what would happen if we pegged rent? (1 Viewer)

OK , just more more more money for me , which I promise to spend profligately , thereby stimulating virtually all economies in my immediate vicinity . You're welcome .



Spread the wealth my friend. :hihi:
 
Not sure if this should go here, or one of our economics discussions but...

https://finance.yahoo.com/news/renters-making-more-landlords-100009343.html

A popular narrative of the U.S. housing market has been that big city prices are locking out young buyers, feeding a cycle in which a growing number of people are forced to rent at ever higher rates as demand overwhelms supply. Throw in the fact that wages haven’t kept pace, and you have a world where a wide swath of Americans can't save enough to ever buy that first home.





The reality may be a bit more complicated. It's true that, when combined with a lack of government support for affordable housing, this situation has pushed the number of cash-poor renters to a new high. Some 26 percent of U.S. renters paid at least half their income to landlords in 2014, up from 20 percent in 2001, according to the State of the Nation’s Housing report, published on Wednesday by Harvard’s Joint Center for Housing Studies.

On the other hand, the number of homeowners who are severely cost-burdened (paying 50 percent or more of their income) or moderately cost-burdened (paying 30 percent to 50 percent) actually fell from 2013 to 2014, the JCHS study said. And while the poorest renters are more likely to find themselves in dire straits, data compiled this month by Greg Willett, chief economist at property management software maker RealPage, suggests that market-rate renters are keeping up with those rising rents, and are thus able to put some money away for that eventual first purchase.

The median rent-to-income ratio (derived from 4 million apartments tracked by RealPage) has hovered between 22.9 percent and 23.3 percent since 2010. While rents increased over that period, so did the median income of market-rate renters, which rose from $44,000 in 2010 to almost $58,000 so far this year. That’s partly because incomes have risen faster for more affluent renters, Willett said, and partly because changing home-buying behavior has kept higher earners in the renter pool longer.

Those trends have been good for landlords, and they show that most renters are able to find apartments that fit their budgets. The poor, however, are still bearing the brunt of a tight market: The availability of affordable housing falls at the lower end of the market-rate segment, creating greater affordability challenges in lesser-quality apartments. For the bottom tier of rental units, described as "Class D" in the chart below, the median renter is spending more than 30 percent of his or her income on rent.

Plenty of renters remain cost-burdened, and some of them earn good salaries. In 2014, 399,000 households earning $75,000 or more paid at least 30 percent of their income in rent—a number that probably skews to hot markets such as New York or San Francisco. About 1.7 million households earning from $45,000 to $75,000 were moderately rent-burdened during the same period

Then later, this nugget resonates. I stated this before elsewhere.. everything I see in development down here is "Luxury".

New market-rate construction tends to focus on luxury renters, and lower rents take time to filter down. More than 1 million new households were created in 2015, compared 620,000 new homes built, according to new research from the Urban Institute. The shortfall of 430,000 units put more pressure on housing prices, especially at the bottom of the market.

When the bottom has pressure, it moves up to the middle. If you can afford a 500k+ home, you're probably fine in many markets. If not, you're going to have a harder time.

EDIT: This link directly from Bloomberg is better. http://www.bloomberg.com/news/articles/2016-06-22/renters-are-making-more-and-landlords-get-it-all
 
Not sure if this should go here, or one of our economics discussions but...

https://finance.yahoo.com/news/renters-making-more-landlords-100009343.html



Then later, this nugget resonates. I stated this before elsewhere.. everything I see in development down here is "Luxury".



When the bottom has pressure, it moves up to the middle. If you can afford a 500k+ home, you're probably fine in many markets. If not, you're going to have a harder time.

EDIT: This link directly from Bloomberg is better. Renters Are Making More, And Landlords Get It All - Bloomberg

jibes with empirical observation

no one's really offered a decent "gloom" scenario to show what would happen if price controls were exerted
 
jibes with empirical observation

no one's really offered a decent "gloom" scenario to show what would happen if price controls were exerted

Well, price controls are different than pegging rent as originally stated.

Controlling prices based on neighborhood or only allowing rent to raise 3-5% a year at max would be better controls (or less). My 2015-2016 rent increased 3.5%. Of course, that 5 change isn't small actual numbers, because the rent is a bit high.

Pegging rent based on income just gives owners an excuse to more directly discriminate based on income. You'd end up putting the squeeze even higher on the poor and lower middle class. And anyone heading towards the upper middle class would stagnant at first trying to cover those rents. Sot, it may help the bottom end a bit, but no one will want to rent to the poor and/or it will further push the poor into only a few select bad neighborhoods.

The benefit to the current system, is that eventually, if you do well enough you can blow past that rental cost, and the % of income drops.

Prior to my fiancée graduating, I'd say 22% of our (my) gross income was going towards rent when we had to move to take the kids. It used to be more like 16-17% before that. Then, when she graduated and started working, it's back down to about 15% of our combined gross pay. I'd say our area, if we moved we'd easily jump up to 19%. So, we're lucky in a slightly below market unit, but it's also a slightly below market looking place. It's not bad, it's not great. It's ok. I didn't care, I just didn't want to go broke while she was still in school. And I'm not moving until we are able to buy a house, so God willing, this owner doesn't try to jack up the rent too much.

So, one could say, I could afford more and someone who makes less could squeeze into our spot. But the reality is, that owner would rather I stay there, because they know I won't freak if they want to raise rent a little. Or if I were new, I could, in theory, out price someone and raise the overall market rates in the area too.

However, again I think price controls are fine, but pegging based on salary is bad. Also, I think new homes need to be built in the 'non-luxury' category more than they are.
 
However, again I think price controls are fine, but pegging based on salary is bad. Also, I think new homes need to be built in the 'non-luxury' category more than they are.

in my initial fantasy, a neighborhood could only have a discreet numbers of rents at specified levels (x # of homes at $1000, x # at 1500, etc)
in the hopes that not only would the rent squeeze be alleviated but the resultant problems of disparity of public education, healthy food accessibility, et al would tilt toward an equilibrium
 
in my initial fantasy, a neighborhood could only have a discreet numbers of rents at specified levels (x # of homes at $1000, x # at 1500, etc)
in the hopes that not only would the rent squeeze be alleviated but the resultant problems of disparity of public education, healthy food accessibility, et al would tilt toward an equilibrium

So, basically forcing a mixed income neighborhood like HUD tries on occasion?
 
Is this about something else?
 
I don’t think this is exactly the thread I was thinking of
But it’s in the ballpark
(I do miss BHM, though)



Housing is getting absurd here. It's always been high, but run of the mill townhouses here start at 500k and go up from there. The neighborhood I'm renting in, a townhouse was under contract in a week and listed at $774k last month. That one is in nice condition. Another one across the street with a dated interior is listing at $665k. Single family homes that are in good condition start at 600k and the average home price is probably close to a million. The same home that can be had in say Lafayette would cost around 250k. It's been going up quick, and people are often offering list or above list prices. The thing is, I haven't seen many homes sit for very long. Usually a week or two at most. Some will be on the market longer if they're asking stupid prices, but most are actually trying to sell and striking the iron while it's hot. Feels like prices are going up significantly. Certainly 20-30% higher over the last 5 years or so.

We'd love to buy right now but just not in a position to yet. Maybe another year or so.
 
so rule of thumb seems to be that rent should be 25% of gross salary

what would happen if we pegged that? made it so that rent was "controlled" at 25%? (the % isn't important, but more the idea of 'fixing' it)

i think i can anticipate some of the "why nots" but I'm interested to hear the arguments pro/con

I agree that housing is a problem. But I have a feeling that your plan would completely screw the middle class.

I think what would happen is that fewer people would rent out their house...they’d just sell.

But I’m with you that ghettos are a problem. Some cities that decentralized public housing (such as Madison), with good results. The biggest gripe is that resources are usually centralized, so things such as transportation can be a problem. Perhaps pegging transportation costs could get around that.
 
To add, to me, the only real solution is for these altruistic billionaire investors to invest in decent housing (heck, it doesn't even have to be built cheaply, because they can afford the loss, or use it as a tax write off as charity, I'm sure). Basically set it up similar to Habitat for Humanity, but perhaps with less volunteering required. Have an ownership time requirement before you can consider selling the house or whatever. Allow people who qualify (all via this investor person, or via the charity) to purchase homes for an amount based on income (and I'd honestly go under 25% of monthly, especially since many are paid bi weekly, and you have to wait 6 months to catch up, since you only get paid for 4 weeks a month for a while).

Side Note, Section 8 makes you pay 30-40% of your income, but without looking, I'd assume that's after taxes (and not counting EITC if you get it).

So, two things happen. You drastically increase or improve the number of low income homes that most builders or investors don't want to touch right now (unless they're going for section 8 vouchers). So, you are relaxing the strain on the "tier 2 market" for middle class buyers. Some middle to lower middle class could potentially qualify for some of these homes (there could be tiers). It's all my pipe dream anyway.

And secondly, you decrease the bottom end of pricing relaxing some of the false supply side price increase. I say false, because so many over priced units sit empty and either people over pay to squeeze in there or it inflates other properties near by that were a bit cheaper. e.g. if you like a neighborhood and see a series of houses all for $400k, and there is one gem for $300k, you might find yourself in a bidding war with a few others for that cheaper home, now it's $375k and you strain to buy it.

The more I think of all this stuff, the more I realize I need to move out of a metro area. An Engineer and a social worker can't hack it here, I guess.

You're in South Florida right? Move up to Jacksonville! Not as many tourists...so it keeps our prices down. Great job market. You can still very easily get to some nice beaches. Fernandina Beach and St. Augustine are both amazing beaches. Jax Beach is great for surfing...which is all I use it for anyway. You can get to Orlando in a few hours.
 
I don’t think this is exactly the thread I was thinking of
But it’s in the ballpark
(I do miss BHM, though)



Well, when the Fed prints a butt load of money and keeps interest rates near zero, people are going to look for more solid places to put wealth. Real-estate is usually one of those places.

Oh, I have seen a lot of speculation that prices will crash again with so many people out there not paying mortgages. That can't last forever. Foreclosures will spike eventually or, even worse, the government just nationalizes housing.
 

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