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

guidomerkinsrules

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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
 

DaveXA

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In my area, we have Apple moving in (more than before), Tesla setting up, and all kinds of people emigrating from states where $80k/ year is poor and small houses cost $500k+. The average budget of home buyers here is an absurd $800k.

My house has, supposedly, doubled in value in the 10 years we've owned in ... 50% of that has been in the last 6-12 months. People are putting their houses up for sale and getting dozens of offers, many sight unseen, for much more than the original asking price.

I don't know about the rest of the country.
Yep, very similar here. But then, Fairfax County is one of the highest in the country for most cost of living and average income. Anywhere else and I'd be doing alright, but here, my pay is below average. Meh.
 
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In my area, we have Apple moving in (more than before), Tesla setting up, and all kinds of people emigrating from states where $80k/ year is poor and small houses cost $500k+. The average budget of home buyers here is an absurd $800k.

My house has, supposedly, doubled in value in the 10 years we've owned it ... 50% of that has been in the last 6-12 months. People are putting their houses up for sale and getting dozens of offers, many sight unseen, for much more than the original asking price.

I don't know about the rest of the country.
Pretty sure that there is a boom everywhere...at least according to a number of my friends spread out throughout the country. Having trouble wrapping my head around it.
 

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Economics is definitely not my forte. How we can be having a housing boom right now in what most people consider a recession makes you scratch your head. My house's value has gone up 15-20% in two years. The interest rates have dropped SIGNIFICANTLY. Makes you nervous, but how can you NOT take advantage of these rates? Likely drawing more people in to buy. There could be slew of foreclosures within the next 5 years. Could be another 2008 all over again.
A tale of two econimic realities. The unemployment is largely, I think, low wage, low skilled labor that needs to be in the office or storefront. Some mid wage jobs too..like personal trailers, and such are probably taking a hit.

But higher end jobs, or office jobs, or positions that you can work remotely aren't affected much at all. A while back, it was a 3.7% unemployment rate for those groups according to something I watched on Yahoo news.

Also, people wealthy enough to buy 10-50 homes, are still gobbling up properties. All the while, you still have young couples, with decent jobs, looking for their starter homes. The interest rates just allow people to justify bad price points all in favor of a achievable monthly payment.

It's everything bad about car buying now in housing (probably been there).
 

WhoDatPhan78

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Housing speculation is gross to me. No one needs more than one home, and buying houses to rent out only drives the prices up so people in lower income brackets can't afford to own.

The petit bourgeoisie in the US seems to think that buying up extra houses to rent out is a way for them to get rich. Everyone in the process wants the prices as high as possible. Realtors, bankers, speculators, all want prices to go up. It is a bad thing for most of the people in the country.

As someone about to sell my home, it is a good thing on paper, but when no one can afford a place to live, don't be surprised when people burn down the vacant homes you bought up because of your own greed.
 
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DaveXA

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Housing speculation is gross to me. No one needs more than one home, and buying houses to rent out only drives the prices up so people in lower income brackets can't afford to own.

The petit bourgeoisie in the US seems to think that buying up extra houses to rent out is a way for them to get rich. Everyone in the process wants the prices as high as possible. Realtors, bankers, speculators, all want prices to go up. It is a bad thing for most of the people in the country.

As someone about to sell my home, it is a good thing on paper, but when no one can afford a place to live, don't be surprised when people burn down the vacant homes you bought up because of your own greed.
Well buring down those homes would just make the already terrible problem worse. There's already not enough housing...so...let's burn some down?

I get the sentiment and don't necessarily disagree with it. But something other than burning down homes, even vacant ones, is the way to go.
 

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Housing speculation is gross to me. No one needs more than one home, and buying houses to rent out only drives the prices up so people in lower income brackets can't afford to own.

The petit bourgeoisie in the US seems to think that buying up extra houses to rent out is a way for them to get rich. Everyone in the process wants the prices as high as possible. Realtors, bankers, speculators, all want prices to go up. It is a bad thing for most of the people in the country.

As someone about to sell my home, it is a good thing on paper, but when no one can afford a place to live, don't be surprised when people burn down the vacant homes you bought up because of your own greed.


I mean.. i get what you’re saying- but to say that “no one needs more than one home” is incredibly naive, at best... I actually own zero homes at the moment (recently sold my home, and am renting for now)- but i think that eventually having, say, a primary home and then a few properties to rent out is a nice goal to have... I agree with you that there is a housing crisis, and I’m really not sure what the answer is- but to suggest that people shouldn’t grow their wealth in real estate is akin to saying that the stock market shouldn’t exist, and that people shouldnt be allowed to make money there either... That is of course an entirely different bag of worms, but I mean, it’s the system we have.. Doesnt mean we cant improve it though.
 

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In my area, we have Apple moving in (more than before), Tesla setting up, and all kinds of people emigrating from states where $80k/ year is poor and small houses cost $500k+. The average budget of home buyers here is an absurd $800k.

My house has, supposedly, doubled in value in the 10 years we've owned it ... 50% of that has been in the last 6-12 months. People are putting their houses up for sale and getting dozens of offers, many sight unseen, for much more than the original asking price.

I don't know about the rest of the country.
Same here in the DFW area. We sold our home in 2019 for a good deal more than we paid for it new. I'm renting now in a good area, but housing here has skyrocketed with companies moving here from California and taking their people with them. I can no longer afford to buy within 30 miles of the metroplex and my wife and I make good money. I had to buy 2 acres in bum fork nowhere 20 minutes east of where I am now just to be able to afford building a new house in about 6-9 months. It's frustrating. There are bidding wars in the metroplex where people are getting 100K over asking price.
 

WhoDatPhan78

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Well buring down those homes would just make the already terrible problem worse. There's already not enough housing...so...let's burn some down?

I get the sentiment and don't necessarily disagree with it. But something other than burning down homes, even vacant ones, is the way to go.
I was just being hyperbolic.

I mean.. i get what you’re saying- but to say that “no one needs more than one home” is incredibly naive, at best... I actually own zero homes at the moment (recently sold my home, and am renting for now)- but i think that eventually having, say, a primary home and then a few properties to rent out is a nice goal to have... I agree with you that there is a housing crisis, and I’m really not sure what the answer is- but to suggest that people shouldn’t grow their wealth in real estate is akin to saying that the stock market shouldn’t exist, and that people shouldnt be allowed to make money there either... That is of course an entirely different bag of worms, but I mean, it’s the system we have.. Doesnt mean we cant improve it though.
I believe that it is immoral to generate wealth from speculation that drives up the cost of any basic necessity.

We've come to accept that it is ok for people to grow their wealth, but it is really just a way to rationalize greed. It is always greed. It's fine if we have accepted that as a society, but it is still greed nonetheless.

If someone has more than they need and want more, they are greedy. People should at least own that.
 

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I was just being hyperbolic.



I believe that it is immoral to generate wealth from speculation that drives up the cost of any basic necessity.

We've come to accept that it is ok for people to grow their wealth, but it is really just a way to rationalize greed. It is always greed. It's fine if we have accepted that as a society, but it is still greed nonetheless.

If someone has more than they need and want more, they are greedy. People should at least own that.



What i will own is the fact that , last i saw, the richest 50 Americans (that is, the wealthiest fifty people in America) own more wealth than the bottom 50% of all Americans.. that, to me, is obscene, and i dont think it’s ”omg socialism!” To try and correct that digusting disparity ... BUT, there is a freaking Grand Canyon between that gross figure, and a guy like my dad who never went to college, but retired a few years ago in his late 50s with a home that is almost paid for, and a couple of properties that he rents out for both short term rentals (i know, yet ANOTHER bag of worms) on Air B&B.. as well as to long term tenants, who seem more than happy to get a good deal on a great place.... I wouldnt een think it were evil if a guy like my dad owned a half dozen such properties....... again, the difference between a guy like that, and a multi-multi-millionaire “speculating” is enormous.. Yet your original statement was that basically no one should have more than one home/property, which is what i took exception with.
 

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What i will own is the fact that , last i saw, the richest 50 Americans (that is, the wealthiest fifty people in America) own more wealth than the bottom 50% of all Americans.. that, to me, is obscene, and i dont think it’s ”omg socialism!” To try and correct that digusting disparity ... BUT, there is a freaking Grand Canyon between that gross figure, and a guy like my dad who never went to college, but retired a few years ago in his late 50s with a home that is almost paid for, and a couple of properties that he rents out for both short term rentals (i know, yet ANOTHER bag of worms) on Air B&B.. as well as to long term tenants, who seem more than happy to get a good deal on a great place.... I wouldnt een think it were evil if a guy like my dad owned a half dozen such properties....... again, the difference between a guy like that, and a multi-multi-millionaire “speculating” is enormous.. Yet your original statement was that basically no one should have more than one home/property, which is what i took exception with.
Maybe we can set the limit to 6 homes.

If you want more, you have to buy apartment complex's.
 

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Here is how you increase supply and lower costs:
  1. Reduce permit costs and expedite reviews.
  2. Build term-limited public housing with enforceable removal policies.
  3. Enforce zoning, increase multipurpose, and encourage building vertically.
  4. End short term rentals of single family homes and condos.
  5. Expedite evictions.
  6. Increase vacancy property taxes.
  7. Encourage Co-Ops.
  8. Lower transaction/recordation taxes on single family.
  9. Reform NAR/MLS and end percentage based commissions.
The idea of capping the cost on private property is way off. ADUs and rent controlled units are just units subsidized by everyone else in a building. Section 8 is questionable for whether it inflates rents at the public’s cost.

Rents in some major cities are down double diget percentages. The suburbs are spiking from demand. We could see some leveling of the cost of living differences between communities which would be good for cities.
 

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Here is how you increase supply and lower costs:


End short term rentals of single family homes and condos


Reform NAR/MLS and end percentage based commissions.


i dont know much about most of the items you listed, but i do know a little about the two above... In the first item above, you are literally suggesting eliminating an entire industry.. it would be like saying “Get rid of Uber and all rideshare services”.. I mean, I realize these arent industries that have been around for 50 or 100 years, but they are still a major part of the economy, and they are legitimate sources of income for people who rent out homes and condos short term.


As far as the other item above, you are suggesting that an entire industry (real estate and agents) change their business model dramatically.. What, would you just pay an agent a couple hundred bucks to help you buy or sell a house? I think the things you listed are very easy to type on a message board, but not very realistic, to say the least.
 

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In my area, we have Apple moving in (more than before), Tesla setting up, and all kinds of people emigrating from states where $80k/ year is poor and small houses cost $500k+. The average budget of home buyers here is an absurd $800k.

My house has, supposedly, doubled in value in the 10 years we've owned it ... 50% of that has been in the last 6-12 months. People are putting their houses up for sale and getting dozens of offers, many sight unseen, for much more than the original asking price.

I don't know about the rest of the country.
Heck i live in the woods of Bastrop County. Property has boomed big time. In 2014 bought 6 acres 29,500 cash. Put a small house cash for 60 something cash. Now it has a tax value of slightly above 300K
 

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i dont know much about most of the items you listed, but i do know a little about the two above... In the first item above, you are literally suggesting eliminating an entire industry.. it would be like saying “Get rid of Uber and all rideshare services”.. I mean, I realize these arent industries that have been around for 50 or 100 years, but they are still a major part of the economy, and they are legitimate sources of income for people who rent out homes and condos short term.


As far as the other item above, you are suggesting that an entire industry (real estate and agents) change their business model dramatically.. What, would you just pay an agent a couple hundred bucks to help you buy or sell a house? I think the things you listed are very easy to type on a message board, but not very realistic, to say the least.
Air B&B is pulling hundreds if not thousands of properties out of the long term rental market in cities. That’s what hotels are for and why land is zoned. Air B&Bs sit vacant 20-23 days per month. This reduced housing stock raises prices. Cities need to push back on these non-owner occupied short-term rentals.

It’s the last thing on the list because it’s the most difficult. It takes almost zero more costs to sell a $200k house than a $600k house in hot HCOL markets where the average is 7 days listed. I literally see agent cell phone photos for 500k homes. However, the cost to the buyer/seller is 12k vs 36k because of the expected 6% agent fees. Add another 4-6% for taxes and closing and every house has to sell for 10-12% over purchase for the seller to break even. The buyer is ultimately paying these costs. The NAR/MLS forces the brokerage/agent structure. The percentage based fee for the service provided by most agents with a brokerage taking 30-60% is just dumb. NAR shouldn’t control the agents and the MLS. It’s a monopoly which explains the costs.
 

DaveXA

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Here is how you increase supply and lower costs:
  1. Reduce permit costs and expedite reviews.
  2. Build term-limited public housing with enforceable removal policies.
  3. Enforce zoning, increase multipurpose, and encourage building vertically.
  4. End short term rentals of single family homes and condos.
  5. Expedite evictions.
  6. Increase vacancy property taxes.
  7. Encourage Co-Ops.
  8. Lower transaction/recordation taxes on single family.
  9. Reform NAR/MLS and end percentage based commissions.
The idea of capping the cost on private property is way off. ADUs and rent controlled units are just units subsidized by everyone else in a building. Section 8 is questionable for whether it inflates rents at the public’s cost.

Rents in some major cities are down double diget percentages. The suburbs are spiking from demand. We could see some leveling of the cost of living differences between communities which would be good for cities.
1. Yes
2. Don't know.
3. Mostly yes, but some areas have limits on vertical buildings. In DC building height is limited. I forget, maybe 6 to 10 floors. DC probably isn't the only place with those type of restrictions. Suburbs in some areas have those type of restrictions as well. Changing the building codes is easier said than done.
4. I just don't see that happening. It's a big business and a lot of people would fight that tooth and nail. I do think it would be a good thing though.
5. Harsh, yes, but true. The moratorium needs to end. A lot of your smaller sole owner, and partnerships are feeling the squeeze and would be forced to sell. Once the moratorium lifts, renters will be forced to either move out or pay up.
6. Not sure about other places, but in DC, vacant properties take a massive hit. When I owned a house in DC, somehow they thought it was vacant. I lost my homestead exemption and they jacked up the tax assessment x5. Got a bill in the mail saying I owed the District almost $30k. Talk about a heart attack when I saw that. I had to do to city hall (iirc) to get it cleared up. I'm sure other cities have similar rules.
7. Yes.
8. For sure.
9. Not sure how I'd change it or how much difference it would make.

It's been a while since I last looked, but if a home is rented or otherwise not owner occupied in DC, there is a bump up in the assessment, but I'm not 100% sure on that.
 
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Mr. Blue Sky

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That’s what hotels are for

”That’s what taxi cabs are for“ would be an argument someone might use if they didnt like Uber and Lyft.

I’m not saying there shouldn’t be areas where STR’s are permitted, and areas where STRs arent permitted.. perhaps that is a solution, and is already the case in some areas.



It’s the last thing on the list because it’s the most difficult. It takes almost zero more costs to sell a $200k house than a $600k house in hot HCOL markets where the average is 7 days listed. I literally see agent cell phone photos for 500k homes. However, the cost to the buyer/seller is 12k vs 36k because of the expected 6% agent fees. Add another 4-6% for taxes and closing and every house has to sell for 10-12% over purchase for the seller to break even. The buyer is ultimately paying these costs. The NAR/MLS forces the brokerage/agent structure. The percentage based fee for the service provided by most agents with a brokerage taking 30-60% is just dumb. NAR shouldn’t control the agents and the MLS. It’s a monopoly which explains the costs.

I agree with what Dave said above, I’m just not sure that it would make too much of a difference.. i think all it would do is put a lot of realtors out of business, or force them to subsist on much, much less.
 

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