affairs and really hard for working people here. Sucked
| dry with nothing left to use to get out.
| roguecoder wrote:
| Don't worry; they have laws to ensure that.
| lotsofpulp wrote:
| Who is "they"? The people active in the local community
| and sit on the zoning boards denying permits and
| variances to build?
| lalaithion wrote:
| Because it's easier to build housing for the rich than for the
| poor, due to things like zoning, building regulations, density
| regulations.
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