More anti-landlord action coming?
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votesNot surprising I guess considering the current administration......
They're the bleeping problem! Of course rents are going to rise after they print TRILLIONS of dollars! The government can't balance a budget and even worse gave people socialistic helicopter money to sit at home!
It's the fault of these CLOWNS and they want US LANDLORDS to take the hit for their stupidity. Why would anyone trust THEIR solution when THEY created the problem in the first place?
Where the federal government COULD and SHOULD take action is by investing in housing by offering better benefits to developers to encourage construction. The biggest problem is that we have a shortage of housing stock. Other actions that would help is to encourage competition by limiting the ability of large funds to purchase huge amounts of housing stock by utilizing the Sherman Anti-Trust Act.
We do NOT have a shortage of housing stock. We have an overabundance of entitled people who believe they have the right to live where they want even if they can't afford it. People have no right to live in extremely expensive cities and complain things are expensive. People need to be told the cold hard truth. You can't afford to live here, so you need to move to some place cheaper. Don't matter if you grew up here or your family and friends are here or your job is here. Just because YOU can't afford to live here doesn't mean we should build to the sky and destroy the appeal of the area.
The local governments do NOT want more housing built. State and federal might, but that is because they don't suffer the consequences. What local politician wants the number of people living in his area to suddenly increase? More cars, but same size streets. More students, but same size schools. More usage of infrastructure, but same old infrastructure. Upset the current residents who voted them in and add a bunch of new voters that may want someone else. No politician wants this.
And the hedge funds buying up all the housing stock is a boogeyman argument. Last I heard, mom and pop landlords outnumbered hedge fund ownership by 25-to-1 margin. Maybe the government should do something like encourage mom and pop ownership, perhaps by leveling the playing field between landlords and tenants?
I actually do agree with part of what you said. It's true that people who can't afford to live in say, the center of a major metropolitan city, have zero argument to needing affordable housing stock in the most expensive areas. However nationwide compare over the last 40 years median income rates with the average home cost and the CPI, you quickly see that housing costs have far outpaced income rises and inflation.
1983:
Median Household Income: $24,580
Average Cost of a new home: $75,300
CPI: 99.6
2023:
Median Household Income: 72,000 * (estimate from most recent census numbers)
Average Cost of a new home: 446,000
CPI: 296.797
40 year change:I agree there's a free market solution, however the problem is that zoning and master planning is controlled by politicians.
The answer there is to vote with our feet...move to areas with positive, pro-people zoning and let the cities with anti people zoning commissions go to rot...
I'm actually in favor of some "anti-landlord" changes. Especially after having seen how rents have skyrocketed over the last year or so in areas where there's no real rhyme or reason for it, outside of the fact that out of state investors are simply trying to recoup their investments after paying above-market rates for properties in areas they're unfamiliar with.
I'm actually in favor of some "anti-landlord" changes. Especially after having seen how rents have skyrocketed over the last year or so in areas where there's no real rhyme or reason for it, outside of the fact that out of state investors are simply trying to recoup their investments after paying above-market rates for properties in areas they're unfamiliar with.
a) Are you a Landlord?
b) Landlords cannot just raise rents to unreasonable levels...why? Because at some point, no one will pay and the LL will go under. The free market is always the best arbiter.
c) What changes would you be for?
1983:
Median Household Income: $24,580
Average Cost of a new home: $75,300
CPI: 99.6
2023:
Median Household Income: 72,000 * (estimate from most recent census numbers)
Average Cost of a new home: 446,000
CPI: 296.797
40 year change:I'm not sure why you picked 1983 as the start point, and it doesn't really matter, but historically homes have been around 5X median household income.
While we are at a higher level (6X-7.5X depending on which numbers you use) very recently, there are many factors at play that people like to ignore. Homes have exploded in size over the years. Average home was around 1000 sq ft in the 1950s. Between the 1950s and today the average size of a home is up around 150%. That increase in size is not free. Homes built today also include many more expensive things like dual-paned windows, energy efficient roofs/water heaters/appliances, insulation, safer electrical and plumbing, garages instead of carports, etc. All that stuff isn't free either. Not to mention some places (California) require things like solar panels and rain barrels on new builds, not to mention sturdier bracing for earthquakes.
I'd love to see some cost per sq ft numbers and then factor in original building requirements. Right now it's like comparing a 1980's Toyota to a 2023 Maserati and saying the cost of cars has outplaced wages.
I'm actually in favor of some "anti-landlord" changes. Especially after having seen how rents have skyrocketed over the last year or so in areas where there's no real rhyme or reason for it, outside of the fact that out of state investors are simply trying to recoup their investments after paying above-market rates for properties in areas they're unfamiliar with.
a) Are you a Landlord?
b) Landlords cannot just raise rents to unreasonable levels...why? Because at some point, no one will pay and the LL will go under. The free market is always the best arbiter.
c) What changes would you be for?
a) I am a landlord.
b) Landlords can, indeed, raise rents to unreasonable levels -- and in some instances, they have. Yes, there's the argument that eventually nobody will pay, but that doesn't mean market rates will then fall to a livable level and a comfortable equilibrium will be found. Rent prices will often still be high enough that renters will continue to be stretched thin, because that's just par for the course in how the landlord game works. The free market, in my opinion and experience, is not always the best arbiter. In my particular area, rent for a 3 bedroom SFH in a C or B- neighborhood has gone from ~$550/mo to ~950/mo in the span of a bit over a year. Property taxes have not increased in most areas at all, nor have insurance rates in a lot of instances. In fact, taxes and insurance have gone down for my own properties. The driving force behind the massive increase in rent, in my area, is the influx of investors -- particularly out of state investors -- who are (1) unfamiliar with the area and so end up purchasing properties for quite more than they're actually worth, which then means that (2) they now must increase rents in order to cover their investment costs and make a decent return. The landlords are essentially setting their own market prices at this point here, and most people can barely afford to rent anymore.
c) I'm in favor of capped rent increases under certain criteria, and also making federally-backed mortgages unavailable for investment purposes. I'm also very much in favor of investment mortgage loans requiring more than 20% down, and think they should require something closer to 30-40%. I also do like the idea of giving homeowners first choice over investors when it comes to purchasing opportunities on the market; I understand that this is, or has, already been implemented in some areas, but I'd like to see it across the board. I'm open to other changes as well, though am not too familiar with anything else; I simply believe that allowing those changes alone will allow for more fair competition between individual homeowners and investors. In my opinion, there are simply too many cooks in the kitchen. However, I am certainly not in favor of the suggested change to seal eviction records, or not being able to deny certain applicants on the grounds of their notable criminal history.
Again, these are my opinions based on my own experiences in my own markets, not only as a landlord but also as a fellow human being.
Where the federal government COULD and SHOULD take action is by investing in housing by offering better benefits to developers to encourage construction. The biggest problem is that we have a shortage of housing stock. Other actions that would help is to encourage competition by limiting the ability of large funds to purchase huge amounts of housing stock by utilizing the Sherman Anti-Trust Act.
We do NOT have a shortage of housing stock. We have an overabundance of entitled people who believe they have the right to live where they want even if they can't afford it. People have no right to live in extremely expensive cities and complain things are expensive. People need to be told the cold hard truth. You can't afford to live here, so you need to move to some place cheaper. Don't matter if you grew up here or your family and friends are here or your job is here. Just because YOU can't afford to live here doesn't mean we should build to the sky and destroy the appeal of the area.
The local governments do NOT want more housing built. State and federal might, but that is because they don't suffer the consequences. What local politician wants the number of people living in his area to suddenly increase? More cars, but same size streets. More students, but same size schools. More usage of infrastructure, but same old infrastructure. Upset the current residents who voted them in and add a bunch of new voters that may want someone else. No politician wants this.
And the hedge funds buying up all the housing stock is a boogeyman argument. Last I heard, mom and pop landlords outnumbered hedge fund ownership by 25-to-1 margin. Maybe the government should do something like encourage mom and pop ownership, perhaps by leveling the playing field between landlords and tenants?
I actually do agree with part of what you said. It's true that people who can't afford to live in say, the center of a major metropolitan city, have zero argument to needing affordable housing stock in the most expensive areas. However nationwide compare over the last 40 years median income rates with the average home cost and the CPI, you quickly see that housing costs have far outpaced income rises and inflation.
1983:
Median Household Income: $24,580
Average Cost of a new home: $75,300
CPI: 99.6
2023:
Median Household Income: 72,000 * (estimate from most recent census numbers)
Average Cost of a new home: 446,000
CPI: 296.797
40 year change:You neglected to mention interest rate in 1983 was approaching 20%. If we use 2021 interest rate of 3% that is over 6 times.
When including interest rate, the high LTV financed property of 2021was significantly more affordable than the high LTV purchase in 1983. I will go one further and say your example year was one of the more difficult times to purchase property and much more difficult than 2021 with its cheap mortgage rates, high LTV options, and numerous sources of information that could allow purchase with no investment (value adds) or alternate cash flow options such as STRs, house hacking, etc.
2012 to 2020 were some of the best times to purchase property.
The answer there is to vote with our feet...move to areas with positive, pro-people zoning and let the cities with anti people zoning commissions go to rot...
some of us are unwilling to cede the beautiful places we grew up in to the hordes.
Quote from @Alexa K.:
Especially after having seen how rents have skyrocketed over the last year or so in areas where there's no real rhyme or reason for it...
Yeah, what is inflation anyway. How much is that new AC unit again?
Also have to say this is my new favorite thread. Very interesting to see the mix of those balancing professionality with political topics and those that have stopped caring.
The free market, in my opinion and experience, is not always the best arbiter. In my particular area, rent for a 3 bedroom SFH in a C or B- neighborhood has gone from ~$550/mo to ~950/mo in the span of a bit over a year. .....
in my area, is the influx of investors -- particularly out of state investors -- who are ....
c) I'm in favor of capped rent increases under certain criteria, and also making federally-backed mortgages unavailable for investment purposes. ... I also do like the idea of giving homeowners first choice over investors when it comes to purchasing opportunities on the market
To point 1- the free market would say allowing the building of more housing will allow competition in rent prices, buying prices, and all other important metrics to stagnating real estate investment in comparison to individual home ownership. but they create so much BS around building (specifically referring to CA, where I'm located) that they have manufactured the crisis these actions would be designed to counter. Judging the free market on what we are witnessing presently is akin, in my opinion, to judging a fish on it's ability to climb a tree.
It's true there's abundant real estate across the US, and to your second point, Geographic arbitrage is a very real thing for both the investor and individual. that wouldn't be such a driving force in Austin, Denver, etc if it weren't for the heavy-handedness of San Francisco, Los angeles, Etc. IMO.
to your third point, I would suggest that's discriminatory. a buyer is a buyer in the free market, and the government creating issues for those that wish to benefit the buyers (builders) should not be the burden of the investor. Regulation only helps stagnate the small businesses of the world, blackrock can still push through whatever they want, and what they want is stagnation in inventory because it benefits them.
If my previous comment came off as harsh, no offense was intended, but just a fun jab. downsides of written mediums, you can't hear me chuckle when I'm typing.
And that is everyone's right. But then you must be prepared and willing to pay increased rents....that's the whole point.
First of all, is that number based on every property in your area? No. Second, what about the other expenses? Gas to drive to your property, maintenance costs, materials, CapEx must go up dramatically, utilities are way up, Etc.....If you actually owned rentals you would surely be aware of this....
I'm not saying that a 72% increase (if it were true) is a good thing, but it's really none of your business, is it? You really have no idea what individual landlords are using to justify their rents. You're implying that they're just greedy...more likely they could be in financial trouble, or maybe that's their business plan. Again, none of your business.
If the rental rates are too high, no one will rent these properties. Period. And if these properties are being rented, then it os proof that the rents are not too high. RIght?
you really need to use data for things like this, most new build houses are priced less than $300k and $600k primarily, that's like still within the median income people in US.
And that is everyone's right. But then you must be prepared and willing to pay increased rents....that's the whole point.
And that is everyone's right. But then you must be prepared and willing to pay increased rents....that's the whole point.
Some thoughts:
- virtually all residential property is cash flow negative at purchase with high LTV loan in Sacramento. This is an indication that rents are too low.
- market sets rent. If rents are too high, people can purchase (but they cannot because purchase is more expensive), move away, move to higher occupancy living situation.
- cap ex/maintenance on small unit count properties is much more costly than many people, and virtually all renters, believe. Cap ex for roof is ~$40/month. Cap ex/maintenance on kitchen is ~40/month. Water heater is ~$10/month.
- tenant turnovers are more costly than most people, and virtually all tenants believe. Patching/painting, all the wear repairs, cleaning of flooring. I have a tenant turn over list that we use on each tenant turnover that hopefully eliminates issues with the subsequent tenant and protects the unit.
- in my market we had the most stringent Covid eviction moratorium in the country. An eviction could only safety issues. Tenant could stop paying rent, bring in 50 pets, grow marijuana, smoke, invite all their friends and family to stay in the unit and you could not evict. by the way San Diego city still has a Covid eviction moratorium. This is a newly identified risk. Virtually no one thought that the government would ever mandate LL provide rent free housing to tenants that did not pay. Increased risk warrants increased revenue to compensate for the increased risk.
- many LL did not get paid full rent during Covid. Some tenants took advantage of the eviction moratorium
- rent increases during Covid were often halted and in virtually all cases minimized. There was fear raising rent could result in more tenants not paying their rent. This implies that the recent rent hikes are for a longer time span than 1 year. For example if rents increased $400 this year but was proceeded by 2 years with $0 rent increase, there has been a $400 rent increase over the last 3 years.
I am not going to apologize or feel guilty for charging market rent. I provide my tenants clean, safe housing. The cash flow in my market (San Diego) is pathetic (I.e. negative with high LTV) for the value of the property. The units are of high value, take work to operate/maintain, and do not cash flow with high LTV financing. The high rents are justified.
- tenant turnovers are more costly than most people, and virtually all tenants believe. Patching/painting, all the wear repairs, cleaning of flooring. I have a tenant turn over list that we use on each tenant turnover that hopefully eliminates issues with the subsequent tenant and protects the unit.
@Albert Hasson
Actually it was Carter and the cra that started it.
- tenant turnovers are more costly than most people, and virtually all tenants believe. Patching/painting, all the wear repairs, cleaning of flooring. I have a tenant turn over list that we use on each tenant turnover that hopefully eliminates issues with the subsequent tenant and protects the unit.
In CA, it is only $500 parts and labor. I do not remember this being increased this century so this is absurdly low.
However, by job separation and purchasing the materials, I can usually work within this absurd constraint.
Another choice is to make them an employee. Employees can work anything in my market including owner builder permits.
I agree that RE investors typically need less protection than owner occupied. Similar to accredited investors have less protection than non accredited investors, RE investors should have option of taking on increased risk of using handymen. Note there are good and poor handymen. The good handymen are likely more capable than owners that do their own repairs.
According to realtor.COM, only 5 of the 50 biggest cities have finance mortgage payments less that rent.
https://www.cnn.com/2023/01/26...
The 5 cities are Memphis, Tennessee, Pittsburgh; Birmingham, Alabama; St. Louis and Baltimore.
Monthly buying costs assume a 7% down payment (difficult to obtain non owner occupied) with a mortgage rate of 6.36%, and include taxes, insurance and homeowners association fees.
note this is not all costs to an RE investor. There is no maintenance/cap ex, PM, vacancy, miscellaneous. What this shows is on average virtually every large city is cash flow negative when allocating for all costs using high LTV financing.
This implies that rents need to increase. Without the increase, LL cannot continue to provide housing. Being a property owner is too much work/effort to lose money.
@Bruce Woodruff anti landlord crap is always coming. It doesn’t matter if it’s R or D in office. Period.
Hard not to make it about politics when this is a political proposal. And can you point to some anti LL laws being pushed by the right? I'd be happy to rally against those politicians.
I'm actually in favor of some "anti-landlord" changes. Especially after having seen how rents have skyrocketed over the last year or so in areas where there's no real rhyme or reason for it, outside of the fact that out of state investors are simply trying to recoup their investments after paying above-market rates for properties in areas they're unfamiliar with.
ugh smh