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The Rent Really Is Too High

America’s rental crunch. Big buyers scoop up properties and our rents have gone sky-high.

In this Feb. 28, 2012, file photo a yard sign reading "For Rent" is seen in Fremont, Neb. A new Harvard University Study shows a significant increase in single-family homes being transformed into rental units after the 2008 recession. (AP)

In this Feb. 28, 2012, file photo a yard sign reading “For Rent” is seen in Fremont, Neb. A new Harvard University Study shows a significant increase in single-family homes being transformed into rental units after the 2008 recession. (AP)

Big report out in the last week spelling out what millions of Americans already know:  rents in this country are skyrocketing.  Digging deeper and deeper into incomes that are widely going nowhere.  First the recession pushed millions out of home ownership and into the rental market.  Next investors scooped up properties, including single-family homes, that went from owner-occupied homes to rental units.  And rents just soared, as incomes have stagnated.  People paying a third or half their income for a place to sleep.  Or finding themselves unable and homeless.  This hour On Point:  the wild ride in the American rental market.

– Tom Ashbrook

Guests

Diana Olick, real estate correspondent for CNBC. (@diana_olick)

Susan Wachter, professor of Real Estate and Financial Management at the University of Pennsylvania’s Wharton School of Bussiness. Co-director of the Penn Institute for Urban Studies.

Chris Herbert, research director of the Joint Center for Housing Studies at Harvard Unversity. Was a lead author on “America’s Rental Housing: Evolving Markets and Needs.” (@Harvard_JCHS)

From Tom’s Reading List

Harvard Joint Center for Housing Studies: America’s Rental Housing — “Rental housing has always provided a broad choice of homes for people at all phases of life. The recent economic turmoil underscored the many advantages of renting and raised the barriers to homeownership, sparking a surge in demand that has buoyed rental markets across the country. But significant erosion in renter incomes over the past decade has pushed the number of households paying excessive shares of income for housing to record levels. Assistance efforts have failed to keep pace with this escalating need, undermining the nation’s longstanding goal of ensuring decent and affordable housing for all.”

NPR: When Buying A Home Is Too Costly And The Rent Is Too Damn High — “In general, those who rent tend to make less money, which makes sense. A higher income means you have a better chance of saving up money for the down payment on a home and are more likely to qualify for a mortgage. “People of color are more likely to have lower incomes. And lower-income households have fared quite poorly [as rents have risen],” says Chris Herbert, the lead researcher on the project. The racial skew in the rental market underscores the wide disparities that remain in homeownership.”

Wall Street Journal: Overseas Money Pours Into Miami Real Estate — “Miami is just a bigger example of a recent national tilt toward multifamily buildings—both apartments and condominiums—instead of the single-family homes that dominated during the bubble years leading up to the recession. While the majority of national construction is still of single-family homes, the recent rebound in construction activity—whether measured by new starts or permits—has been centered in multifamily buildings.”

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  • brettearle

    Where is the line drawn between gouging profit and tenants who are paying so much they literally are throwing good money after bad….by not finding some way to become a homeowner?

    In the face of rents that are so high, would it not compel tenants to consider a more prudent investment and more permanent alternative?

    If Rents continue to go up–in the absence of rent control– how do tenants NOT come to this potential solution?

    Is it not getting to the point where a mortgage on a house is no longer far from daunting–if you’re throwing away money, each month, on payments that are less and less competitive with some mortgages…. and, by continuing to pay monthly rents, thereby ignoring one’s own investment in one’s future?

    If the rents are that high, and the tenants can afford to sign leases that reflect such rates, then they ought not to be far away from becoming homeowners….even if those homes fall short of their dreams.

    • LinRP

      good question I hope gets discussed.

    • HonestDebate1

      Your overall point is a good one: people have choices.

      • Acnestes

        People with enough money have choices.

        • HonestDebate1

          People who don’t make bad choices have enough money to use on good choices.

          • jefe68

            Not always. People who make good choices do get sick or they have accidents that incur huge health care bills. Or they simply lose their job and can’t find another one that pays what they earned before.

          • Acnestes

            Glib and shallow.

          • HonestDebate1

            Everyone is not a helpless victim.

          • Acnestes

            Neither does everyone lead your seemingly insulated and empathy free life.

          • keltcrusader

            his wife supports him so he doesn’t have to worry about this kinda stuff

          • HonestDebate1

            Yea, that’s it.

          • HonestDebate1

            Empathy is cool, sympathy not so much. People acually do have choices, really they do.

    • adks12020

      I see your point and I actually made that decision this past year, however in some markets homes are simply out of reach for a lot of people. The ability to buy really depends on the area a person lives in. Higher home prices mean people must have a larger amount of money to put down and higher incomes in order to qualify for a mortgage. My girlfriend and I were able to put 20% down on a 3 bedroom home because the real estate market in my area is pretty cheap. If we lived in NYC we probably couldn’t even afford 10% down on a nice apartment. I think that is a huge part of the problem.

      • hennorama

        adks12020 — Congratulations, and kudos for taking the conservative route and putting the full 20 percent down.

    • Enuff_of_this

      It’s merely supply and demand. If your rents are rediculously high, what’s driving them up? Students? The area being marketed as “the place to call home”? poltical climate? There are reasons.

    • hennorama

      brettearle — a couple of points:

      Renting has its advantages, flexibility being the primary one. If your circumstances change, it’s far easier to make a change of address when you’re renting. Not to mention that repair and maintenance are generally not the tenant’s responsibility.

      Income is not as much of a barrier to home ownership as are lack of significant down payments, and negative credit issues. Add to these the present tight lending standards, and ownership is out of reach for many, despite sufficient income.

      • brettearle

        Points taken…

        But what do you think is behind the nature of my mildly controversial points?

        Is it not, nevertheless, prudent to bring up the point of home ownership–since it is the ultimate aspiration of many (despite the credit default swaps fiasco) and can always, at least theoretically, serve as one of the engines of the growth of the Economy?

        • hennorama

          brettearle — this assumes that people make completely rational decisions when it comes to renting vs. owning. This is definitely not the case, as evidenced by the number of homeowners who have NOT walked away from their underwater properties.

          There is also a related issue, especially for those whose incomes are low — the everyday stresses of trying to make ends meet crowd out thoughts of the future, and the ability to imagine a better future. This can lead to deleterious financial decisions, and a general sense of hopelessness.

          Generally speaking, those who purchase a home are hopeful and optimistic, and believe their future will be better. This is in marked contrast to many whose incomes are low, and who struggle day-to-day and month-to-month.

          See:
          http://www.princeton.edu/main/news/archive/S37/75/69M50/index.xml?section=topstories

          http://www.sciencemag.org/content/341/6149/976

          http://onpoint.wbur.org/2013/11/04/food-stamps-cut-snap-farm-bill

          • brettearle

            Henn–

            The issues of the middle class, the lower middle class, and the poor class do not fall away from me.

            Indeed, I was published nationally on the current Economy and the plight of the middle class and the blue-collar sector of the Employment base.

            That having been said, it is not unpolitically correct to offer alternatives to a residential population who have to deal with the atrocious realities of Rental Property–despite the financial hardships posed to so many people.

            The disastrous venture, of home ownership through Federal subsidy, does not negate opportunities, for the future.

  • howtodisappear

    If you’re renting in a highly desirable area, how can you convince your landlord to make needed improvements? I feel like our landlord has a ‘take it or leave it’ approach, which is an effect of the booming rental market. They have no incentive to do more than the minimum because they know if we moved out, somebody else would move in almost immediately.

    • John Cedar

      I’m not sure if this would work for you, but I used to own rental property with a partner and said partner was influenced by the tenants, via sexual favors. Other than that, if you became your own landlord you could convince them of anything you wanted to.

    • Enuff_of_this

      Highly desireable areas will be heavily regulated with housing codes and minimum standards. A quick call to the code enforcement office at city hall should get things moving.

  • John Cedar

    I just bought a 13 year old $225k home, specifically to rent to someone I wanted to help out. The taxes are $420/month and I gave up $200/month interest on my highly secure and liquid money. I don’t know what the insurance is costing yet, but a good guess would be $100/month. So rent is $720 just to cover expenses. then last weekend I spent four hours fixing her boiler. and this fall I spent $2k fixing a leaky door and crawl space.

    Since this house was built the guvmint has increased replacement costs to benefit the engineering cartels and to appease the firefighter dram-queens. Storm water treatment, asbestos remediation, lead paint and a harassing OSHA are all concerns that didn’t exist here 13 years ago. New septic systems could be built using the recipe in a cookbook back then but today the cartel gets $1k for “designing” it. Homes that used to be built from the plans the back of a napkin using skills of the trade and prescriptive codes, now require you pay the cartel to stamp plans. Add some CO detectors and smokes in every room plus the crawl space. Raised heel trusses to allow you to put arbitrarily nonscientific high amounts of R-value into the attic. Then tape the house air tight and pay someone to blower door test it. then sit back and enjoy the mold.

    OSHA used to stick to commercial, but now they harass residential builders too. Do you pay the fine or contest it when they tell you ,you broke the law by putting a UL listed replacement plug on your extension chord? Of course you pay it. but the renters pay for all of it in the end..

    • JGC

      You forgot the radon testing.

      • John Cedar

        Good point. The Radon testing profiteers have been extending their greedy tentacles into not at risk areas. But most of the areas I have lived in have required testing and radon preventive building techniques for decades.

    • JGC

      Whether the intent is to buy a home for yourself or as a rental property, all these disclosures are required or let the buyer beware.

      • John Cedar

        The buyer is and was very aware. The first point was that rent pays for a lot of overhead and not all profit.
        The second point was that the supply of dwellings is constrained due to new laws for new buildings and new laws for rehabilitation of old buildings.

    • J__o__h__n

      If the government didn’t require you to remove the asbestos, you wouldn’t need smoke detectors.

      • Enuff_of_this

        they weren’t using asbestos 13 years ago

      • John Cedar

        I don’t think they require you remove it. They just require you to test for it for pre ’78 buildings and tell you how to handle it if you disturb it when doing demolition or renovation. Renovation includes any work even as simple as hanging a picture on the wall.

        • jefe68

          A tad hyperbolic methinks. Renovation is when you do work on a building that requires a permit.
          Such as removing walls. Or replacing an old boiler that is insulated with asbestos.

          If you own a single family home in the Boston area and you are not messing with a load baring wall you don’t need a permit to redo a bathroom or a kitchen.
          Of course if you higher a plumber and a electrician they will pull a permits which will mean inspection. But if you do the work yourself you don’t. But then you could be in violation of your home owners insurance.

          You don’t sound like the kind of person who should own rental properties.

          • John Cedar

            Hyperbole, only because when commenting, I carelessly conflated the lead rules with the asbestos rules.

            Any work that “disturbs a significant amount” of material that may have lead in it. We don’t know what a “significant amount” is, but we know the government considers the glaze on a single pane of glass to be significant. So the government is not talking about a lot of material being disturbed before they consider it “significant” and requires lead testing and lead abatement..

          • jefe68

            Boy of boy, you don’t have a clue.
            If you own rental units and they have lead paint on the windows you might not want to rent to people with small children.
            Window pains are not considered a lead hazard, it’s the paint. And if you scrape one window there is a lot of dust that is visible and more that is not.

    • jefe68

      One has to ask why it is you did find a good home inspector before buying the home?

      If the home is only 13 years old it most likely does not have asbestos.

      Also there is a reason why building codes are stiffer, because people cut corners to save money.

      If you buy a home that was planed on the back of a napkin, good luck with that.

      You forgot about home owners insurance. If you don’t have smoke detectors in your home you could be denied coverage. Also if it’s a rental, as you have stated, the insurance will require it’s up to code as well as the city or town.

      Here’s a libertarian solution to your whining, sell the property.

      • HonestDebate1

        It’s two different issues. If a house that is drawn on a napkin can pass inspections then why does it need an engineer’s stamp?

        • jefe68

          Because it would still need to be up to code. Simple answer. Don’t buy a rental property if you’re not into playing by the rules.

          • HonestDebate1

            If it passes inspection then it is up to code.

          • jefe68

            Which means it’s fine. By the way, not many homes built in the last 60 years or more have been designed on the back on napkins.

            http://www.youtube.com/watch?v=32JWUyd1Fw0

          • John Cedar

            Millions of homes in this country have been designed by homeowners in conjunction with contractors using a simple sketch or two. Then the contractor built them using prescriptive codes and skills of the trade. In my state, houses smaller than 1500 sq ft still do not need stamped plans and so many people opt to stay below that to save paying the cartel for useless copy and past wall section “plans”.

          • jefe68

            Good for them. I hope they have hired experienced licensed contractors how are insured. If not, that’s pretty dumb planing in my book.

            You mention building codes which means town or city inspectors. Get a grip and start to realize that we don’t live in 1898 anymore.

      • TFRX

        Maybe the solution is to secede and say that the rental property is in Galt’s Gulch.

        Lead paint? Hey, that wasn’t enough to stop Ayn Rand.

      • John Cedar

        The whining here is about why the rent is too damn high. I listed some expenses landlords contend with before they make a profit, the biggest being property taxes paid to the government

        I also listed some government reasons why the supply of dwellings has been constrained and made more expensive for both new and refurbished. If the supply of dwellings was increased, the rent would go down.

        • jefe68

          Nope, you were whinging on about your own experience and you used a lot of made up nonsense to support your absurdist ideas.

          Funny how you seemed to forget about the housing boom in the early 2000′s.
          In places such as Las Vegas and huge parts of Florida there was building going on all over the place.

          Depending on the state or city or municipality property taxes will vary a lot.
          In New York City they happen to be pretty low compared to what the value of property is. In New Hampshire they very high due to no income tax.

          Your view is skewed by your disdain of government (based on the history of your posts) which seems clouded by the immaturity of libertarianism.

  • adks12020

    Wow! I couldn’t rent a closet for $477/month in my city. A similar duplex would easily run me $1800 and my city is relatively inexpensive for the northeast.

  • adks12020

    My girlfriend and I chose to buy a home this past year when we realized we could get a 1,950 square foot, 3 bedroom home for the same monthly payment (including taxes and insurance) that we would pay for a nice 2-3 bedroom apartment about half that size. There is no way either of us could have afforded to buy on our own but since we’ve been together for 4.5 years we felt comfortable doing it and it made much more sense financially. Sure there are upkeep costs but at least when we make improvements it’s to something that we own and we are building equity.

  • wauch

    Does Blackstone and its bombastic chief Stephen Schwarzman ever do anything for the good of anyone other then their investors? It amazes me that the same right-wingers who moaned about Fannie and Freddie as the cause of 2008 – rather than including irresponsible Wall Street in their hectoring – are the same ones re-inflating the housing bubble.

    • William

      Obama is leading the charge to change Fannie/Freddie.

      ““For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” the president said. “It was ‘heads we win, tails you
      lose.’ ”

      http://www.nytimes.com/2013/08/07/us/politics/obama-fannie-mae-freddie-mac.html?_r=0

    • JGC

      Blackstone go the green light to peddle a new class of bond known as “single-family rental securitization”. Moody’s gave their plan the coveted triple-A rating (a surprise to many) which means Blackstone can sell these bonds to a much wider sector of investors.

      Does this sound familiar? It should. This is like the securitization of home mortgages, where tranches of bad mortgages were sliced and diced and wound up in everyone’s portfolios, including pension funds. It is difficult to believe Blackstone has any intention of playing landlord and taking care of individual single-family rental homes spread throughout the country.

  • Labropotes

    The Federal Reserve bank purchases $40 billion a month in mortgage backed securities, approx $2 trillion since 2008. If they stopped doing this, interest rates would rise and house prices would tumble. We need to clear the bad debt. As is, we are converting 20-somethings to wage and interest slaves for the boomers. It’s unconscionable. Plus, the kids won’t take it.

    • Tim from Durham, NC

      It’s Congress’s fault. The Fed can’t build roads or invest in research, it has limited mechanisms at it’s disposal to stimulate the economy. Unfortunately, those mechanisms tend to benefit the rich disproportionately.

      If Congress was allocating $40 billion a month in infrastructure spending, tax cuts for the lower classes, research, and public services, we’d see less need for action on the part of the Fed. I’d rather have consumer spending up and more cash in the pockets of the middle class and poor than the Dow surging and flooding the pockets of the investor class.

      • Labropotes

        Agreed, except for the concept of consumerism leading to prosperity.

        • Tim from Durham, NC

          It doesn’t necessarily. However, we’ll be in a better place to take sound action politically if we don’t have a middle class that feels like it’s losing ground and is insecure about their future. That makes the climate ripe for demagogues from either political extreme.

      • TFRX

        Are you familiar with the “helicopter drop” idea?

        • Tim from Durham, NC

          No, what’s that?

          • TFRX

            The dithering and inaction from (basically) the Beltway sorts and right-wingers have restricted the conversation on the economy. Congress’ hands aren’t only tied, they’re living in an artificial culture where left-wing ideas (such as some of the things you mention) aren’t even on the table.

            Given the limited number of “approved” solutions, and other things like the (oft-ignored) multiplier effect, moral hazard (often misplaced), and the simple, some liberal wag said, several years ago

            “The stuff being done with this money is messed up. It would do better for people, result in more growth, keep the economy moving, not reward the wrong people and would be better for growth and long-term government finances if we just dropped this money out of a danged helicopter and whoever finds it gets to keep it.”

            The idea is that, almost at random, more of this money would find its way to people faster and get into the economy than all the dithering and speechifying we’ve had on it since the Great Recession started.

            (My paraphrase.)

  • Jim

    Mr Menino and Mr Bloomberg think they have solidified their legacy by gentrifying their entire cities. But to the eyes of many poor and working class people, they have an absolute poor policy and have no heart.

    In my eyes they are absolute businessmen disguised as politicians.

    • JGC

      “The world’s first “wellness” residence is now available at 66 E. 11th St in New York. ..The idea is to promote wellness through building materials and designs that lower stress, improve sleep and productivity, as well as limit nasty pollutants and toxins…the 11th Street building has more than 75 wellness “amenities”, from vitamin C-infused showers to ultraviolet light that sterilizes harmful airborne elements to a lighting system that balances the body’s internal clock…There is a floating floor that gives when you walk; it’s easy on the knees and supports good posture…Paul Scialla, a 39-year-old former partner at Goldman Sachs is behind the wellness real-estate movement…Asking prices for the lofts range from $14.5-million to$50-million.”

      (From Barron’s, “Trend Spotting: the Healthy Highrise, by Carrie Coolidge, 2 Dec.2013)

      (Note to self. Remind John Cedar it is time to upgrade his rental property again: vitamin C-infused shower, floating floor, etc, etc.)

  • Tim from Durham, NC

    Working for a property management company this summer, it was amazing to see how many 50-something doctors, lawyers, and software engineers, etc. have turned to buying up housing while the market is down and renting those properties out as a source of income. For some this is how they plan to finance their retirement.

    Fair enough, it’s their money to use: but I feel jaded watching a legion of well off Boomers buy up all the cheap housing in the area, driving prices up and making starter homes scarce. If this gets pervasive enough, it’ll mean the formation of a rentier class at the top, and a nation of workers paying a third of their wages to that class monthly on the bottom.

    As a newly wed in their 20′s, it doesn’t seem fair that the same wealthy elite who were in the driver’s seat in the run up to the 2008 crash are now the ones making a killing off the wreckage. Add in the fact that older voters across the income spectrum seem prepared to slash discretionary spending, even on education, in exchange for keeping their entitlements untouched, and it feels like the younger generation is being indentured to pay for the profligacy of the older.

    • jimino

      Believe me, those about whom you complain are in no way representative of “Boomers” in general, the vast majority of whom have seen their savings depleted and, with interest rates being almost zero, have no place to get any sort of safe return on their savings; many of whom have also lost their long-term employment, and few of whom have any sort of pension and will be relying on Social Security to live on.

      It is not a generational transfer of wealth so much as a transfer to the very top of the economic scale in our country, and now an entire world of unfettered capital in the hands of an increasingly smaller number of people. As someone with a long life ahead in this “brave new world”, this is where you should focus your attention, concern and efforts.

      • Tim from Durham, NC

        Yes, I get that most Boomers don’t have much to retire on. I was speaking merely to the fact that they poll in support of slashing investment in favor of preserving their entitlements. Fair enough, they need them, and if our parents become insolvent our generation will end up supporting them anyhow.

        However, it’s easy to get bitter when you see the same demographic group held political power as a voting bloc in the time period from the 1980′s on, right as the federal debt exploded and financial regulations were demolished. They had 30 years of a growth economy to save for retirement during the peak of their earnings potential. I doubt I’ll see the same thing.

    • hennorama

      Tim from Durham, NC — as a landlord with properties spread out in a diverse geographic mix, I can tell you that this phenomenon is not universal.

      It is also the case that the easy money has already been made.

      Many of the “50-something doctors, lawyers, and software engineers, etc.” are putting their own funds at risk, as financing rental property is no easy task for newbie landlords. Remember that the deal between the all-cash landlord and the tenant is “Here are the keys to my $200,000 pile of cash. You are free to enjoy my $200,000 pile of cash as you wish. In return, you agree to pay me $XXX/month, and promise to not turn my big pile of cash into a much smaller pile. I know you are pretty much free to walk away at any time, even if you do turn my big pile of cash into a much smaller one.”

      Not everyone has either the wherewithal or the temerity to take on that level of risk with their own money, and many “Mom & Pop” landlords don’t take the downside risk very seriously.

      • TFRX

        It is also the case that the easy money has already been made.

        No more calls, please. We have a winner!

        Seriously, this phrase can apply to anything–the market in vintage baseball cards, classic baby-boomer American autos, you name it–but the work involved in being a rental owner is something people don’t often figure out at the start.

        It almost makes the fetishizing over a 57 Bel Air hardtop or a mint Mickey Mantle rookie card seem reasonable, as those items can be enjoyed on their own terms.

      • Tim from Durham, NC

        Our investors turned over all the work of management to us. We were insured against damages, and so were our investor clients. They literally had to do nothing but collect a fee, though granted, management takes a cut. Any investor who doesn’t insure their property against damages deserves any losses they get.

        Plus, real estate is not much of a risk when the government is controlled by the wealthy and will do anything in it’s power, including opening up $8+ trillion lines of credit to major banks, to stabilize the housing market and make sure prices rise. As fewer and fewer Americans are homeowners and there are more multi-home owning investors, the question does arise: how much do efforts to rise home prices help all Americans?

    • ToyYoda

      Several points.

      1. Unless you are privy to the owner’s financing terms, I wouldn’t be so jaded. I own property but I barely clear a profit. For me, it was a mistake to get into the market when I am much more versed in valuing stocks.

      2. When I have to make repairs, there goes all my profit.

      3. Lots of people are poor when they are in their 20′s. Then they move up. I use to make very close to poverty level income in my 20s. This was mid 90′s. It wasn’t until I was in my 30s that I started to make decent income. I am 40 now and saved up money to buy something.

      If you are 20, things will get better. Just be patient.

    • FrankensteinDragon

      interesting that Tom neglected to finish this comment on air.

  • J__o__h__n

    My greedy landlord raised the rent $200 last year. I’m dreading getting this year’s letter.

    • Enuff_of_this

      Before you toss out the greedy label, how much did the property taxes go up? How much did the cost of amenities and utiliities he covers go up? In many cases, renters have no clue about the hidden costs of ownership, and they especially don’t take the time to consider the effect on them of voting for outrageous budget increases funded by proerty taxes. Someone has to pay for feeding those budgets.

      • J__o__h__n

        The rent usually went up $50 (a month) each year. Sometimes $75 or $100. There were no expenses to justify $200 more a month, just the changing market and greed.

        • jefe68

          Yeah, it could be the property taxes went up. Which you could find out through public records. Also the cost of electricity has been going up as well as water bills.
          In some areas water bills have been doubling even tripling.
          If you live in a area hit by some bad storms the insurance rates could have gone up.

          • J__o__h__n

            I pay the electric bill and it has been cheap – usually $20-$25 except for July when I use the AC.

          • jefe68

            Well it could be the taxes and the insurance rates. Or he or she is sending you a message.

          • Enuff_of_this

            so you don’t pay the water or heat? trash? landscaping and snow removal? Gee, that stuff must be all free then

        • Enuff_of_this

          The truth is you don’t know for sure. Maybe it is all profit, which is highly doubtful seeing the real profit potential comes when the building sells

        • HonestDebate1

          If you were to move how long do you think it would take your landlord to rent it at the new rate?

          • J__o__h__n

            Not long.

    • Jim

      I suggest you put some blame on your mayor. Do you know how many highly potentially taxedl buildings in the cities are considered “non-profit”? Those buildings are occupied by hospitals, universities, etc. You got the idea? That is why you should take heed at the previous responses that there is large hidden expenses in ownerships. Find out the reasons behind it before labeling people.

      • J__o__h__n

        I agree with that (you left out churches). They have not built enough middle income housing to keep prices in check. Expenses didn’t jump up that much in one year though. It was just a reaction to the market.

        • J__o__h__n

          Also, the city has not required the universities to build enough new housing for student which also drives up the rents.

  • twenty_niner

    But I thought inflation was in check?

    You mean to say that the Fed pumping $85 billion into Wall Street every month has resulted in massive real estate asset bubbles that translate into higher rents? You mean that when I squeeze the balloon with both hands and a foot, it can inflate unpredictably and then eventually pop?

    “70% of Brooklyn home sales going to hedge funds, investors and international buyers”

    http://freewilliamsburg.com/douglas-elliman-rep-70-of-brooklyn-home-sales-going-to-hedge-funds-investors-and-international-buyers/

    • gregghr

      Inflation, as measured by the fed, is in check. Guess what is not included in the inflation equation — RENT!

      • twenty_niner

        Yes, I was aware. Their POS formula is for big screen TVs made by slave labor in factories that in this Country would be designated as “super-fun” sites. Conveniently, it doesn’t include any of the real costs of living: rent, energy, food, education, and health care.

        • gregghr

          Exactly. The fed and whichever party is in the white house will always screw with this formula to make their economic policies appear in a better light.

  • James Patrick Dwyer Jr.

    Rent is going up, wages flat, greed is alive and well.

  • RealEstateCafe

    LISTENER QUESTION:

    PLEASE ASK DIANE OLICK if she thinks soaring rent burdens will eventually have unintended backlash: Shrink baby boomer nest eggs / inheritance?

    http://bit.ly/RentBacklash

    BACKGROUND for call screeners & readers:

    The housing market acts as an ECO-SYSTEM, so if one part of the housing ladder stalls, in this case because “generation broke” cannot afford to save enough money to buy a starter home or condo, it’s just a matter of time before that has an unintended negative consequence for babyboomers who want to downsize and use their home equity for their retirement.

    DO THE MATH

    If rent-burdened population increased 13%+ between 2000 and 2013, or by 1% per year, approximately 6 out of 10 renter households will be rent burdened by 2020. That’s the year some industry observers, including the National Association of Realtors, are concerned that the Great Senior Sell-Off will begin:

    http://bit.ly/SrSellOff (please share this short link with your social networks)

    If only 4 in 10 households can afford their rent, how will many accumulate enough savings to afford a downpayment or the reinflated housing prices of 2013?

  • Jim

    I share and feel your predicament. In a sharing and less generous society, learning how to survive is important. I think many people are getting roommates. The price, I am afraid, won’t subside anytime soon as long as more and more people are moving into cities.

    • disqus_76C0PFpw8x

      I lived with roommates for many years during college and in many years following. I hate living with roommates, and was so relieved when I finally was able to get a small studio on my own. You’re right, though, that I may need to go that route again in the future no matter how much it sucks.

  • Shag_Wevera

    I get the best (er worst) of both worlds. I own a two story farmhouse with an upstairs that has been converted to an apartment. It is remarkable how little people care for a dwelling they don’t own. At the same time, the cost of ownership can be depressing, to say the least. If I had it to do again, I wouldn’t have bought a home. The ease of occasionally changing residences is really appealing to someone who will likely be stuck in the same house for the rest of his life. It doesn’t help that home ownership is no longer the investment miracle that it once was.
    By the way, ownership is a tricky term. Laws about what you have in your yard, or what color you paint your house, or eminent domain laws make your ownership somewhat less than true.

  • jefe68

    The 1920′s.
    He wants an uninsulated home with a one ton asbestos covered boiler fueled by coal.
    Lets add in lead plumbing and cloth covered exposed wiring. And of course all the paint is lead based.

  • alsordi

    The bankers are resurrecting the feudal system in the USA.

    These banksters lend their good pals cheap money, fiat Federal Reserve currency, to build more and more apartments, and to buy up the American Dream from the struggling and aspiring middle class.

    Already, the apartments are way overbuilt, as are the single family track homes they are buying.

    The bankers are probably planning to lift immigration to fill up all these rental units, at the expense of more domestic jobs. Whatever the outcome, it will only be good for banksters.

  • JGC

    What is your commute like now to get to your workplace? This is another stress added to your life: the transit costs (which includes any additional time involved).

    • disqus_76C0PFpw8x

      It has added another 20-35 minutes each way depending on traffic (it is variable because I have 2 legs on public transit rather than one). Also, my office has experienced a similar real estate crisis, and also has to move further from public transit, which will add yet another 15 minutes each way in the coming months.

      • JGC

        That will be rough – an extra hour and a half each day just for commuting, on top of the present commuting time.

        Maybe when your office gets settled into its new space, you can investigate moving (yet again!) closer there when your current lease is up. (I assume they are going to an area with lower overall real estate costs.)

        Good luck to you.

        • disqus_76C0PFpw8x

          Actually, my office move is not going to help–they are staying in the same high-cost city, just at a slightly cheaper location that is not right next to the T, so it just adds a 15 minute walk. There is no way to move closer.

  • MarkVII88

    It’s not just that big buyers are scooping up properties and raising rents. It’s more complicated than that. I own a rental property that’s been in my family since the early 20th century and was fully updated and remodeled in 2011. When I price my apartments to rent out, I have to take into account what the rest of the market is doing. I’d be stupid to price my apartments below what the typical market price is in my area even though I’m one guy and not a company that owns dozens of buildings with hundreds of units.

    • James Patrick Dwyer Jr.

      You are charging what you can get away with, not what you need to make a reasonable profit. You are typical of a lot of people.

      • J__o__h__n

        and the property was inherited.

        • MarkVII88

          My mortgage on this property would indicate otherwise.

          • Enuff_of_this

            How many of the units are rented to students?

          • Labropotes

            I saw your grandmother’s funny bumper sticker: “I’m spending my childrens’ strike{inheritance} income.” With respect to your grandmother, of course.

      • Enuff_of_this

        You clearly don’t live in an area where the vacancy rate is between 0.5% and 1.3%

    • hennorama

      MarkVII88 — you could also set your rents a bit under market, and put some of the maintenance cost risk onto the tenant. Let me explain:

      Set your rents 5 percent under market, then set very high standards for tenant screening, and be sure to collect the maximum legal security deposit. Include as a condition of the lease that the tenant is responsible for incidental maintenance and repairs under a certain dollar amount ($100, for example). Add to this a provision whereby you have an annual professional property inspection (at your expense), to identify issues before they get out of control, and to ensure that the tenants are not ignoring routine repairs.

      This reduces the number of calls you get about clogged toilets and leaky faucets, etc., and gives the tenant a clear expectation that both you and they will be committed to upkeep.

      Tenants will see you as a responsible and reasonable property owner, and will tend to treat your property better as a result.

      This strategy tends to result in longer tenancy duration, and fewer of the usual headaches.

      [PS] It is important to clearly explain this to potential tenants, so that they understand “the deal” upfront. My experience is that potential tenants are universally surprised by this concept, but they easily understand the benefits of lower rent vs. the risks of occasional repair and maintenance costs.

  • fromanjon

    I live in Illinois and our rent is horrible! My wife and I live in a 650 sq. ft. 2BR apt and pay between 40%-45% of our income for a place that hasn’t been renovated since we moved in 3 years ago. We’ve asked month after month for new appliances (most are still from the early 90′s with duct tape holding a lot pieces together). We feel like we’re stuck because so much is going towards rent and paying off student loans that we can’t afford to put a lot away to save for a house. It’s just frustrating seeing how little landlords care and the greed of companies that prevent all but high-income families live in a decent place.

  • brettearle

    Look,

    My comment was NOT in the same spirit as Right Wingers who tell the unemployed to find jobs.

    My comment has nothing to do with supporting any gouging landlords or blaming any victims.

    I am aware of the Down Payment issues.

    I am aware of the Catch-22′s in Down Payments vs High Rent.

    And what I AM saying may very well be nothing more than Lip Service:

    But the closer the cost of rent gets to monthly mortgage payments, the greater the chance, theoretically, there might be, to maneuver for a mortgage–somewhere, somehow.

    If there were a larger discrepancy between Rents and Mortgages, rather than an-ever increasing small differential between the two, then I wouldn’t have made the comment in the first place.

    It’s unfortunate and unfair.

    • disqus_76C0PFpw8x

      You asked why renters were not coming to the conclusion that buying would be a solution to avoiding the high rents, and I answered. I was not attacking you.

      • brettearle

        `Round these parts, ya sometimes can’t tell the difference between a jab, a pat on the back, and a neutral comment.

        And I can assure you, too, that some took my prior comment in a way that prompted me to defend it.

        But, big deal?

        Criticism or not, I am thus, in any case, adding a bit of an expanded dimension to the prior chat.

  • James Patrick Dwyer Jr.

    I have read that before the 1930′s 96 percent of the people rented, 4 percent were home owners. The American dream of owning a home is a fairy tell imposed upon the population to make money. Propaganda works. Greed is alive and well.

    • Labropotes

      Per US Census, the lowest rate of homeownership of the 20th cent was in 1940, 44%. But your point that govt policy has pushed people towards homeownership pointlessly is right, IMO.

    • jefe68

      Read more history. A lot of that rental property was due to low wages and factory towns and neighborhoods.
      In the 30′s the Great Depression brought an onslaught of cheap boarding houses and flop houses for those who could afford it.

      What we see here has more to do with flat wages for the majority of Americans than renting.

  • MarkVII88

    One item that I don’t think has been mentioned in this conversation are municipal restrictions on the numbers of people that can live in rental units. In Burlington, VT where I live, which is a big college town, the city of Burlington passed an ordinance several years ago limiting the number of non-family individuals who can occupy a rental unit to one person per bedroom. The rationale here was to cut down on parking problems with fewer people trying to park per building and also to reduce wear and tear on the housing stock, which is some of the oldest in the nation, and which many corporate landlords run like slums. How do you think laws like this impact the costs to renters???

    • Enuff_of_this

      But enforcement is lax and it is only taking the housing problem out of Burlington and moving it to SB and Winooski.

  • Fiscally_Responsible

    One of the reasons that rents are so high is due to high property taxes, which are used to fund bloated teachers’ salaries and benefits including exorbitant pensions resulting from overpowered teachers unions.

    • jefe68

      BS.

    • gossipy

      Probably not teachers as much a public safety using so much tax money.

    • Labropotes

      I just looked up mil rates in NYC. The lowest class rate is 10.3% of the property’s assessed value. That is a lot of tax, and must account for at least a third of the rent.

      http://www.nyc.gov/html/dof/html/property/property_rates_rates.shtml

  • creaker

    After decades of stagnating wages and jobs fleeing this country, a large portion of the middle class needs to come to terms with their current reality – they’re poor.

  • gregghr

    Our neighbor tried to sell their home for 5 months. No takers. So they sold it to a “corporate” buyer who will rent it out for up to 2 – 3 x the mortgage payment. There are other neighbors renting in the Spring Hill, TN area paying well over $2K per month for a house of 2000 – 2400 sq ft. Many homes in this area are owned by these corporate owners who are in many cases foreign entities which means the profits are going off-shore. We need to have some controls on rents. Rents this high are equivalent to usury rates on loans and they have federal controls and regulations. Why not rent. Every dollar spent on rent is that much less that people will have to spend in the general economy, save for retirement, spend on healthcare (mandatory), save for education, etc., etc.

    I am a renter myself. My home is 1600 sq ft and I’m paying at least 2x the mortgage on the home. I believe our landlord will be increasing our rent by 15% this next year, which will force my wife and I to move to something smaller and less expensive. The reason he would increase the rent is because the other homes renting in our area are going much higher because of these corporate and off-shore owners.

    • hennorama

      gregghr — it appears from your comments that you intend to stay in the general area where you currently reside, and that your income would support a home mortgage.

      If these things are true, why haven’t you purchased a home?

      • gregghr

        I wasn’t sure that my work contract would be extended or not. It wasn’t. I am working at finding some longer-term contract work or permanent hire opportunities. The work I came here on in 2011 was only 30 months with no certainty we would remain. Didn’t seem prudent to buy with the economy where it was in Jan 2011.

        We have been renting in Michigan and Oregon since 2005. We sold our home in Michigan just before the real estate market went into free fall. Renting has given us the opportunity to be flexible with work locations.

        I disagree with landlords being able to charge such high rents when it is not merited. This community is far from beach front condo or mountain side views.

        If what they say in this comment string further down about Blackstone is proof positive that the gov’t has no clue what these institutions are doing and how it’s hurting the people who really work for a living and not just use key-strokes to make millions on investments.

        • hennorama

          gregghr — thanks for your reply.

          Congrats on selling when you did.

          You have been able to enjoy the flexibility of renting, and it makes perfect sense to have done so, based on your circumstances. Imagine if there had been no rental housing available, and you were instead forced to buy, or to commute from a great distance. You would have much less ability to pursue work regardless of its location.

          That flexibility has its costs.

          Blackstone and other groups are doing what makes sense for them and their investors. They see an opportunity in buying underutilized assets and making more productive use of them.

          Twas ever thus.

          Whether this will actually transform the rental housing industry, as one of the guests theorized, remains to be seen. But certainly if theses groups purchase and renovate this housing, it improves neighborhoods, and increased property values accrue to nearby owners, adds to the tax base, employs contractors, and adds to overall economic activity.

          This helps many more people than just these groups and their investors.

          • JGC

            I found myself agreeing with much, Henn, but we know Blackstone has no long term interest in the housing. It will give that burst, but don’t you think that their main interest is turnover? Single family home maintenance is much more complicated than an apartment building. Plus there is that bond securitization they are floating…

            And…I am reluctant to say this but, is there a possibility that in Blackstone’s interest to keep costs down, they will hire (inadvertantly, eyes closed) third-party undocumented workers to maintain the properties? I see more problems than blessings in the 1% investor class further burrowing into the single family home market.

          • hennorama

            JGC — TY for your reply.

            Blackstone, the new REITs, PE, etc., are less than 1 percent of the entire market. Blackstone and the PE/hedge firms are “hot money” players, but if the REITs can make it work as a longer term proposition, then we’ll see more of it.

            As things are systemetized, with professional mgmt, contract personnel will be much more likely to be legit, as the downside risk of hiring undocumented labor is much greater for publicly traded entities.

            The market as a whole is about 15 million rental SFRs, valued at around $3 trillion.

          • JGC

            Hope so!

  • distractedriver

    Your San Fran caller is probably employed by a technology or biotech firm nested in a well educated city importing a lot of bright college grads. If you’ve grown up in a neighborhood that’s quickly being developed for upscale shopping, expensive houses and designer grocery stores, but you don’t have the cash to move out of town and afford a security deposit on a new apartment, you’re left in a jam! How is it the fault, or should be a burden to the existing residents that the development of their surrounding neighborhood is inflating their property taxes and edging them out of their childhood community?

    • warryer

      Stay informed of your environment.

  • Guest

    After decades of stagnating wages and jobs fleeing the country, a large portion of the middle class needs to come to terms with their new reality – they’re poor.

  • Ben Titter

    I’m a young lawyer working at a small criminal defense firm in Virginia Beach, VA. I have about $250,000 in student loan debt (accumulated mostly during graduate and law schools) and I make $36,000 a year. My wife is a Public Defender who, as a state employee, hasn’t seen a pay raise in over three years. We’re renting right now because we financially are not able to put any money into savings to cover a down payment. And even renting is putting a large strain on our bank account. Our current lease is up in February and we’re seriously contemplating moving in with my in-laws just so we can try and possibly buy a house before we’re ready to retire in 50 years. There’s really no good option for us.

    • hennorama

      Ben Titter — this is obviously your own fault, as you should have been able to foresee the Great Recession and its impacts on the legal profession and state and municipal finances before you chose to enter law school way back when.

      (Tongue firmly in cheek as to the above.)

    • Labropotes

      Ben, I feel sorry for two lawyers at once for the first time in my life. Try to get a job at an insurance company. People are usually forced to buy insurance by govt regs or terms of their mortgages/leases. Go into an industry where the sheep are forced to submit themselves for shearing at least quarterly.

    • JGC

      This is a theme seen repeatedly, including in today’s postings: student debt.

  • Labropotes

    That Blackstone is “securitizing” their rental income flow means that they are EXITING the housing market. If they were bullish on rental income, they would keep it on their own books.

    They are just fabricating the assets that the Fed will purchase, and collecting their vig, their arbitrage. Meanwhile the Fed adds to its not marked-to-market $4 trillion balance sheet.

  • gregghr

    So, here we sit, 4 years after the mortgage crisis. If you can no longer sell bundled mortgages and derivatives, then you buy up available homes and apartments and rent them out for vastly more than should be allowed. This is how you make money for your investors when the fed has shut down other questionable means available to you. The banks have just found another way to make money.

  • creaker

    They really aren’t linking that the places with high rents are the places with the jobs. Sure, go get a 3000 sq ft house in somewhere in OK for $800/month – but how will you pay for it?

    • J__o__h__n

      Don’t forget the tornadoes.

    • hennorama

      creaker — your general premise is accurate, but using Oklahoma as an exemplar is not, as it has a relatively low rate of unemployment (5.5 percent for Oct. 2013), likely due to the boom in the energy business.

      See:
      http://www.bls.gov/web/laus/laumstrk.htm
      http://www.bls.gov/web/laus/mstrtcr1.gif (map of unemployment rates by state)

      • Enuff_of_this

        Since when does low unemployment equal living wages capable of paying the 800 a month and associated costs?

        • hennorama

          Enuff_of_this — thank you for your response.

          It’s true that unemployment data is not a perfect proxy for housing affordability, but other measures indicate OK has fared better, and is also more affordable, than the US as a whole.

          For example, while US real median household income has declined each year since peaking in 2007, Oklahoma RMI has not only declined far less, it actually rose in 2012.

          For more, see:
          http://www.deptofnumbers.com/income/oklahoma/
          http://quickfacts.census.gov/qfd/states/40000.html

          • Enuff_of_this

            Where I live, the pols keep touting a healthy local economy, but fail to mention that the growth is predominately in the lower wage service sector. There is growth across all areas but the deadend job market is leading the pack. That’s what happens you build your economy on college students, tourists and refugee resettlement.

          • hennorama

            Enuff_of_this — thank you again for your response.

            No economy is perfect, and politicians generally are eager to take credit for and emphasize good news, and ignore everything else.

            Part of the issue of rental housing affordability is the length of time required to add supply when and if demand increases. When lots of homeowners lose their homes, and those homes remain empty for extended periods, there is a double whammy of reduced supply and increased demand. Rental prices only move in one direction when these dual factors are at work. This is only partly offset by reductions in household formation that occur during recessions.

            Pile on top of all this a lending contraction and increased lending standards. Add in the negative effects of the Great Recession on credit scores. This makes owning a home MUCH more difficult for a large number of people, meaning that rental demand increases. Again, rental prices move in only one direction when these factors come together.

            Because rents are high, more supply will come on line eventually. That is why large consortiums are buying up single family residences, and converting them to rentals. The demand is there, and prices justify it.

          • Enuff_of_this

            There isn’t much hope for more inventory, landlords are enjoying a 0.5 – 1.3% vacancy rate and there is little available pace to construct new units. Then there’s the matter of subsidized housing complexes being converted over to market rate unit or are going condo.The colleges keep making pledges to add additional on-campus housing, but they also keep expanding enrollment, so they are of no help. My personal favorite is one of our city councilors who purchased the vacant lot next to their house so that no one could develop it. They also live in a neighborhood where the number of single family houses can be counted on two hands and the rest were built as duplexes and larger units. The problem is not just isolated to that neighborhood, we are also seeing people coming in and buying up coverted duplexes and turning them back into single family residences.

          • hennorama

            Enuff_of_this — perhaps you should run for office under the banner of The Rent Is Too Damn High Party.

            See:
            http://www.rentistoodamnhigh.org/

          • cumulus14

            Lovely. You have my vote.

  • Fiscally_Responsible

    One reason why rents in major cities are so high is due to high property taxes used to fund city services. City service workers are typically represented by strong unions that have bloated wages and pension benefits and ridiculously low acceptable retirement ages at which time they can begin collecting those bloated pensions. Also many unions support work rules that allow a high padding of overtime in their last year of employment, which impacts their pension for the next 30 years.

    • creaker

      I live in Boston and my jaw drops when I hear tax rates in what sound like small communities in the middle of nowhere. On the order of 3-4 times what I pay.

      • jefe68

        Like New Hampshire, which has no income tax but high property taxes.

    • jefe68

      Again with this. By the way those people work and keep communities thriving do to having good decent jobs.
      You’re antiunion meme is nothing short of a regressive right wing whining.

    • dust truck

      Yah know that taxes are linked to the value of the property. So if the property is worth a lot, you pay more in taxes. Don’t complain if your property is gaining value, I’m sure your profits will far exceed anything that City Hall takes.

  • jefe68

    People not in the top income percentile cannot afford to live in New York City nor any other major city in this nation anymore.

    http://creativetimereports.org/2013/10/07/david-byrne-will-work-for-inspiration/

  • terry7

    Other than Blackstone, what other large companies are guilty of contributing to this large conversion of owner-occupied into high-rent houses? Some of us may be unconsciously contributing to this problem if we own stock in such companies, unaware of their role in this antisocial investment activity. Identifying these companies would enable us to invest socially responsibly.

    • twenty_niner
    • JGC

      Silver Bay Realty Trust (SBY)

      • JGC

        Just noticed there is insider buying of shares for SBY. Life must be good for the REITs that invest in single family rental homes.

    • JGC

      P.S. A lot of this investment comes through private equity; so there is small chance to affect outcomes as can be done through the public ownership channels.

  • Kent

    Buying a house makes no sense either unless you are in a high income tax bracket and can make use of the government subsidies that allow the deduction of interest and property taxes. The cost of a high income individual to own a house is actually less than a low income individual because of the difference in pre and post tax income. We should eliminate the mortgage deduction. Everything we do to make homes more affordable ends up making them more expensive for the very people who need the help. Quit subsidizing home ownership and drive the cost of the home DOWN is the best way to make homes more affordable. Throwing money at home ownership just makes homes higher priced.

    • TELew

      Actually, there are many intangible benefits to owning your own home. Besides the rent money you would pay each month being thrown into a black hole from which there is no recovery, you do not have to put up with neighbors who play their stereo too loud, who decided their bedroom (which shared a wall with my bedroom) would be a great place to set up their rock band’s “studio” (this happened to me), or who do the “rabbit thing.” Of course, the thin walls work both ways, and so your privacy is not really assured, especially when you do some bunny hopping.

      I’ve lived in an apartment most of my adult life (close to thirty years). The longer I do so the less I am willing to tolerate things my neighbors do. I long for the peace and privacy my own home would provide (no kids). If I had a yard, I could get a dog. As I am somewhat craft oriented, I could set up my own shop. I could even go out into my yard, sit in a chair, and just relax.

      Like I said, intangible things make a big difference.

      • cumulus14

        They do, but even with no dependents, no car, no tv and in what should be a “below market” rental (no dishwasher, no disposal, horrible heating/windows/sealing, thin thin floors with incredible noise transferance, loud old pipes and leaded paints, etc. that is miles from city center) I’m paying 40% of my paycheck to rent (not including heat, electric, and phone). I work full-time and have a Master’s degree – I work in health sciences research and that’s the going rate where I live, for both incomes and rentals. To live in a more desirable unit and have more than one room, I’d pay nearly half my salary to rent. Here in PDX we have a lot of controversy over zoning laws and creation of affordable housing – those intangibles you mention remain elusive when the demand far exceeds the supply of places low-income people can afford to live. It’s frustrating.

        • TELew

          I am right there with you. PhD, student loan debts (which only keep growing), chronically underemployed. I am lucky that about six years ago I found a very cheap (old) apartment with actual amenities, such as a dishwasher, and washer and dryer. If I had selected a new, unfurnished apartment, it would have cost at east a third of my take home pay; a similar two-bedroom apartment would have cost about 40% of my pay.

          I have lived in apartments for over twenty-five years. For me a house is a pipe dream.

  • https://www.facebook.com/kyle.rose Kyle Rose

    Sad that there isn’t a single comment on this story that even mentions the impact of zoning laws on the supply of available housing in urban areas that need the most additional housing units. Basically, the dynamic is: existing owners want to keep density where it is and also keep the value of their own units as high as possible, so they vote for politicians that support policies making the development of new housing as difficult as possible. The end result? A massive imbalance between inelastic supply and nearly-inelastic demand, with skyrocketing rents the only way to balance the two.

    As an owner of a multi-family house in an expensive suburb of Boston who can profit off precisely this dynamic, I feel absolutely qualified to call these policies out as unjustifiable rent seeking by incumbent property owners. Sadly, nothing will happen because democracy, but if you want to understand why the rent is too damn high where the jobs are, you need look no deeper than this.

    • Enuff_of_this

      So, do you charge below market rate rents on your units?

      • https://www.facebook.com/kyle.rose Kyle Rose

        I do, because I rent to friends. But below-market rental rates isn’t a general solution to the problem of supply, as it would just result in shortages (this is econ 101), so I’m not sure what the point of your question is. The only solution to high inelastic demand is more supply, and the only way to more supply is to loosen or eliminate the land-use regulations that restrict the supply of available housing.

        • Enuff_of_this

          The point of the question was you choosing to undercut the market rent and then chastize those owners who do not for whatever reason they may have. I am aware of econ101, and it would be nice to just toss up a couple hundred more units except that there are zoning concerns, infrastructure, permit processes and you can’t blow off the NIMBY’s (they hate that)

          • https://www.facebook.com/kyle.rose Kyle Rose

            I think you’re making my point for me. Only the NIMBYs are really a problem: the rest of it can be managed if it is made a priority. The problem is that everyone wants the city they bought into to remain at exactly the same density level and just become “nicer”, and that’s the way they vote.

          • Labropotes

            An adjacent landowner gave the development rights to his land to the VT Land Trust. He was able to write off more than half the value of his land, 1450 acres, as a gift. Given his retirement income, he will never pay income tax again. In the next town meeting, about 3 months later, he spoke against our town’s shortage of section 8 housing.

          • https://www.facebook.com/kyle.rose Kyle Rose

            Sorry, I’m missing the point of your tale. (I’ve been zombified from working all day and may not be thinking clearly enough.) Can you explain further? Is the issue that he gave away a bunch of land to a land trust, some of which could have been used for development of affordable housing?

          • Labropotes

            Yeah, sorry. Not quite. He gets to keep the land and use it as he always has. He can sell it. He can pass it on to his children. But no one can ever again develop the land for agriculture or housing. Not only did he fail to use the land for the purpose he recommended to others, he forever removed it from the productive economy in exchange for a big tax break.

            It’s an example of the kind of strange incentives and regs that are restricting growth in housing stock.

          • JGC

            That is a dilemma, though, isn’t it? The purpose of the Vermont Land Trust is to help maintain the rural character of Vermont, sort ot the raison d’être, the branding for Vermont. Unless the 1450 acres is adjoining Burlington or Manchester, for example, it might just make better sense to keep construction off it. But there is no exemption for agriculture? So it is to just be maintained as a woodlot? No easy answer here for me.

          • Labropotes

            If the rest of America is happy paying Vermonters to maintain a large park, there is still the problem of the corrupting effect of dependance. When a mainstreet edifice burns in VT, a nonprofit committee is establish to beg for money to rebuild. We all know there is no business that could afford to rebuild it. Springfield is doing all it can to prevent truck traffic even though it is economically destitute. A wholesome culture sustains itself by means other than non-voluntary cash transfers.

          • https://www.facebook.com/kyle.rose Kyle Rose

            I think we’re pretty much on the same page here, though I’m going to go out on a limb and guess that there’s so much unoccupied land everywhere in VT that this isn’t really the issue there that it is in, say, NYC or Boston or DC or San Francisco or any number of other places where the only way left to build and still provide reasonable commute times is “up”. So I suppose any land use restrictions in VT that have a noticeable effect on housing prices are doubly insane.

          • Labropotes

            There is not a shortage of land, just a shortage of incentives to build a productive economy. Vermont’s is becoming a culture of self-righteous dependance.

  • Matthew Saint

    It would have been impossible to get our home this August if I didn’t have access to my VA loan, spent three years living with in-laws to save money, and sacrificing so much just to get into the market. We saw four years ago that the rental market was going to kill us if we didn’t make these moves.

    With all of that, we still gave up Satellite/Cable and cut more corners to survive than we ever had to before.

    • hennorama

      Congratulations, and welcome to the real world of homeownership.

  • rootspiano

    What’s even cooler is well-off gen-xers paying less for their mortgage than the renters in their rental property.

    • dust truck

      Exactly. Some of us weren’t lucky enough to buy a triple decker in 1976 for 70,000 and have it worth 7 million now. Jeez that performance is even better than the stock market during the same time period.

      • FrankensteinDragon

        this is what creates our eternal feudal conditions. we are entering a new age. These people benefited from the aftermath of ww2 and America having NO challengers or contenders.

        This a permanent change in America and the world. it will not change–ever–without radical revolution–and blood int he streets. it will only get worse.

  • HonestDebate1

    Anyone who can’t afford or doesn’t want to buy a house, cannot rent a house until someone else puts their money at risk. Shouldn’t the risk taker get a return? Why would anybody put their money at risk for no reason? Don’t we want more people putting their money at risk? We should thank them.

  • JGC

    Tyler Cowan. That is the name of the economist who wrote “Average is Over”. He is at George Mason University.

    When I lived in the Washington, D.C. metro area in the 1980s, George Mason University was a somewhat sleepy community college-ish learning institution in the Virginia ‘burbs. At some point around that time, it got infiltrated by funding from the Koch Brothers and their ilk. Now it is a Conservative and Tea Party think-tank-stitution, growing and nurturing little baby Kochbots in their Mason-jars.

    It is not to totally discount everything Cowan says. Some makes painful sense. But just to let folks know who butters the George Mason bread.

    • HonestDebate1

      I know a beloved music professor at George Mason. His mother has had 3 or 4 horses here over the last 25 years. She used to ride with her daughter (the professor’s sister) who planted that Bradford Pear tree when it was little more than a stick. Now it has 2 picnic tables under it. She grew up and went away. She’s a vet now but her mom still keeps ol’ Panama here. He’s old now and never gets ridden.

      There was this kid who loved horses but her family couldn’t really afford to buy or lease one for her. Lessons were tough enough but the girl helped feed horses every Sat. morning to trade for riding lessons.

      We teamed her up with Panama with the owner’s blessing. Panama had burrs in his forelock and ears. She got them all out and rode him very week after feeding. The two were great for each other. That was a year ago.

      I noticed Panama had a new blanket on the other night. It turns out the girl who has since leased a horse she can trail ride and take to shows, saved her feed money to keep Panama warm.

      No point really.

      • JGC

        It’s a nice story. We’re trying to cobble something together for our younger son, who seems to be intent on riding even though we have been skeptical parents (about his devotion to a time- and financially- demanding sport like this) until this past year. We’re looking for a nice but used saddle for a stellar Christmas gift. It seems like when a person decides they love horses, there is no turning back.

  • darius035

    My
    Uncle Leo got a year old Fiat by working part-time from a macbook air. this
    link J­a­m­2­0­.­ℂ­o­m

    • JGC

      Is Uncle Leo earning cash by posting spam links on public forums?

  • mumtothree

    A couple of points:
    1. Renting means you are not responsible for repairs, major or minor ones. As small landlords, we have had to come over to flip the reset button on a power strip because the tenant was sure the electricity wasn’t working. And replace a furnace in the middle of a cold snap.
    2. Many tenants do not hesitate to disregard the owner’s rules such as not disabling a smoke detector, banging holes in the wall, flushing inappropriate things down the toilet, using an unreasonable amount of water. Tenants have no idea what water costs.
    3. Gen-Xers and younger expect deluxe for cheap. I’ve had prospective tenants ask me where the dishwasher was. Where’s the air-conditioning? Do they think I just snap my fingers and make those things magically appear? High-end means high price. I charge below market rent because I have found tenants who know how to do dishes by hand. The kitchen is functional but there are not outlets every 3 feet, and no disposer. They are nice, large apartments with off-street parking, but are not luxury. There are trade-offs, for both LL and tenant. They get affordable rent, I get low turnover.
    4. Finally, one comment about zoning and getting started in the world. There used to be nice rooming houses, but we have zoned them right out of existence.

    • hennorama

      mumtothree — you might want to consider a lease term making tenants responsible for maintenance/repairs below a certain dollar level (say $100), in return for the below-market rents.

      In my experience, when this is explained, tenants are universally surprised by this concept, but they easily understand the benefits of lower rent vs. the risks of occasional repair and maintenance costs.

      Add to this a provision whereby you have an annual professional property inspection (at your expense), to identify issues before they get out of control, and to ensure that the tenants are not ignoring routine repairs.

      This reduces the number of calls you get about clogged toilets and leaky faucets, etc., and gives the tenant a clear expectation that both you and they will be committed to upkeep.

      Tenants will see you as a responsible and reasonable property owner, and will tend to treat your property better as a result.

      This strategy tends to result in longer tenancy duration, and fewer of the usual headaches.

      • mumtothree

        Yes, I read your post below. Interesting suggestion. However, I don’t want a do-it-yourself job, or a failed attempt which may worsen the problem. Nor do I want tenants calling in professionals themselves. That still leaves me in a position of having to do it myself (for which I send them a bill for my labor and materials under $100?) or being on the hook for an expensive contractor. I don’t know of any plumber who will come to the property for that little. And because I’m the homeowner and responsible party, I want to be the one to do the hiring.

        • hennorama

          mumofthree — those legitimate concerns can be overcome with a list of pre-approved contractors/handypersons with whom you have prior positive experience.

          You also could increase the dollar amount to one that is realistic based on prevailing cost in your area. One way to calculate the trade-off is to do the simple arithmetic of the rent reduction vs. the normal annual repairs, and what your time and effort are worth.

    • The poster formerly known as t

      ” There used to be nice rooming houses, but we have zoned them right out of existence.” Who’s “we”? I heard this zoning argument trotted out in the New York Times, at the height of the housing bubble. In developing countries around the world, where one would argue that there are less regulations, the same pattern emerges; not enough affordable housing and lots of luxuxry apartment buildings. Sure, I guess, we could blame the government but most governments are run by the elite, who try to restrict the number of poor people entering major cities, sometimes explicitly, as with China discriminating against rural migrant workers. Our real estates problems have social class dynamics written all over it.

      • mumtothree

        It is hard to know who the “we” are, but I suspect it is not only supporters of snob zoning. Even before (long before) the latest housing bubble, supporters of the Great Society truly believed that no one should “have to” live like that, so that option was taken off the table. Civilized societies don’t have rooming houses.

  • Loren Talbott

    The rich woman Muncy from San Francisco needs to live the way real people who do real work for a living. She is incredibly insulting saying that I can’t afford my rent because I am foolishly spending my money.

    I have worked hard all of my life at one time working 3 jobs and I have not ever been able to make even make $4,000.oo per month. I foolishly blow my money on bare sustenance. This woman is so infuriating!

    I would love for her to live the way I have (and most people I know) most of my life and decide whether to foolishly waste my money on food, gas and/or medicine. She should have to sit there and wrestle with the decision as to should she “blow” her paycheck on gas to get back and forth to work, pay the insurance or buy the medicine that the doctor prescribed? Maybe just say “to heck with all of it” and blow the paycheck on a bottle of Seagram’s 7 and a bucket of KFC. That is how most working people I know blow their money foolishly and it comes from being so beaten down and desperate that that is all of the joy they can afford in life.

    • Human2013

      I was also offended…not sure who would spend their rent money on a new pair of shoes, but I’m guessing very few.

    • thegreengrass

      Amen. Absolutely insane.

    • The poster formerly known as t

      This is no more ridiculous than
      Dan Ariely saying that “At $61K a Year, College Is a Bargain”. I even found an old TIME magazine from the 1950s, which was a time when education-based class mobility was at an all-time high, where representatives from various higher educational instituions were complaining about tuition being too low. So, this is not insane. This is how people who live in Ivory Towers see things.

  • FrankensteinDragon

    greed

  • Guest

    The girl who says that a $2800/month apartment is “affordable” is insane.

    • The poster formerly known as t

      Well, the people who make $2800 a month are a very vocal group, these days. They’re who the politicans cater to. They’re who marketing departments salivate over. Some of them think they’re middle-class or “just getting by” when they compare themselves to wealthy foreigners whom are sometimes, their neighbors and you know, what, since their frame of reference is the only reference that matters, that becomes empirical reality.

  • The poster formerly known as t

    My general thoughts on this is that there’s no money in affordable housing, because all that gets built is luxury complexes, in large cities.

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Jul 30, 2014
Smoke and fire from the explosion of an Israeli strike rises over Gaza City, Tuesday, July 29, 2014. Israel escalated its military campaign against Hamas on Tuesday, striking symbols of the group's control in Gaza and firing tank shells that shut down the strip's only power plant in the heaviest bombardment in the fighting so far. (AP)

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