 |
| Many New High Priced Housing Unit Are Being Built |
Many factors feed into the complicated market that provides a roof over the heads of the American people. Mary Salmonsen writes for multifamilyexecutive.com states that cheap interest rates make for low Cap (capitalization) rates and nationwide, “Mid-/high-rise cap rates declined to 4.8%, and garden apartment cap rates to 5.6%, both historic lows,” she writes. This means developers can build, lease up and flip projects at sky-high valuations based on projections of ever higher rents in coming years. An article in Business Insider warns the US apartment market has become overdeveloped, with supply outpacing demand, especially in the most expensive segment of the market. Most likely if history is any indication many of the resulting loans from this construction will end in default and come back to haunt us in the coming years.
An article that appeared in my local paper detailed how after a dozen
years after opening on the IPFW campus, a university funded by the
state, student housing has not achieved full occupancy since the last of the buildings opened in 2010. Currently, the units are more than a
quarter empty, exactly how much was not indicated. Stories that
delve into what is happening in our communities are important, I
consider them as "microeconomic" images of what is occurring in many
places across America. The crux of the article after you got past all the positive spin was taxpayers will be
carrying the burden of this government over-expansion for years but the problem was being managed, only by reading between the lines was it apparent the whole fiasco has not been a positive for the community.
A story I was told by a property manager caused me to
ponder just how much society has changed over the years and wonder how much of it was due to social policy. While
attending the second phase of an eviction hearing yesterday an older
couple asked
her if she represented the landlord then told how their two rentals,
something they planned for and viewed as a way to help them through
retirement by producing a little income had become an albatross around
their necks. Sitting in court, visibly shaken and holding a stack of pictures showing the
damage caused by a tenant they said that
dealing with renters was ruining their lives
and they would do anything to just get out of the business. Sadly, many
landlords in a similar situation still owe on their properties and cannot just walk away.
Over the years government in many areas of the country have bent over backward in an attempt to "protect the consumer" and in many ways, this is creating an army of irresponsible people who go through life exploiting loopholes in the system. This even goes as far as making it much harder to check the credit of someone wanting to rent in an effort to protect a person's privacy, cast aside is the fact those of us renting an expensive piece of property are putting themselves at great financial risk. Landlords find their claims are usually pursued and disputed in the small claims division of the court where getting an eviction or judgment against a bad tenant is both time consuming and expensive. Adding to this ugly reality are limits often in place that mean only a fraction of their loss will be covered, where I live the limit is generally $3,000. It is not difficult for unpaid rents and damages to greatly exceed this amount.
To give someone unfamiliar with the numbers a better idea of the cost we will use some figures that give an idea of what landlords face. Let us start with two months lost rent $2,300, unfortunately, it is not uncommon for a tenant who stays for several years slipping behind a little behind here and there without ever getting caught up to run up a hefty sum. The cost of filing with the courts generally ranges from $90 to as much as $400 and are often topped off by paying an official from the sheriff's office to serve the papers, to this we often have legal fees which can run from $250 to $5,000. In some areas, it can take as much as 180 days to finally get someone out of a property and when this is done it is not uncommon to spend $2,500 clearing out the property and getting it ready to lease. Starting from the position evicting a tenant is a losing proposition we should consider the fact many landlords never see the first penny of a judgment they are finally granted because many deadbeat tenants eventually declare bankruptcy or simply don't pay and such collections are difficult to pursue.
The government holds responsibility for much of our housing problems and even more so in low-income situations because government policy holds little penalty for those who are irresponsible. The chief reason many people are evicted is because they do not follow the rules, damage an apartment or not paying their rent. An eviction on someone's record usually means they become ineligible for government housing programs. By making them "ineligible" for certain programs the government shrewdly and cleverly sidesteps having to deal with these people. The brutal truth is that government housing cherry-picks the best of the low-income renters providing them with very low rents and nice apartments and dumps the worst on the private sector. The unintended consequences of government policy that sidesteps responsibility for the dysfunctional poor over time only add to America's housing woes by driving up the cost of renting.
Footnote; The article below sheds a bit of light on this issue.
http://brucewilds.blogspot.com/2016/05/evictions-in-america-plight-of-poor.html |
| Landlords Cannot Price In Risk From Nightmare Tenants |
Over the years government in many areas of the country have bent over backward in an attempt to "protect the consumer" and in many ways, this is creating an army of irresponsible people who go through life exploiting loopholes in the system. This even goes as far as making it much harder to check the credit of someone wanting to rent in an effort to protect a person's privacy, cast aside is the fact those of us renting an expensive piece of property are putting themselves at great financial risk. Landlords find their claims are usually pursued and disputed in the small claims division of the court where getting an eviction or judgment against a bad tenant is both time consuming and expensive. Adding to this ugly reality are limits often in place that mean only a fraction of their loss will be covered, where I live the limit is generally $3,000. It is not difficult for unpaid rents and damages to greatly exceed this amount.
To give someone unfamiliar with the numbers a better idea of the cost we will use some figures that give an idea of what landlords face. Let us start with two months lost rent $2,300, unfortunately, it is not uncommon for a tenant who stays for several years slipping behind a little behind here and there without ever getting caught up to run up a hefty sum. The cost of filing with the courts generally ranges from $90 to as much as $400 and are often topped off by paying an official from the sheriff's office to serve the papers, to this we often have legal fees which can run from $250 to $5,000. In some areas, it can take as much as 180 days to finally get someone out of a property and when this is done it is not uncommon to spend $2,500 clearing out the property and getting it ready to lease. Starting from the position evicting a tenant is a losing proposition we should consider the fact many landlords never see the first penny of a judgment they are finally granted because many deadbeat tenants eventually declare bankruptcy or simply don't pay and such collections are difficult to pursue.
The government holds responsibility for much of our housing problems and even more so in low-income situations because government policy holds little penalty for those who are irresponsible. The chief reason many people are evicted is because they do not follow the rules, damage an apartment or not paying their rent. An eviction on someone's record usually means they become ineligible for government housing programs. By making them "ineligible" for certain programs the government shrewdly and cleverly sidesteps having to deal with these people. The brutal truth is that government housing cherry-picks the best of the low-income renters providing them with very low rents and nice apartments and dumps the worst on the private sector. The unintended consequences of government policy that sidesteps responsibility for the dysfunctional poor over time only add to America's housing woes by driving up the cost of renting.
Footnote; The article below sheds a bit of light on this issue.
Footnote #2; Another place government policy is leading to problems is when it comes to food stamps or the program known as SNAP.
http://brucewilds.blogspot.com/2012/01/food-stamp-reform-needed.html
Very interesting perspective. I live in Austria and I wouldn't dream of becoming a landlord. Eviction is effectively impossible and the government has imposed rent caps. I considered buying a couple of small places for AirBnB purposes, but the government is clamping down on that too.
ReplyDeleteInterest rates on a normal savings account are now at 0.05% (literally). My only remaining choice is to pile into a stock market currently in its eighth year of a record bull market and in its 90th percentile of historic P/E, or buy gold and wait/hope(?) for the inevitable crash.
It's not good when normal folk who are trying to put a euro or two aside for a rainy day are forced to take big speculative risks to get any sort of yield.
Henry, thanks for the comment, I had not thought about how government policy also impacts landlords in other countries. Past history of failed efforts like "rent control" and such should be a lesson to governments everywhere..
ReplyDelete